Japan Early Election ‘Won’t Be Possible’ as Kan Battles Post-Quake Crisis

None of Japanese Prime Minister Naoto Kan’s four predecessors lasted more than a year in office. He may be set to avoid a similar fate as the country’s strongest earthquake and a nuclear crisis rule out the likelihood of an early election.

Dissolving the parliament, or Diet, “won’t be possible for some time” given the need for national unity, said Kozo Yamamoto, a lawmaker for the opposition Liberal Democratic Party. “There’s no way the Diet can be dissolved,” said Hiroshi Kawaguchi, a member of the ruling Democratic Party of Japan. Both spoke in interviews yesterday.

Kan was fighting for his political life before the March 11 temblor and tsunami struck, facing questions over a political donation and hamstrung by his failure to get opposition lawmakers to approve the sale of deficit-financing bonds. Now the opposition has agreed to join him in a rebuilding effort that will cost at least 5 trillion yen ($62 billion), according to economists’ projections.

“They’re not going to worry about an election for months to come, not in 2011,” said Gerald Curtis, a professor of Japanese politics at Columbia University in New York. “This government as it stands has to manage an immediate catastrophe.”

Coalition Proposal Rejected

The opposition’s newfound cooperation doesn’t extend to uniting with the DPJ government and a prime minister who took office only last June.

LDP leader Sadakazu Tanigaki on March 19 rejected an invitation from Kan to join the cabinet as vice prime minister for reconstruction. Yamamoto and legislator Hiroyuki Hosoda, a former LDP secretary-general, said the idea of a coalition government would only complicate the decision-making process.

“Opposition parties have said they will fully cooperate on quake measures, so there’s no need to join the cabinet,” Hosoda said.

Kan’s party signaled last week it was willing to compromise on campaign promises in order to secure funding for the reconstruction effort. DPJ secretary general Katsuya Okada said the government needed to review spending pledges such as for childcare handouts and toll-free highways.

‘Deep Breath’

Rather than trying to draw in the opposition, Kan, 64, should focus on soliciting their ideas and formulating a strategy to speed up Japan’s recovery, Curtis said.

“What the crisis needs is not a grand coalition, it needs an agreement on policy direction,” he said. “Kan has to take a deep breath and figure out how to build a bipartisan approach.”

Nor is political wrangling gone for good, said Kirby Daley, a Hong Kong-based senior strategist with Newedge Group’s prime brokerage business.

“Political infighting in Japan is taking a back seat, for obvious reasons,” he said. “The administration has six to eight weeks before it will be politically viable for the opposition to begin applying serious pressure again.”

Reconstruction Estimates

The World Bank yesterday said reconstruction efforts may take five years. Barclays Capital analysts estimated the reconstruction budget at 5 trillion yen to 7 trillion yen in a March 18 research note. Nomura Holdings Inc. assumed 6 trillion yen in new spending during the fiscal year starting April 1. Morgan Stanley economist Takehiro Sato predicted “10 trillion yen or so,” noting it will take time to gauge the scope of what’s needed.

Japan’s Nikkei 225 (NKY) Stock Average rose 4.4 percent today, spurred by the progress in stabilizing the crippled Fukushima Dai-Ichi nuclear plant, after tumbling 10 percent last week. The yen was little changed against the dollar. The stock market was closed yesterday for a holiday.

Tokyo Electric Power Co. yesterday said it was making progress in getting power to reactors at the plant, prompting Kan to say he could see “light at the end of the tunnel.” The company today said damaged fuel rods at the facility in northeastern Japan have released five kinds of radioactive material and contaminating nearby seawater.

Rising Death Toll

The death toll from the disaster rose to 9,079 as of noon today, with a further 12,645 people missing, according to the National Police Agency. The number of people evacuated from their homes fell to 338,522, down from almost 400,000 last week.

Hours before the quake struck, Kan was fending off questions in parliament over a donation that may have been made by a non-Japanese resident, the same alleged violation that prompted his foreign minister’s resignation earlier this month.

Even before the campaign finance accusations surfaced, Kan was fighting calls for an early election as he tried to persuade opposition lawmakers to authorize 44.3 trillion yen in government bonds for the budget beginning in April to finance the world’s largest public debt. Moody’s Investors Service in February lowered Japan’s debt rating outlook on concern over political gridlock, after Standard & Poor’s cut the rating in January.

Soliciting Help

Since the quake, Kan has solicited help from former DPJ leaders, including Ichiro Ozawa, who was indicted in January for his role in a campaign finance scandal. Ozawa was suspended from the DPJ for the duration of his trial, provoking a backlash from lawmakers loyal to him.

Kawaguchi, who is close to Ozawa, criticized Kan for trying to bring Tanigaki into the Cabinet. At the same time, he said the political landscape had changed and it was possible the current parliament would last until elections for the Diet’s lower house must be held in the second half of 2013.

“The DPJ bears the responsibility of responding to this unprecedented once-in-a-thousand-year crisis,” he said.

While there was political impasse over the budget before the earthquake, politicians “are now working even harder to find an agreement for facilitating helping those who are affected by the disaster,” Susumu Kato, chief economist for Japan at Credit Agricole CIB and CLSA in Tokyo, and associate Yoshiro Sato wrote in a March 16 research note. The idea that Kan will dissolve the Diet by June isn’t realistic, they said.

To contact the reporter on this story: Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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