Can Yoshihiko Noda survive longer as Japan's prime minister than any of his recent predecessors? At the end of August, the former finance minister became the sixth premier in five years - taking the reins of a country that had already spent more than a decade in the economic doldrums before it was struck by a tsunami and nuclear accident in March 2011. Whether Noda can stop the revolving door at the Japanese prime minister's office, the Kantei, will depend on how he tackles the biggest reconstruction effort in Japan since the Second World War, in the face of expanding public debt (now more than twice the size of GDP).
Noda became PM after the resignation of Naoto Kan, who lasted 15 months. He is the third since the Democratic Party of Japan (DPJ) beat the Liberal Democratic Party (LDP) in 2009 general elections, ending an almost uninterrupted 54 years of LDP rule. But the DPJ's efforts in government have left voters disillusioned with both main parties. In a recent opinion poll, nearly half of respondents favoured no party at all, and neither main party commanded the support of more than a quarter.
Kan's downfall
Noda's first task will be to overcome infighting within his own party, which contributed heavily to Kan's resignation. Kan's approval ratings stood above 60% when he came to office in June 2010, but his popularity took an immediate hit when he suggested doubling sales tax to 10%, to reduce the country's more than $10 trillion (904.08 trillion yen) public debt. There was little support for this measure and when the DPJ lost the July 2010 upper-house election, the LDP was able to veto it. Kan then faced a (failed) leadership challenge from Ichiro Ozawa, leader of the DPJ's largest faction, who criticised Kan for reneging on election pledges to rein in bureaucracy and cut spending.
In September 2010, Kan was also accused of bowing to Chinese pressure after a Chinese fishing boat attempted to ram a Japanese coastguard vessel in disputed waters near the Senkaku/Diaoyu islands. The Chinese crew was arrested but then freed after Beijing cut all high-level cooperation and stopped the export of rare earth minerals to Japan.
Such political squabbles were, however, overshadowed by the disaster on 11 March, when a massive earthquake struck off Japan's northeastern coast, creating a tsunami that killed at least 15,000 people and caused widespread damage, including to the Fukushima No. 1 nuclear plant. Explosions and meltdowns at Fukushima led to the evacuation of all dwellings within 20 kilometres and to widespread power outages. The government's response soon came under fire after it failed to satisfactorily deal with the Fukushima disaster or show how it would rebuild the devastated areas.
For almost three months, the government and TEPCO, the utility operating the plant, failed to officially acknowledge that three of the six Fukushima reactors had gone into meltdown. Radiation forecasts went unpublicised. Locals complained that they were getting mixed messages about permissible levels of radiation, leading to public confusion, while inspection of food for radioactivity proved flawed and inconsistent.
The lack of decisive leadership, resulting risk to public health and TEPCO's continuing problems in stabilising the reactors dealt a fatal blow to Kan's approval ratings, contributing to a significant change in Japanese attitudes towards nuclear power. Additionally, while clean-up after the tsunami has been swift, authorities have dithered on important decisions regarding reconstruction.
Former officials believe the government played down the disaster to limit the scope of expensive evacuations and head off public criticism of the nuclear industry, which has strong political ties. A regulatory shake-up has now begun, but more than 80,000 evacuees have not been rehoused and the reactors at the nuclear plant are still leaking radiation.
In June, Kan took the unusual step of promising to resign when it became clear that this was the only way to survive a no-confidence vote in the Diet (parliament). However, he declined to put a date on his resignation and said he would only quit if parliament passed three pieces of legislation, relating to the budget, government bonds for reconstruction and the promotion of renewable energy. After the last of these passed, a DPJ leadership election was held, in which Noda emerged victorious over four other contenders. However, as DPJ kingmaker (or 'Shadow Shogun') Ozawa backed another candidate, Noda's win leaves ongoing questions over the party's unity.
Noda's debt conundrum
In a speech ahead of his election, Noda referred to himself as not a flashy goldfish, but a bottom-feeding loach, happy to work his way through Japan's muddied politics. 'Prime Minister Loach', as he is now known, thus sought to lower expectations and to set the tone for more consensual politics. However, he faces the same set of domestic policy challenges as his predecessor: to revitalise economic growth, to oversee post-tsunami reconstruction in the northeast and to redefine policy on nuclear energy. Although he is seen as a less polarising and more charismatic leader than Kan, who was regarded as quick-tempered and uninspiring, Noda's efforts in these areas will risk reopening differences within the DPJ.
Noda is regarded as a fiscal hawk, and was the only DPJ leadership candidate who consistently called for painful reforms to reduce public debt. However, he is caught between the desire to do this and the need to stimulate faster economic growth and pay for post-tsunami reconstruction.
The Japanese economy has been stagnant since the mid-1990s, when a credit-driven asset bubble burst, and a combination of a savings surplus and low demand, vested political interests, structural impediments and policy mismanagement prevented the country from breaking out of a deflationary spiral.
