September 1, 2008 / 12:39 PM / 10 years ago

Japan PM Fukuda quits over parliament deadlock

TOKYO (Reuters) - Unpopular Japanese Prime Minister Yasuo Fukuda resigned on Monday over a political deadlock, becoming the second leader to quit abruptly in less than a year and threatening a policy vacuum as Japan slips towards a recession.

Japan's Prime Minister Yasuo Fukuda speaks during a news conference at his official residence in Tokyo, September 1, 2008. REUTERS/Toru Hanai

Fukuda, 72, has been struggling to cope with a divided parliament where opposition parties have the power to delay legislation. His sudden departure has deepened doubts about his conservative party’s ability to cling to power or even hold together after ruling Japan for most of the past six decades.

Fukuda has also suffered recently from conflict between his Liberal Democratic Party (LDP) and its junior coalition partner, the New Komeito, which was wary of letting him lead the ruling bloc into an election that must be held in the next year.

“If we are to prioritize the people’s livelihoods, there cannot be a political vacuum from political bargaining, or a lapse in policies. We need a new team to carry out policies,” Fukuda said. “I thought it would be better for someone else to do the job than me.”

Taro Aso, an outspoken, right-leaning former foreign minister and LDP secretary-general, is the frontrunner to succeed Fukuda but pressure is likely to mount for an early general election.

A government economic relief plan unveiled on Friday that included a promise of income tax cuts and about $16.5 billion in extra spending this year to ease the pain of rising prices, failed to revive Fukuda’s popularity among voters.

“This is two prime ministers in a row ... The political vacuum will be at least two weeks, more like a month. Nothing will get done. It is quite likely that there will be pressure for the LDP to call an election as soon as possible,” said Koichi Nakano, a political science professor at Sophia University.

“Certainly, this is not anything that can be condoned. It is unheard of, even by Japan’s standards.”

Japan has had 10 prime ministers since 1993, when the current head of the main opposition Democratic Party, Ichiro Ozawa, left the LDP and sparked political upheaval that saw the long-ruling party briefly lose its grip on power.

The dollar rose above 108 yen and the euro back up toward 158 yen on the surprise news, which caught traders off guard in a thinner market than usual because of a U.S. holiday.

Analysts said Fukuda’s sudden resignation would likely be negative for Japanese shares and a bit of a minus for the yen.

VOTERS GRUMPY

The bespectacled Fukuda, a moderate conservative who favors close ties with Japan’s Asian neighbors, took office last September after his predecessor, Shinzo Abe, also suddenly resigned after just a year in office.

Speculation had been simmering that the unpopular Fukuda might be replaced by the LDP ahead of a general election that must be held by September next year but could come sooner.

But the surprise timing of his departure will create the very political vacuum he said he wanted to avoid at a time when Japan’s economy is nearing a recession.

“It seems the process of selecting his successor, no matter who is chosen, will likely create discord among his party,” said Fumiyuki Nakanishi, head of investment information at SMBC Friend Securities. “Political confusion is a negative factor.”

Ordinary Japanese were both angry and resigned.

“It cannot be helped. I thought it’s about time for him to quit,” said 26-year-old Seina Korenaga, waiting for her husband in a downtown Tokyo nightspot.

“He did not have leadership,” said her twin sister Reina Sato. “It’s irresponsible.”

Fukuda’s resignation does not automatically mean an election.

However, whoever the LDP picks as its leader, and thus the next prime minister, might chose to go to the polls early to take advantage of any rise in public support.

The main opposition Democratic Party’s No.2 leader, Yukio Hatoyama, rubbished Fukuda and called for an early poll.

“I am furious that he treats parliament so lightly and ignores the people,” Hatoyama told reporters. “Basically, he should call a general election. That is the will of the people.”

The next session of parliament had been scheduled to open on September 12, but Kyodo news agency quoted a government source as saying it was likely to be postponed.

The uncertainty also casts deep doubts over whether Japan can extend beyond January a naval refueling mission in the Indian Ocean in support of U.S.-led operations in Afghanistan.

LDP FUTURE GRIM?

Initially popular, Fukuda’s popularity sank on doubts about his leadership in the face of the divided parliament.

A poll by the Nikkei business daily released on Monday showed support for Fukuda’s cabinet fell nine points to 29 percent, back to levels before a cabinet reshuffle last month. Aso was way ahead as the most popular person to lead Japan.

Slideshow (2 Images)

Analysts said the next LDP prime minister would face similar woes given the parliamentary deadlock and the party’s rusting political machine and scandal-tainted image. Talk of a broad realignment of party alliances has been simmering since the opposition took control of the upper house last year.

“The question is whether this will mark the dismantling of the coalition and possibly the end of the LDP,” said Jonathan Allum, Japan strategist at KBC Financial Products.

“We will not know the answer to that question for some time.”

Additional reporting by Isabel Reynolds, Chisa Fujioka, Tokyo bureau and London markets team; Editing by Rodney Joyce

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