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Post-Quake Reprieve Over for Japan’s Kan as He Faces Calls to Stand Down

Japan’s Prime Minister Naoto Kan earned a reprieve six weeks ago when the earthquake, tsunami and nuclear crisis diverted attention from a funding scandal and budget impasse. The respite is over.

Kan’s Democratic Party of Japan fared poorly in local elections this month and polls show more than two-thirds of voters disapprove of his handling of the situation at the crippled Fukushima Dai-Ichi nuclear plant. His efforts to corral the opposition Liberal Democratic Party into a coalition were met with a suggestion from its leader that he quit, a call echoed last week by a member of his own party.

“Things are heading in a very difficult direction,” DPJ lawmaker Hiroshi Hamamoto said in an interview. Calls for Kan’s ouster “are sporadic fires that could spread, depending on whether the nuclear situation is contained.”

Kan’s immediate challenge is containing the crisis at the Fukushima plant and winning support for a post-quake rebuilding plan without adding to the world’s largest debt burden. A failure could end his tenure and make him Japan’s fifth straight leader to last no more than a year.

The LDP, which until 2009 held power for more than 50 years, has refused to approve legislation to sell bonds that would fund almost half of this year’s record 92.4 trillion yen ($1.1 trillion) budget.

The administration will submit an initial recovery plan of about 4 trillion yen to parliament this month. The LDP opposes the DPJ’s proposal to use pension money to fund it and party leader Sadakazu Tanigaki signaled he was unlikely to cooperate when he said April 14 that “the time has come for the prime minister to decide whether to stay or step down.”

Internal Dissent

Kan, 64, also faces internal dissent. DPJ legislator Yozaburo Ishihara last week said he should resign immediately, Jiji press reported. Ishihara spokesman Satoru Kumagai said the lawmaker was calling for Kan’s resignation if the situation at Dai-Ichi didn’t improve.

Some DPJ members also oppose plans to use 2.5 trillion yen in pension funds to help pay for reconstruction, Hamamoto said.

The quake and tsunami left almost 28,000 people dead or missing and the government estimates the damage may reach 25 trillion yen. The disaster lowered growth expectations and the economy may shrink at an annualized 3 percent pace this quarter, according to the median estimate of 18 analysts surveyed by Bloomberg News.

The Nikkei 225 (NKY) Stock Index has lost 7.2 percent since March 10, the day before the quake hit.

Photographer: Haruyoshi Yamaguchi/Bloomberg

Naoto Kan, Japan's prime minister. Close

Naoto Kan, Japan's prime minister.

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Photographer: Haruyoshi Yamaguchi/Bloomberg

Naoto Kan, Japan's prime minister.

Approval Rating

“All the problems Kan had before the disaster are still lurking,” said Jeff Kingston, head of the Asian Studies program at Temple University’s Tokyo campus. “The DPJ’s divided. He’s still got a respite, but only for another few weeks.”

Hours before the temblor hit, Kan was fending off criticism over reports he received an illegal donation, an issue that forced his foreign minister to resign. Damaged by his inability to win support for the deficit-funding bills, his approval ratings dropped to 20 percent.

Kan’s popularity has improved marginally: His rating this week was 21 percent in an Asahi newspaper survey, 22 percent in the Mainichi daily and 27 percent in the Nikkei newspaper. The polls showed seven in 10 voters think the government has mishandled the nuclear disaster.

Plant owner Tokyo Electric Power Co. this week unveiled a plan to end the crisis within the next six to nine months. The government says it will aid Tepco’s efforts to compensate nearby residents who evacuated because of radiation leaks.

No-Entry Zone

Japan today imposed a 20-kilometer (12 mile) no-entry zone around the facility in the interests of public health, Chief Cabinet Secretary Yukio Edano said. About 80,000 people lived in the area and some have returned against the advice of officials. Kan today visited Fukushima and met with Governor Yuhei Sato.

The polls also showed about 60 percent of voters favor a DPJ-LDP coalition. That prospect may be more likely if Kan quits, LDP lawmaker Ichita Yamamoto said in an interview.

“Kan resigning would provide the LDP with the opportunity to change our stance,” Yamamoto said.

Criticism of Kan hasn’t translated into support for the LDP. The Nikkei poll showed less than a fifth of those surveyed want him to step down immediately, and while the Asahi poll put DPJ support at 17 percent, the LDP’s support was only 19 percent.

“There isn’t a whole lot of enthusiasm for the LDP either,” Kingston said. “There’s no benefit of seeking an early election and getting hammered for anyone.”

Before the earthquake, Kan rejected calls to resign and he has given no indication since that he plans to step down.

Defending Kan

“In addition to achieving a recovery from the disaster, I want to pave the way for fiscal reconstruction,” he said this week in parliament.

His defenders in the DPJ say resigning would weaken the party by subjecting it to a leadership contest in the midst of Japan’s worst crisis since World War II.

“Even if Kan were replaced, it’s not like the situation would change completely,” DPJ lawmaker Masaharu Nakagawa said in an interview. “What’s important is that the current government improve its direction and come up with an appropriate vision for reconstruction.”

If the LDP refuses to back Kan’s rebuilding plans, one other option is for the prime minister to bring in smaller parties to push through relief funding.

“Kan certainly is seen as being out of touch,” said Jun Okumura, a former Japanese trade ministry official and a senior adviser at Eurasia Group in Tokyo. “But he’s not the kind of person to go gently into the night.”

To contact the reporters on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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

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