Quake Region Lawmaker Azumi Named Finance Chief to Lead Japan’s Recovery
Jun Azumi, a lawmaker from Japan’s devastated northeast, will become the nation’s eighth finance chief since 2008, tasked with funding earthquake reconstruction and securing a recovery endangered by a soaring yen.
Azumi, 49, a former head of parliamentary affairs for the ruling party, replaces Yoshihiko Noda, who’s succeeding former Prime Minister Naoto Kan. Azumi hails from Ishinomaki, a coastal city with almost 4,000 dead or missing from the March 11 quake and tsunami. Incoming Chief Cabinet Secretary Osamu Fujimura made the announcement in a press briefing in Tokyo.
The next finance minister is less well known than his two predecessors -- Noda and Kan, who had a record of public remarks on topics ranging from exchange rate policy to the Bank of Japan when they took the job. Noda oversaw three rounds of yen sales to counter the currency’s appreciation to a postwar high against the dollar, and endorsed tax increases to cope with rebuilding.
“With Noda as his boss, the new finance minister is likely to inherit Noda’s commitment to ensuring fiscal health,” Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Co., said before today’s announcement. “The question is how he will convince lawmakers strongly opposed” to tax increases to rein in Japan’s public debt, the world’s largest.
Azumi told reporters today he may need to ask the public for “help” in funding the reconstruction, one sign he may endorse tax changes. He wrote in December 2010 that Japan will face “big problems” if it fails to overhaul its fiscal revenue structure, according to his blog.
The incoming minister’s first appearance on the international stage may come as soon as next week, when the Group of Seven holds a meeting in Marseille, France. Global policy makers have struggled to sustain confidence in the economic rebound from the 2008 world recession, with U.S. unemployment in excess of 9 percent and European confidence in the outlook the weakest since 2008.
Along with scrutinizing Azumi’s stance on exchange-rate policy, traders may seek to gauge his appetite for applying pressure on the Bank of Japan to add monetary stimulus. Noda has refrained from such comments, saying as finance chief in April the government and central bank had basically the same view on the economy. He said Aug. 8 that he hoped the BOJ would continue to offer support through appropriate policy steps.
The BOJ meets next week to set policy. Governor Masaaki Shirakawa has expanded the central bank’s asset purchases since the March temblor, while warning against more aggressive steps such as direct underwriting of government debt.
“Azumi isn’t likely to put much pressure on the BOJ to ease monetary policy further, just like Noda,” said Junko Nishioka, chief economist at RBS Securities in Tokyo. Since he doesn’t have a background in the areas of economy and finance, “there’s a chance for a shift to bureaucrat-led policymaking,” she added. Kan had sought to bolster the role of politicians in setting policy, rather than career bureaucrats.
A former journalist with national broadcaster NHK, Azumi graduated from Tokyo’s Waseda University, which is also Noda’s alma mater. He was first elected to parliament in 1996, is married with two children and counts reading and golf among his hobbies, according to his website.
The incoming minister may be met with calls by corporate leaders to take further action on the yen, which has advanced about 21 percent against the dollar since the start of last year. The currency traded at 76.87 as of 1:25 p.m. in Tokyo, less than 2 percent from its postwar high reached last month. The government spent 4.51 trillion yen ($59 billion) in August on yen sales, the biggest intervention for any month since 2004.
“I want the new government to show a firm stance against the strong yen, which isn’t reflecting Japan’s economic fundamentals at all,” Toshiyuki Shiga, head of Japan Automobile Manufacturers Association, said on Aug. 31. “The strong yen will cause significant damage to the auto industry,” said Shiga, who is also the chief operating officer of Nissan Motor Co., Japan’s second-largest automaker.
Exchange-rate appreciation threatens to hurt exporters’ earnings, impairing a forecast rebound from three straight quarters of economic contraction. A government report today showed that capital spending tumbled 7.8 percent in the second quarter, bucking the median forecast in a Bloomberg News survey of economists for a 1 percent gain. The unemployment rate unexpectedly rose for a second month to 4.7 percent in July.
Power disruptions stemming from the nuclear crisis at the Fukushima Dai-Ichi plant after it was inundated by the March 11 tsunami have also challenged the nation’s exporters. In addition, with reconstruction weighing on Japan’s finances, the outgoing government incurred corporate criticism from abandoning plans to lower the nation’s business taxes.
“Manufacturers here have faced endless obstacles such as foreign exchange rates, corporate tax and environmental and labor regulations,” Katsuhiko Machida, chairman of Sharp Corp., Japan’s biggest maker of liquid-crystal displays, said at a briefing in Osaka on July 15. “This issue over power supply could be the end of manufacturing in Japan.”
Among Azumi’s tasks will be preparing a third package of post-quake spending, after two supplementary budgets totaling 6 trillion yen so far -- about one third of the 16.9 trillion yen of damage from the disaster, according to Cabinet Office estimates.
The size and financing method of the next round of reconstruction may affect the nation’s credit rating. Moody’s Investors Service already lowered the nation’s rating last month on concern that the government will fail to rein in its debt. The one-step cut to Aa3 left the grade even with Standard & Poor’s, which still has the sovereign rating under review for a downgrade.
Japan’s public debt is projected to reach 219 percent of GDP next year even before accounting for borrowing to fund reconstruction, according to the Organization for Economic Cooperation and Development.
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