video Video

Is Noda the man with a plan?

Thursday, September 01, 2011 - 02:53

Sept. 1 - Will Yoshihiko Noda succeed in fixing Japan's political divisions and ailing economy, where five others before him have failed? Kei Okamura reports.

▲ Hide Transcript

▶ View Transcript

Political deadlock runs deep in Japan's parliament, preventing desperately needed fiscal reforms. How to break this logjam falls to this man: Yoshihiko Noda, Japan's new Prime Minister. SOUNDBITE (Japanese) JAPAN PRIME MINISTER ELECT YOSHIHIKO NODA, SAYING: "A Democratic Party of the people must not let democracy die. We must grit our teeth and sweat it out for the people and create a stable politics for all." An inability to pass policy has led to dire consequences. Growth is anemic and Japan has the highest debt in the developed world. In the past foreign investors have ignored Japanese politics, but the stakes are higher this time around. Policy discord on both sides of the Atlantic is threatening growth worldwide. Morgan Stanley is among many banks forecasting the world economy will grow more slowly this year… SOUNDBITE (Japanese) WESTERN ASSET MANAGEMENT'S HEAD OF ASIA-PAC INVESTMENT MANAGEMENT, KAZUTO DOI, SAYING: "Europe and the U.S. debt ceiling problem turned out to be far greater than what was initially expected. The political situation became uncontrollable. And for investors, this is a type of risk that goes way beyond whether you can or cannot bet against it." SOUNDBITE (English) REUTERS CORRESPONDENT, KEI OKAMURA, SAYING: "Japan's economy faces a mountain of hurdles -- from delayed reconstruction to a strong yen, and of course, its biggest problem: a huge fiscal challenge To fix any of these issues will require Noda to heal divisions not only within his own party, but also with the opposition." But time is ticking. The cost of insuring Japan against default is rising. And the economy remains weak, with data this week indicating slowing growth in industrial output. Rating agencies aren't waiting. Moody's downgraded Japan this month, citing politics as one factor, and both S&P and Fitch have the country with a negative outlook. SOUNDBITE (English) FITCH RATINGS', ANDREW COLQUHOUN, SAYNG: The political calculations, the factional conflict and the partisan bickering between the LDP and DPJ have got in the way until now, and it will be interesting to see if Mr. Noda has any way of breaking through that jam. Prime Minister Noda has floated the idea of a grand coalition with the opposition, but the idea has had a cool reception. SOUNDBITE (Japanese) JAPAN NEW KOMEITO PARTY LEADER, NATSUO YAMAGUCHI, SAYING : The likelihood of a grand coalition succeeding is small and there are more factors that are likely to make it fail. Five previous prime ministers have thrown in the towel, showing just how difficult it is to bridge the deep divide in Japanese politics. So - is Noda a man with a plan? Or just another Japanese politicians who will dodge the tough decisions need to get the country back on its feet. Kei Okamura, Reuters, Tokyo.