Japanese leader faces further battles despite beating off rival's challenge

JAPAN’S PRIME minister Naoto Kan has shrugged off a bruising challenge from his party’s most powerful backroom figure to keep his job.

However, as the dust from the bout settles, he now faces a battle to stop the ruling Democrats (DPJ) from disintegrating.

Mr Kan (63), comfortably saw off veteran Ichiro Ozawa, winning more votes from both party lawmakers and rank-and-filers around the country.

Despite Mr Ozawa’s hefty political clout, he failed to convince the party that he has the popularity or charisma to win national elections.

The result saves Japan from its third leadership change in a year but leaves the prime minister with a growing list of woes, including a careering national debt, falling population and ballooning social welfare costs – with a potentially divided party behind him.

Mr Kan has prioritised tackling the debt – about twice the size of Japan’s economy – warning that otherwise the country faces a “Greek-style” meltdown.

“Japan is currently in serious difficulty,” he warned yesterday after his victory was announced. “We must rebuild to make a healthy Japan again in order to hand it to the next generation, and I will stake my life to do the job and gain support from the people.”

His first task will be enlisting the support of Mr Ozawa (68), who controls the party’s biggest faction and disagrees publicly with the direction of the government.

Mr Ozawa blames Mr Kan’s hawkish fiscal austerity on the cabinet’s declining popularity, and wants him to fulfil last year’s pledges to expand welfare spending and tackle entrenched bureaucratic power.

Mr Ozawa wants more intervention in the country’s $5 trillion (€3.84 trillion) economy to stop the yen from rising – news of his loss yesterday briefly pushed the yen to a new 15-year high against the dollar, putting further strain on struggling exporters such as Toyota and Canon.

Some observers predict Mr Ozawa, who has a history of political defections, may bolt from the DPJ unless he is given more policy say in the cabinet – the prime minister largely shut him and his supporters out when he formed his government three months ago.

Mr Kan also faces a divided parliament since the DPJ and their junior coalition partner lost the upper house in July. After just three months in office, his one serious policy initiative, a proposed consumption tax rise, is now widely considered a political error. Analysts, therefore, expect him to look for help from opposition parties, including the conservative Liberal Democrats, who back the tax rise. That is unlikely to endear him to his opponents in the DPJ.

Mr Kan has also promised to follow through on a controversial deal with Washington to build a new US military base on the southern prefecture of Okinawa, although any move to actually do so will spark huge protests.

Disagreements over his budget-cutting proposals may also come to a head early next year, forcing him to call a snap general election.

For these reasons, few analysts feel safe predicting that Japan’s prime ministerial merry-go-round will not turn again next year.