Japanese finance minister Hirohisa Fujii left financial markets guessing today on whether he will remain in his post, saying he was still awaiting test results after being hospitalised last week suffering from exhaustion.
Mr Fujii is an advocate of fiscal discipline and one of the few experienced members of cabinet. His health problems have added to the pressure on the novice Democratic Party-led government as it wrestles with deflation, a fragile economy and huge public debt.
The 77-year-old veteran said today that results of his medical tests may be available shortly, and said a decision on whether he should stay on should be made before parliament convenes later this month, likely around January 18th.
"The market had a sense of trust in the government because of Fujii's leadership in compiling the budget," said Toshihiko Sakai, manager of foreign exchange trading at Mitsubishi UFJ Trust Bank.
"The budget is already put in shape, but a lack of Fujii's leadership could mean political unstability in the future and is therefore negative for Japanese government bonds."
Mr Fujii said last week he was worn out by wrangling about how to finalise the budget. He has been in the post for a little over three months.
"I don't know what the results of the medical tests will be. But they should be available soon," Mr Fujii told a news conference, adding he would respect the advice of his doctors.
Often serving as the voice of fiscal restraint, Mr Fujii was the main proponent of sticking to a cap of around 44 trillion yen ($476.8 billion) on new bond issuance in the budget for the year from April as the government looks to contain a mountain of debt.
Deputy finance minister Yoshihiko Noda said later that he expected Mr Fujii to attend the coming parliament session, denying speculation that health problems would force him to step down.
Picking a successor for Mr Fujii would be tough given the need for a veteran politician to balance the conflicting tasks of reining in the public debt while supporting a weak economy with more government spending.
Mr Fujii's two deputies, Mr Noda and Naoki Minezaki, are possibilities as well as other cabinet members such as national strategy minister Naoto Kan.
Even if he stays in the post, health problems may cast doubt on whether Mr Fujii is fit enough for the job that includes frequent overseas trips and attending hours of debate in parliament.
"The concern in the market is whether there will be a delay in parliament deliberations on the budget," said Akitsugu Bandou, senior economist at Okasan Securities.
"It's better if a decision on whether he stays is made before parliament convenes. But it's also unclear whether there will be a smooth transition if a new person were to take over the job."
Local media have reported parliament will convene on January 18th.
After three months in office, support for the Democratic Party-led government has slipped below 50 per cent as doubts grow about Prime Minister Yukio Hatoyama's leadership, adding to his headaches ahead of an upper house election in mid-2010.
The government fears the economy could slide back into a recession this year as falling wages and persistent deflation dampen consumers' appetite to spend.
Reuters