The rising mountain of government debt run up during this 'lost decade' has so far been less of a problem than in Western European economies because so much of it - some estimates say 90% - is held by local investors. However, Japanese society is ageing. Nearly 40% of the population is projected to be over the age of 65 by 2050, meaning that pension and care costs will rise. The Mizuho Research Institute estimates that by 2025 around 70% of government spending will go towards servicing the national debt and social security. Therefore, structural reforms were necessary long before the tsunami and Fukushima disaster, and Japanese politicians had continually damaged their credibility by failing to deliver them.
The cost of reconstruction after the tsunami and Fukushima is estimated at $185-309 billion. Japan is planning to spend $248bn (19 trillion yen) over the next five years, leading some economists to wonder about 'post-disaster bump', in which reconstruction spending provides a much-needed wider economic stimulus. Optimists point to Kobe's swift recovery after the 1995 earthquake, and the extra percentage point in national growth the year afterwards. However, the initial signs for Noda are not positive. A small upswing in GDP growth in 2010 has been reversed by the March disaster. Reports in August showed rising unemployment and falling retail sales. Mizuho Research predicts that any recovery will peter out next year.
Like Kan, Noda has expressed a wish to double consumption tax. However, such a move has an unfortunate precedent: a decision to raise the rate from 3% to 5% in 1997 was blamed for prolonging Japan's economic malaise. Senior officials are split on the issue, and so is the public.
A particular challenge is the strength of the yen. Japanese government bonds have been seen as a safe haven in volatile international markets, and this has pushed the value of the yen to post-war highs, hampering Japan's export competitiveness and endangering jobs. Noda has said that if the currency's strength were maintained, it would be 'almost impossible to break out of deflation and reconstruct areas hit by the disaster'.
Noda has said he will present a growth plan by December. Meanwhile, his government is preparing a third stimulus plan for this fiscal year, worth around $130bn (10 trillion yen). This is to be financed by spending cuts and 'disaster bonds' with a set repayment term. A fourth, $13-26bn (1 to 2 trillion yen) stimulus package may also be passed, financed by unused allotments for bond interest payments.
Noda is also mulling a rise in income and corporate taxes. As finance minister he oversaw three large market interventions by the Bank of Japan to try to bring down the yen, and part of the third supplementary budget will be used to relieve yen appreciation, according to Reuters.
Nuclear and security debates
The Fukushima accident has - as elsewhere - provoked controversy about the future of nuclear energy. Before the crisis, nuclear power produced 30% of the country's electricity, but local communities have so far blocked the restarting of reactors, leaving 35 of Japan's 54 plants offline. Noda has called for them to be restarted when it is safe to do so, saying they are needed to deal with power shortages. His approach thus differs from that of Kan, who thought Japan should aim to eliminate nuclear power altogether. Noda wants to reduce reliance on nuclear energy but not eliminate it entirely, with the remaining industry to be regulated by a new, independent Nuclear Security and Safety Agency.
The issue has already caused Noda political problems. A June poll showed that more than 80% of Japanese are now anti-nuclear, and distrust official information on Fukushima. On 19 September, 60,000 marched against nuclear power in Tokyo. Trade Minister Yoshio Hachiro, whose portfolio included nuclear energy, was forced to resign on his eighth day on the job following insensitive remarks he made after visiting irradiated areas surrounding the Fukushima plant. He pretended to rub his sleeve against a reporter, saying 'I will give you radiation', and later described municipalities in the area as 'towns of death'. Signs of inexperience among other ministers - for example, Defence Minister Yasuo Ichikawa described himself as a 'security novice' - have allowed the LDP opposition to call Noda's judgement into question.
Internationally, Noda faces difficult relations with both allies and traditionally distrustful neighbours. He is regarded as pro-US, but Washington is likely to watch him closely, fearing that Japanese politics has become dysfunctional after the resignation of so many leaders. In their first meeting, on the sidelines of a UN meeting on 21 September, Noda told President Barack Obama he saw the alliance as vital, while Obama said the alliance should be 'modernised'.
Yukio Hatoyama, prime minister from September 2009 to June 2010, resigned partly over a broken campaign promise to close an American base on the island of Okinawa or to move it to another island. Noda supports a 2006 deal with Washington, rejected by Hatoyama, to relocate the Futenma air station further north on Okinawa, but the agreement may yet come undone because of the financial situation on both sides of the Pacific. The current terms require Japan to pay $6.1bn of the projected $10.2bn relocation cost. However, the US Government Accountability Office now believes that the cost may rise to $15bn.
Undoubtedly, the greatest challenges confronting Noda are on the home front, and he only has 12 months before the next general election. Though he still enjoys high ratings in opinion polls, it may be difficult for him and his 'Loach Cabinet' to rise above the mud. It is entirely possible that Noda will be Japan's next former prime minister earlier than he would like.