January 6, 2011 / 6:02 AM / 9 years ago

Struggling Japan PM tries to seize policy initiative

TOKYO (Reuters) - Struggling Japanese Prime Minister Naoto Kan is launching a counter-offensive to try to boost his ratings, take control of his fractious party and prod opposition parties to help tackle policy problems in a divided parliament.

The strategy is risky and possibly too late.

But it may be Kan’s last chance to turn around his fading fortunes and chalk up some achievements in key areas such as tax reforms to fix heavily indebted state finances and trade liberalization to help companies compete abroad.

“What the public wants to see is progress,” said Tsuneo Watanabe, a political analyst at the Tokyo Foundation think tank.

“If he acts, there will be criticism but also support.”

Kan, who took office in June as Japan’s fifth premier since 2006, has come out swinging on several fronts in the new year.

He is raising again the touchy topic of boosting Japan’s 5 percent sales tax to fund ballooning social welfare costs and curb a public debt twice the size of the $5 trillion economy.

He is also pitching the need for trade liberalization keenly sought by businesses but opposed by powerful farm lobbies.

“What I am stressing most is a counter-offensive to deal with political issues that have been put off,” Kan wrote in his blog this week.

“I want this year to energetically and courageously confront issues that can no longer be postponed.”

Kan’s more aggressive stance might not only come too late to impress voters but also risks angering opposition parties just when their cooperation is needed to pass laws in parliament.

Opposition parties control the upper house and can block bills, including those needed to implement the 2011/12 budget.

“A counter-offensive is fine in terms of seizing the policy initiative, but when it comes to the budget process, you have to build bridges and alliances and he hasn’t done anything to secure a legislative majority,” said Sophia University’s Koichi Nakano.

SENGOKU’S FATE

Kan has also upped the ante in a clash with powerbroker Ichiro Ozawa that has caused a rift in the ruling party, hinting the veteran strategist should not only leave the party but resign from parliament after he is indicted over a funding scandal. A judicial panel has ruled he must be indicted.

Ozawa has denied any wrongdoing in the scandal over suspected misreporting by his political funds body, but clipping his wings would please voters put off by his image as a backroom fixer.

What Kan has not yet made clear is whether he will yield to opposition demands to dump his de facto deputy, Chief Cabinet Secretary Yoshito Sengoku, to clear the way to enact bills needed to implement the state budget for the year from April.

Kan may not be able to avoid that painful decision, since Sengoku was censured by the upper house late last year and opposition parties have threatened to boycott business in the coming parliament session if Sengoku stays.

But ditching Sengoku could destabilize Kan’s government given the shortage of suitable candidates to fill a position that is central to coordinating policies and making decisions.

“The question is, who will replace him?” said Tokyo Foundation’s Watanabe, adding that Defence Minister Toshimi Kitazawa, mentioned in domestic media as a candidate, would probably do reasonably well in the key post.

Japanese media said on Thursday Kan was considering replacing Sengoku in a mid-January cabinet reshuffle but would likely retain Finance Minister Yoshihiko Noda.

Kan, a former civic activist once known as a fiery debater, has disappointed voters since taking office, leading his party to defeat in a July upper house poll after sloppily floating the notion of doubling the sales tax. He then came under fire for appearing to cave in to Chinese demands in a territorial row.

Kan has also been bedeviled by a split in his Democratic Party of Japan over how to handle Ozawa, who was widely credited with helping the DPJ sweep to power for the first time in 2009 but whose scandal-tainted image has haunted the party since.

Whether Kan can regain lost momentum remains in doubt, especially since tough policy decisions remain to be made.

Kan called on Monday on opposition parties to join talks on tax and social security reform with an aim of thrashing out plans by June, and set a similar deadline for deciding whether to join a U.S.-led free trade initiative, the Trans-Pacific Partnership.

But his own party has yet to forge a consensus on either.

“I think it is completely up in the air,” Waseda University professor Tetsuro Kato said of the chance of success for Kan’s strategy to turn around his fortunes. (Additional reporting by Yoko Kubota; Editing by Robert Birsel)

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