Aug. 31 (Bloomberg) -- Japanese voters want Prime Minister Naoto Kan to prevail in a leadership fight next month as he tackles a deflationary spiral that confounded seven predecessors. His ruling party may not oblige them.
Polls yesterday showed the public favors Kan over challenger Ichiro Ozawa by a four-to-one margin in the Sept. 14 election to head the Democratic Party of Japan, which will be determined by DPJ members. Ozawa, who is under investigation for his role in a campaign-finance scandal, is the party’s top campaign strategist and heads its largest faction.
“The very presence of Ozawa is polarizing; he’s popular within the parliamentary party but extremely unpopular outside in the country,” Stephen Church, a research partner at Tokyo-based Japaninvest KK, told Bloomberg TV today. “There is concern that if he were to win, it will be extremely bad for the general election which is expected as early as the spring of next year.”
Kan’s three-month-old administration is also struggling to revive an economy burdened by falling prices and the yen’s advance to a 15-year high. He unveiled a planned 920 billion yen ($10.8 billion) stimulus package yesterday, announced in tandem with steps by the Bank of Japan to ease monetary policy.
Ozawa may drop out of the DPJ leadership race, Mainichi newspaper reported today, citing people close to him, adding that he might meet Kan today. Kan agreed with former Prime Minister Yukio Hatoyama last night to respect the so-called “troika” leadership of Kan, Hatoyama, and Ozawa, plus DPJ upper house leader Azuma Koshiishi, the paper said.
Japan’s top government spokesman Yoshito Sengoku confirmed that Kan is planning to meet Ozawa.
“I’d like to watch what the outcome of the meeting is, and whether the meeting itself will start,” Chief Cabinet Secretary Sengoku told reporters in Tokyo, adding that Kan “decided to hold a meeting because many lawmakers have fears and concerns about government management after the election if the race becomes too fierce.”
Seventy-three percent of people surveyed prefer Kan as prime minister, compared with 17 percent for Ozawa, the Nikkei newspaper said yesterday. The poll was conducted by telephone Aug. 27-29 and received 940 valid responses from 1,488 households. Kan was favored by a similar margin in surveys by the Yomiuri and Mainichi newspapers. None of the polls provided a margin of error.
The election for DPJ president will be conducted by the party’s parliamentary lawmakers, local assembly members and regional officials, with the votes of the first group worth more than twice that of the next two combined. The party chief is ensured of being prime minister because of the DPJ’s majority in parliament’s lower house.
“Kan may have advantage now in opinion polls, but DPJ members tend to act according to labor unions and other groups that don’t always reflect the views of the general public,” said Minoru Morita, a Tokyo-based political commentator. “Ozawa has a chance to increase support by criticizing Kan as neglecting the cries of small companies damaged by the strong yen.”
The yen climbed yesterday, reversing earlier declines, on concern the joint action by Kan and the central bank is a continuation of policies that have failed to spur domestic demand and prevent 17 months of falling consumer prices.
The leadership contest raises the possibility of Japan’s sixth prime minister since 2006 and the third since the DPJ ousted the Liberal Democratic Party from half a century of almost unbroken government control a year ago. In June, Hatoyama stepped down as premier and Ozawa quit as the party’s No. 2 following a dispute with the Obama administration over a U.S. military base in Japan.
Hatoyama discussed with Kan last night concerns within the party that the race may be divisive, the Mainichi newspaper said, citing the two men. Ozawa, 68, announced his candidacy on Aug. 26 with Hatoyama’s support.
Three of Ozawa’s former aides were indicted in February for violating campaign financing laws. Tokyo prosecutors decided in May not to indict Ozawa after a civilian judicial panel recommended charging him. Should the panel reaffirm its recommendation, it would become legally binding. Ozawa has denied any wrongdoing.
Kan yesterday said his stimulus will boost employment and help small businesses threatened by the rising yen and prolonged deflation. The plan will be ready on Sept. 10, four days before the DPJ election.
The package will extend incentive programs to buy energy-saving household appliances and include measures to help graduates find jobs, Kan’s administration said in a statement. It will also support small and mid-sized-companies struggling to cope with the yen’s gain against the dollar and map out measures to help strengthen domestic investment.
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