The World Economy... - 3/6/2010

Japan Is In Political Struggle Again That May Hammer Its Efforts To Cut Debt

Japan’s Prime Minister, Yukio Hatoyama, resigned yesterday, as money scandals and a broken promise to move US troops forced him to step down. The Prime Minister lost credibility with voters after breaking a campaign promise by deciding last week to uphold an accord reached between a previous LDP-led administration and Washington to keep US forces in Okinawa. The decision angered the Social Democratic Party of Japan, which abandoned the coalition government in protest, and drove the Prime Minister’s support ratings to 20%, comparable to his predecessor, Taro Aso, just before the LDP’s defeat last summer. The Prime Minister’s term was the shortest for a Japanese leader since 1994, and his resignation will force parliament to select the nation’s fifth prime minister in four years. The end of the Hatoyama administration highlights the difficulties of achieving political change in Japan, which has suffered four recessions and persistent deflation since 1990. As a result, stocks fell and the yen weakened on concern political instability may hamper Japan’s efforts to cut public debt, the world’s largest, ahead of mid-term elections next month. Ratings companies have signaled that they are awaiting the government’s budget proposals to assess Japan’s credit standing.

The World Economy... - 3/6/2010