Hatoyama Resigns Over U.S. Base Decision, Funding Scandals

Yukio Hatoyama, Japan's prime minister
Yukio Hatoyama, Japan's prime minister, bows during a meeting with lawmakers of the Democratic Party of Japan (DPJ), at the Diet, in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg

Japan’s Prime Minister Yukio Hatoyama quit less than nine months after a landslide election victory as funding scandals and a broken promise to relocate U.S. troops cost him the support of four in five voters.

“I’m sorry to say that in some cases the efforts of our party haven’t reached the hearts of the people,” Hatoyama, 63, said in a televised speech to Democratic Party of Japan legislators. Ichiro Ozawa, the party’s top campaign strategist, will step down as DPJ secretary-general, Hatoyama said. The yen fell and Japanese stocks reversed earlier declines.

Hatoyama’s term was the shortest since 1994. His stepping down comes six weeks before mid-term elections, endangering his party’s prospects and hindering its ability to reduce the public debt. The DPJ in August unseated the Liberal Democratic Party, which governed almost without interruption for more than 50 years, ushering in a new chapter in Japanese democracy.

“Hatoyama’s authority had declined so much that it was unrecoverable,” said Jiro Yamaguchi, a political science professor at Sapporo’s Hokkaido University. “But a change in leadership won’t lift the party’s popularity and they face a big defeat.”

The party may choose a new head on June 4, legislator Yoshimitsu Takashima told reporters. The new leader would become prime minister because of the DPJ’s majority in the lower house of parliament.

Falling Public Support

Likely candidates to replace Hatoyama include Finance Minister Naoto Kan, National Strategy Minister Yoshito Sengoku and Foreign Minister Katsuya Okada, said Gerald Curtis, a professor of Japanese politics at Columbia University in New York.

Polls show voters as likely to vote for the LDP as the DPJ in the contest for half the 242 seats in the upper chamber of parliament. Hatoyama’s handling of a dispute over where to relocate the Futenma Marine Air base on Okinawa overshadowed reports showing the world’s second-largest economy is rebounding and raised concern over his handling of policy.

Hatoyama also lost support among voters because of campaign finance scandals involving himself and Ozawa, who had to step down as party leader before last year’s election.

“I worked for half a year to try and move the bases off Okinawa, but wasn’t able to do so,” Hatoyama said today. “I caused trouble regarding the political donations issue.”

The yen fell to 91.61 per dollar at 11:39 a.m. in Tokyo, from 90.94 late yesterday in Tokyo. It also declined to 112.26 per euro, from 111.22. The Nikkei 225 Stock Average rose 0.4 percent to 9,747.54, having earlier lost as much as 1.1 percent.

‘Has To Change’

“Japan has to change and he obviously hasn’t changed with the current environment,” said Winston Barnes, head of sales and trading for Asian market at WJB Capital Group Inc. in San Francisco. “People have limited trading options today, therefore are speculatively selling the yen and stocks are simply following.”

Hatoyama last week reached an agreement with the Obama administration to move the facility to a less populated part of the island, breaking a campaign pledge to transfer it elsewhere in Japan and dismaying local residents.

The Social Democratic Party left the ruling coalition on the weekend after Hatoyama fired its leader from the Cabinet for refusing to endorse the accord, prompting him to repeat his apology for his handling of the affair.

“Approval ratings have fallen. Top party executives have lost the trust of the people,” senior party legislator Yukio Ubukata said on Asahi Television this morning, before Hatoyama resigned.

Three Ozawa Aides

Prosecutors in February indicted three former Ozawa aides on charges of violating campaign funding laws two months after two men who had worked for Hatoyama were accused of falsifying income sources. Some of that money was a gift from Hatoyama’s mother, and he was forced to pay about 600 million yen ($6.6 million) in back taxes.

Three polls released this week showed Hatoyama’s approval rating at or below 20 percent, compared with 75 percent when he took office.

Half of the 242 upper-house seats are at stake in the July vote. The DPJ and its other junior partner, the People’s New Party, have 122 legislators, and losing that majority might hinder the government’s ability to increase social welfare spending while aiming to cut the world’s largest public debt.

The DPJ has made good on pledges to cut public works construction and disperse childcare allowances to families, and the economy rose an annualized 4.9 percent in the first quarter, fueled by rising exports.

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