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New Kan Cabinet Faces Challenge of Fiscal Reform [ 2010.06.25 ]

[NewsJapan.net] Following the resignation of Prime Minister Yukio Hatoyama, the Democratic Party of Japan (DPJ) on June 4 elected Deputy Prime Minister and Minister of Finance Naoto Kan as its new president. In the afternoon of the same day, the newly elected DPJ president was designated as the 94th prime minister of Japan at plenary sessions of both chambers of the Diet. Kan is the sixty-first person to serve in the post.

Prime Minister Kan’s cabinet members were announced in the afternoon of June 8, and the new cabinet was officially inaugurated in the evening of the same day after Kan had been formally appointed by the Emperor and a confirmation ceremony for the cabinet ministers had been held at the Imperial Palace. Because the Diet is currently in session, 11 of the 17 cabinet ministers, including Minister for Foreign Affairs Katsuya Okada, were reappointed.

According to major newspapers, at his inaugural press conference in the evening of the same day Prime Minister Kan expressed his enthusiasm, saying, “The role of politics should be to minimize the factors that make the people of Japan and the rest of the world unhappy. That is to say, politics should aim to build a society with a minimum level of unhappiness.” He also set the goal of “shoring up the economy, public finances, and social security together in a cohesive manner” and emphasized his determination to achieve this through a growth strategy concentrating funds in the fields of the environment and medical and nursing care and linking the growth of Asia to that of the Japanese economy.

With the comment “I believe rebuilding public finances is a prerequisite to economic growth,” Prime Minister Kan positioned fiscal reform as the biggest challenge for his administration. He also stressed the need for both the ruling and opposition parties to discuss a consumption tax hike with this issue in mind, saying, “How far do we have to go? What about the scale and the schedule? The time has come for us to discuss these matters on a suprapartisan level.” On the issue of the relocation of the US Marine Corps Futenma Air Station in Okinawa Prefecture, Prime Minister Kan expressed his intention to implement the joint statement issued with the United States in May, which stipulates the move of the air station to the coastal Henoko region of Nago City in the prefecture, though he added, “We must make a sincere and all-out effort to reduce the burden on Okinawa.”

While most Japanese leaders in the postwar era have been scions of political families, Prime Minister Kan was born in an ordinary salaried worker's family. Together with his background of having entered politics after working in civic campaigns, this is increasing public expectation of him as an “ordinary citizen type of prime minister.” With a House of Councillors election coming up in the summer, the capabilities of the new prime minister and his cabinet are attracting much attention.

Editorials of Major Newspapers

On June 9 the major newspapers reported the inauguration of the new cabinet in front-page lead articles under such headlines as “Constructing a society with minimum unhappiness” (Mainichi Shimbun) and “Seeking a strong fiscal administration” (Asahi Shimbun). The newspapers also addressed this topic in editorials in which they aired their requests of the new cabinet, especially regarding fiscal reform.

The Yomiuri Shimbun editorial remarked, “. . . what form Kan wants the country to take and what specific measures he plans to implement. As an initial step, he should present a comprehensive national strategy.” In addition, it pointed out that the prime minister and chief cabinet secretary “must . . . enable politicians to make good use of the bureaucratic structure while ensuring the Prime Minister’s Office still makes decisions on key issues.” The Yomiuri also said that Prime Minister Kan “should encourage full-fledged negotiations with the Liberal Democratic Party on tax reform---including a consumption tax increase.”

The Asahi editorial expressed the hope that the new administration would shift Japanese politics to a new model of “choice and persuasion.” It said that the traditional patronage-driven politics must be replaced by a new form of politics “to choose either A or B . . . and invest selectively in what really matters. When there is insufficient funding, the people must be asked to share the burden to cover the deficit, and it is the responsibility of their elected representatives to explain the reasons and make every effort to be understood.” In addition, the Asahi pointed out the importance for the DPJ to review its party manifesto. It also claimed the necessity of “a new method for decision-making in the Diet” to differentiate issues on which there can be no compromise from issues on which dialogue is possible and, with the latter, to have an open debate and work toward a compromise.

The Mainichi carried two editorials on the new cabinet under the headlines “Show the way to fiscal reform” and “Diplomacy with careful consideration and trust is expected.” The editorial on fiscal reform pointed out that the prime minister first of all should work toward “strong public finance.” It commented, “Although cuts in expenditures are always necessary, these are not sufficient to compile the budget. Stable financial resources are necessary for ‘strong social security’---that is, sustainable pensions, health insurance, and nursing care. The DPJ seems to have acknowledged the necessity of tax increases.” The editorial on diplomacy stressed the urgent need to rebuild relations of trust with the United States, a key for Japanese security. The Mainichi called on the new prime minister to make every possible effort to restore mutual trust between the leaders at a meeting with US President Barack Obama planned to be held during the G8 summit meeting later this month.

The Sankei Shimbun said, “The prime minister should give strong priority to drafting a large national strategy for steering Japan faultlessly and show it to the people.” It expressed doubt about the new prime minister’s plan to use the income generated by tax increases for healthcare, nursing care, and the environmental field and to achieve growth and tax revenue increases at the same time. “In the worst-case scenario, however,” it warned, “this may only leave us with big government and a massive debt.” The Sankei suggested, “Put regulatory reform at the center of growth strategy and use the tax increase directly to restore fiscal health.”

The Nikkei pointed out, “the first tasks for the new administration will be the recovery of political credibility and policy reexamination.” It also demanded, “Although we can appreciate the stance of placing importance on striking a balance between economic growth and fiscal reconstruction, the government should quickly set forth a concrete roadmap clarifying what policies, including fundamental reform of the tax system, should be combined toward achieving the goal.”

(Copyright 2010 Foreign Press Center, Japan)

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