January 4, 2010 / 6:55 AM / 10 years ago

Japan PM eyes crucial election as problems mount

TOKYO (Reuters) - Japanese Prime Minister Yukio Hatoyama on Monday urged his party to go all out to win a vital upper house election this year, as economic and diplomatic woes erode support for his three-month-old administration.

Japan's Prime Minister Yukio Hatoyama speaks during a New Year news conference at his official residence in Tokyo January 4, 2010. REUTERS/Issei Kato

Since the Democratic Party won an August general election, voter support has slid below 50 percent on growing doubts over Hatoyama’s ability to manage Japan’s massive debt and ailing economy or to patch up ties with security ally Washington.

If the Democrats win a majority, they will be able to drop an awkward coalition with two tiny parties needed to help pass legislation. A poor showing could allow the opposition to cause policy gridlock.

“This year is crucial,” Hatoyama said in a brief speech at the ruling Democratic Party’s headquarters, before taking part in a New Year’s toast.

“We must win the upper house election,” added the prime minister, flanked by party Secretary-General Ichiro Ozawa, a political mastermind many suspect is pulling policy strings.

“I hope you will work as hard as you can with the sense that this is in a way the most important year in Japanese history.”

Since his party’s spectacular victory over the long-ruling Liberal Democratic Party last year, Hatoyama’s fortunes have quickly waned, as voters lose faith in his ability to make tough decisions on the economy and diplomacy.

Some analysts say an outright win for the Democrats is in doubt as a funding scandal that has engulfed two former aides sparks speculation he may step down, although the opposition LDP has failed so far to score points.

“Japan’s politics are likely to remain a major source of uncertainty for financial markets in the near-term because the Democrats may not be able to win a majority in the upper house election,” said Takumi Tsunoda, an economist at Shinkin Central Bank Research Institute.

ECONOMY IN FOCUS

Hatoyama told reporters on Monday his top priority would be passing budget bills in an effort to prevent the economy from suffering a double-dip recession and promised to resolve a row with the United States within several months.

Weeks of wrangling over how to control the massive public debt, while retaining enough stimulus to maintain growth resulted in government approval of a record budget on December 25, which keeps fresh debt issuance under a promised 44 trillion yen ($474 billion) limit.

The budget still needs to be debated in parliament, giving the Liberal Democrats a chance to attack Hatoyama, though polls show them trailing.

“If the budget at least passes and he reaches a decision on Futenma in May, he may be just about safe,” said political analyst Harumi Arima of the election.

“The reason is that the Liberal Democratic Party has not managed to become an effective opposition force.”

In a fresh headache for Hatoyama, 77-year-old Finance Minister Hirohisa Fujii, one of the most experienced members of the largely novice cabinet, went in hospital for tests days after the draft budget was approved, saying he was “worn out.

Hatoyama told reporters on Monday he wanted to keep his ministers in place for the long term and had no plans for a reshuffle.

Hatoyama also reiterated his determination to find a mutually acceptable solution to a row with the United States over the relocation of a U.S. Marine base on the southern island of Okinawa within the space of several months.

Not only are local people opposed to a plan to move the Futenma base to a different part of the island, but the tiny pacifist Social Democratic Party has threatened to leave Hatoyama’s ruling coalition if the plan goes ahead unchanged.

If Hatoyama makes a decision in May, the coalition could be undermined immediately before the election.

Additional reporting by Rie Ishiguro; Editing by Alex Richardson

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