Japan's FM in the Fire

Japan's PM Out of the Frying Pan, but Fire Awaits

AOL News

TAIPEI, Taiwan (Sept. 14) -- Japanese Prime Minister Naoto Kan today survived a leadership challenge in a party vote.

The embattled leader's win could help stabilize his center-left ruling party as it struggles to guide Japan out of its long-running economic doldrums, at a time when the yen is at a 15-year high and debt is running at about 200 percent of gross domestic product.

But analysts cautioned that Kan now faces a tough battle in pushing his policies through a bitterly divided parliament.

Japanese Prime Minister Naoto Kan was re-elected as the president of the ruling Democratic Party of Japan

"Now he's got to heal the party, roll up his sleeves and get to work on addressing Japan's real problems," said Jeff Kingston, an expert on Japanese politics at Temple University, Japan. "But I have to say, I'm not optimistic."

The ruling Democratic Party of Japan's poor showing in July Upper House elections resulted in a "twisted" parliament, meaning the DPJ controls only the Lower House and must engage in complicated coalition politics and horse-trading to pass measures through the upper house.

"Most likely we're going to see gridlock, politicians floundering and the public getting more frustrated," Kingston said.

He expects further pressure on Kan to step down next year and call new elections.

The challenge to Kan from the party's so-called "shadow shogun," Ichiro Ozawa, became a much-hyped drama in Japan's media, due to the two leaders' distinctive personalities and long, tangled histories.

Ozawa is deeply unpopular with the public and is seen as a consummate behind-the-scenes power broker and veteran of political intrigues. He's also a Karl Rove-esque strategist credited with successfully guiding the Democratic Party of Japan to power last year, ousting the Liberal Democratic Party in the first real transfer of power in Japan since World War II.

Kan, a hot-tempered former activist, has been seen as the poster boy for the DPJ's promise of change.

Both men back reforms to bring Japan's bureaucrats to heel and turn over more power to elected politicians, moves their party believes are needed to re-invigorate Japanese politics by making it more democratic and responsive to the public.

But Ozawa is associated with old-style, patronage politics and lavish public works spending (he backed new bullet trains and more road projects in his campaign, according to respected Japan-watcher Tobias Harris in comments on CNBC Asia earlier today).

Kan, by contrast, has emerged as a Bill Clinton-esque figure who has made fiscal discipline a priority. But he shouldered much of the blame for his party's poor showing in July elections, especially after he proposed a deeply unpopular hike in the consumption tax from 5 percent to 10 percent.

"Ozawa's goals may be good, but his style of winning elections isn't too pretty or clean -- that's the contradiction," said Tadahiro Ishihara, at National Chengchi University's Institute of International Relations in Taipei. "Naoto Kan is clean, but so far his performance isn't so good."

Many DPJ Diet members owe Ozawa favors, which had made today's race too close to call. Today's vote was limited to DPJ Diet members and other local party members.

One focus now will be Ozawa's next move. If the two party bigwigs reconcile -- perhaps by Kan tapping Ozawa and his supporters for top government posts -- the party could move forward more unified.

But some worry Ozawa could bolt the party and take his supporters with him, further destabilizing Japan's fractious coalition politics and stalling reforms. "There could be a party split, but it's not very likely," Ishihara said.

Kan's win boosts his mandate to pursue a pragmatic course that combines fiscal discipline with scaled-back versions of the generous social spending his party promised last year.

His victory avoids an outcome where Japan would have seen its third prime minister in less than a year and been governed by a man -- Ozawa -- whose public approval ratings hover near 20 percent.

"They dodged a bullet," Kingston said. "An Ozawa win would have been a disaster for Japan. But the problems facing Japan are huge, so Prime Minister Kan is certainly not out of the woods."

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