Japan opposition scrambles to form transition team

The Associated Press
31th August 2009

TOKYO – Japan's newly empowered leader Yukio Hatoyama rushed Monday to select Cabinet ministers and start making good on promises to revive the world's second-largest economy after his party's historic trouncing of the ruling conservatives.

Hatoyama, who also has signaled he wants to redefine Tokyo's diplomacy to make it less reliant on Washington, said in a victory speech late Sunday he would focus on a quick and smooth transition and make a priority of choosing the nation's next finance minister.

Hatoyama spoke only briefly with reporters on Monday before huddling with his party leaders.

Prime Minister Taro Aso, conceding defeat, said he would step down as president of the ruling Liberal Democratic Party.

"I have no plan to run for re-election," Aso said. His successor is expected to be named late next month. "The most important thing is rejuvenating our party."

Although the nation gave the Democrats a landslide win, most voters were seen as venting dissatisfaction with the Liberal Democratic Party and the status quo more than they were endorsing the policies of the opposition.

The Liberal Democrats have governed Japan for virtually all of the past 54 years.

The Democrats will also face next year an election for the less powerful upper house of parliament. They have controlled that chamber with two smaller allies since 2007, but if they fail to deliver quickly on their promises the Liberal Democrats could resurge.

Official results were still being counted, but exit polls by all major media said Hatoyama's Democratic Party of Japan had won more than 300 of the 480 seats in the lower house of parliament. That would easily be enough to ensure that he is installed as prime minister in a special session of parliament that is expected to be held in mid-September.

The task ahead for the Democrats is daunting.

Japan managed to climb out of a yearlong recession in the second quarter, but its economy remains weak. Unemployment and anxiety over falling wages threatens to undermine any recovery. The jobless rate has risen to a record 5.7 percent. After a rapid succession of three administrations in three years, Japan is facing its worst crisis of confidence in decades.

In the long-term it faces a bleak outlook if it isn't able to figure out how to cope with a rapidly aging and shrinking population. Government estimates predict the figure will drop to 115 million in 2030 and fall below 100 million by the middle of the century.

The Democrats' solution is to move Japan away from a corporate-centric economic model to one that focuses on helping people. They have proposed an expensive array of initiatives: cash handouts to families and farmers, toll-free highways, a higher minimum wage and tax cuts. The estimated bill comes to 16.8 trillion yen ($179 billion) when fully implemented starting in the 2013 fiscal year.

The party has said it plans to cut waste and rely on untapped financial reserves to fund their programs. But with Japan's public debt heading toward 200 percent of gross domestic product, the Democrats plan has been criticized as a financial fantasy that would worsen Japan's precarious fiscal health.

Japan's stock market surged early in the morning on the news of the election, but then fell back — indicating uncertainty among investors about what the Democratic government will bring.

"The key difference is the Liberal Democrats' spending on public projects and infrastructure, but the Democrats spend on family and education," said Martin Schulz, a senior economist at the Fujitsu Research Institute.

"The Democrats have a year to show results," he added, noting next year's elections are looming.

The Democrats are also under scrutiny for their positions on national security and foreign policy.

Party leader Yukio Hatoyama, set to become Japan's next prime minister, has been vocal about distancing the country from Washington and forging closer ties with its Asian neighbors.

Washington's new ambassador to Japan said the U.S. is looking forward to working with the administration in Tokyo.

"The challenges we face are many, but through our partnership our two great democracies will meet them in a spirit of cooperation and friendship," Ambassador John V. Roos said in a statement Monday.

The Democrats first task will be to convince a skeptical public that they can actually lead.

"I feel very insecure with the Democratic Party of Japan," said 65-year-old voter Shuji Ueki. "They don't have a record."

The Democrats are made up of an inexperienced group of left-wing activists and LDP defectors. The party is just 11 years old, and only a handful have served in top government positions.

But Ichiro Ozawa, co-founder of the party, expressed a quiet confidence.

"We have no fear, and we will steadily achieve our campaign promises one by one," he said.

Tropical Storm Brings Heavy Rain, High Winds to Tokyo

By Aaron Sheldrick

Aug. 31 (Bloomberg) -- Tropical Storm Krovanh increased in strength as it approached Japan, bringing strong winds and heavy rain to Tokyo, forcing flight cancellations and halting shipments from oil refineries.

The center of Krovanh, the 12th storm of the western Pacific cyclone season, was 224 kilometers (139 miles) south of Tokyo at 8 a.m. local time today, according to the Japan Meteorological Agency.

The storm’s maximum sustained winds increased to 111 kilometers per hour from 102 kph earlier today and Krovanh was moving north at 15 kph, the agency said. On that trajectory, Krovanh’s eye will cross the coast south of Tokyo after 3 p.m.

The weather agency issued warnings for heavy rain, high waves and stormy weather for Tokyo, neighboring Chiba prefecture, the location of Japan’s biggest international airport near Narita, and surrounding areas. Krovanh is expected to bring as much as 5 centimeters (2 inches) of rain per hour as it approaches Tokyo and Chiba.

All Nippon Airways Co., Japan’s largest domestic airline, canceled 14 flights to and from Tokyo and between islands to the south of the capital, affecting 1,100 people, it said in a faxed statement. Some train services were delayed in Tokyo and neighboring areas.

Nippon Oil Corp., the nation’s largest oil refiner, stopped shipments from its Negishi refinery in Yokohama south of Tokyo and Cosmo Oil Co. halted those from its refinery in Chiba.

Japan is regularly buffeted by typhoons and tropical storms during the western Pacific cyclone season.

Twenty-three people died earlier this month in flooding and storms attributed to Tropical Storm Etau, according to Japan’s Fire and Disaster Management Agency.

Krovanh is the name of a tree in Cambodia, according to the Web site of the Hong Kong Observatory, which names the storms.

To contact the reporter on this story: Aaron Sheldrick in Tokyo at asheldrick@bloomberg.net.