By Linda Sieg
Fri Apr 23, 2010 3:02pm IST
TOKYO (Reuters) - Limp leadership, inexperience, and rival power barons in the ruling party are snarling policy decisions as Japan faces a raft of challenges, from a huge debt and fast-ageing population to China's rising clout.
The disarray, which comes as Prime Minister Yukio Hatoyama's 7-month-old government tries to craft plans to fix tattered state finances and spur growth, is eroding voter support ahead of an upper house election as well as damaging Japan's image overseas.
In the latest sign of confusion, Transport Minister Seiji Maehara and ruling party election mastermind Ichiro Ozawa are clashing over a plan to revise highway tolls that critics say would contradict a campaign pledge to make expressways toll-free.
Hatoyama is also struggling to meet a self-imposed end of May deadline to resolve a row over relocating a U.S. Marines' airbase that both countries say is vital to deter regional threats.
"You could say that open debate is healthy. But debate without decision is a luxury you can afford as the opposition, but as the ruling party, it spells death," said Jesper Koll, director of equities research at JP Morgan Securities Japan.
"Don't underestimate how badly this reflects on Japan's standing in the world," he added.
The policy uncertainty is making wary some investors who might otherwise be tempted to buy Japanese shares given improvements in the world economy and a slightly weaker yen, and inclining Japanese politicians to keep up pressure on the central bank to fight deflation in the absence of other policy levers.
"It's not really an open factor, but it is probably causing some investors to pull back a bit. I think foreigners in particular may have a bad impression," said Hideyuki Ishiguro, a strategist at Okasan Securities. "They're indecisive, but also the party seems to have trouble working as one."
RIGHT, LEFT, RIGHT AGAIN
Hatoyama, 63, the wealthy grandson of a premier, took office last year after his Democratic Party of Japan (DPJ) trounced the Liberal Democratic Party (LDP) in a lower house poll, ending more than 50 years of nearly unbroken rule by the pro-business LDP.
Central to the Democrats' platform was a pledge to put politicians, not elite bureaucrats, in control of policymaking as well as to end the confusing rivalry between the prime minister and his cabinet on the one hand and party executives on the other that plagued the LDP during its years in power.
But critics -- and there are many -- say Hatoyama has failed to show the leadership needed on tough topics, ranging from tax reform and privatising giant Japan Post to moving the U.S. Marines' airbase on Okinawa after promising to review a 2006 deal to move the base to a less populous site on the island.
"Its a problem of policy coordination. The 'Kantei' (prime minister's office) is not functioning and everything is out in the open," said Sophia University professor Koichi Nakano.
Even some in the DPJ publicly lament Hatoyama's wavering.
"In the morning he says 'Go right', at lunchtime 'Go left' and at dinner time 'Go right'," DPJ elder Kozo Watanabe told a media luncheon recently. "Because he keeps changing his comments, the people have begun not to trust him."
The problem has been compounded by the need to heed demands from two tiny coalition partners, especially banking minister Shizuka Kamei, whose People's New Party helps make up a majority in parliament's upper house to ensure bills are passed smoothly.
Ozawa, a former LDP heavyweight who has devoted a decade and a half to creating a viable second major party, has meanwhile increased his clout after helping mastermind the Democrats' landslide win in last year's general election.
Despite disclaimers to the contrary, Ozawa has intervened in policymaking, this week demanding the government withdraw a plan for revising highway tolls that would raise some tariffs because it backtracks on the toll-free campaign pledge.
While Ozawa's image as a scandal-tainted old-style fixer is contributing to sliding voter support for the Democrats, party heavyweights have shied away from openly urging him to step down.
"Unless Ozawa himself decides to step down, no one can force him to quit," said political commentator Atsuo Ito.
"They are afraid he will leave and split the party."
Some analysts say that if Hatoyama and Ozawa did resign, the government might improve its image and its policymaking.
Others are far less sanguine, given what they argue is a dearth of leadership across the political spectrum.
"The most fundamental issue is that there is no political leader who is willing to tell the public what needs to be done to turn this country around," said Columbia University professor Gerry Curtis, a long-time expert in Japanese politics.
(Additional reporting by Elaine Lies and Nobuhiro Kubo; Editing by Paul Tait)
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