Crunch Time for Japanese PM

The Japanese electorate on Sunday voted for half of Japan’s 242 contested Upper House seats in a quasi-referendum on the Democratic Party of Japan’s (DPJ) 10 months in power after ending the Liberal Democratic Party’s (LDP) almost interrupted 55-year rule with a landslide victory last August.  

Prime Minister Naoto Kan’s DPJ holds 54 seats out of the 121 seats up for grabs in the Upper House, and together with its coalition partner People’s New Party (PNP) it will have to win a combined 56 seats to retain a majority in the second chamber of Japan’s parliament. 

With results not yet in at the time of writing, recent opinion polls indicated that the DPJ could end up winning fewer than 50 seats, giving Kan the perfect excuse to find a new and less unreliable coalition partner if the PNP does not win enough seats to secure the majority in the Upper House.
 
So far, big-spender PNP has been opposed to pretty much everything on Kan’s domestic agenda, including the privatization of Japan’s postal system and plans to raise the  consumption tax.

Teaming up with the small pro-reform and small-government Your Party could be a possible alternative. Your Party is predicted to win up to nine seats - enough for the DPJ to get rid of the PNP and retain the Upper House majority with a new coalition partner.

Kan took over as prime minister and DPJ party chairman after his predecessor, Yukio Hatoyama, quit on 1 June after only eight months in office over his broken campaign promise to relocate a US military base from Okinawa.

This time around, however, an issue much closer to the hearts and pockets of Japan’s electorate is on the very top of the agenda: Kan’s threat to raise the consumption tax from 5 to 10 percent in the years ahead in an attempt to address the country’s disastrous public finance.

Economists agree that this is the right thing to do, arguing that the current level of issuing government bonds is unsustainable in view of the fact that public debt already amounts to a staggering 200 percent of GDP.

Kan is determined to reduce the debt, warning that if Japan does not take “dramatic steps” soon, it could face a similar crisis to Greece.  And while the Japanese do not wish to end up like the Greeks, they also do not want higher taxes, as rapidly declining public approval rates for Kan and his government demonstrate.

Trying to turn things around at the 11th hour, Kan on 2 July did what politicians typically in a time of crisis: He changed the subject, counting on the electorate’s short-term memory and taking the advice of DPJ chief election strategist Jun Azumi not to mention ‘consumption tax’  and ‘raise’  in the same sentence on the campaign trail.

What’s more, Your Party is not (at least not yet) onboard as regards Kan’s plans to raise the consumption tax. That said, it is very possible that Your Party would concede to the tax raise for a piece of power.

If none of the above works and the DPJ does not manage to secure a majority with the PNP or Your Party, Kan the could be forced to resign after only six weeks in office – a very short tenure for a prime minister, even by Japan’s standards, which has seen four prime ministers come and go rather quickly over the last five years.