Friday, August 27, 2010

Japan's new round of musical chairs....and the USA's shenanigans in East ASIA....

Japan's new round of musical chairs
....and the USA's shenanigans in East ASIA....

By Kosuke Takahashi

TOKYO - Around the globe, poor economies are weakening already vulnerable governments and causing political changes. This was so in the United Kingdom in May and is likely to be reflected in the November mid-term elections in the United States.
Japan is no exception. With the country facing a rising yen, sluggish domestic demand and unstoppable deflation - all significant contributing factors to the sinking of the world's long-time second-largest economy, musical chairs with the top job may possibly burden the nation with its third premier in a year.

Political kingpin Ichiro Ozawa, 68, a member of the governing Democratic Party of Japan (DPJ), on August 26 took on Prime Minister Naoto Kan, 63, declaring his candidacy for the party leadership. The outcome of that race will essentially decide Japan's next leader.

The government on Friday offered a pessimistic view of the economy. Japan's consumer prices continued to decline in July for the 17th straight month, another sign that the economy remains mired in a deflationary spiral that is pushing down prices, wages and demand. The yen hovered near a 15-year-high against the US dollar, trading at 84.64 yen a dollar at 4:50 pm in Tokyo.

The fate of the DPJ presidential race has far-reaching implications beyond the domestic arena of politics. Ozawa has said that the US 7th Fleet, based in Yokosuka, Kanagawa prefecture, would be enough to secure the US presence in the Far East from a strategic viewpoint - suggesting that he supports withdrawal of all other US forces from Japan, including the controversial US Marines Corps base in Okinawa.

In December, Ozawa, then secretary general of the DPJ, accompanied more than 600 people, including 143 DPJ lawmakers from the upper and lower houses of the Diet (parliament), to Beijing - showing his pro-China stance as a direct successor of former prime minister the late Kakuei Tanaka, who broke the ice to normalize Japan-China relations in the early 1970s.

The Destroyer

Ozawa, a shrewd veteran lawmaker and former Liberal Democratic Party secretary general, has earned himself the nickname "The Destroyer", a Japanese version of the Hindu god Shiva the Destroyer, for his record of creating and breaking up parties and for crushing personal ties and letting go of many talented aides.

He stepped down as DPJ secretary general in June, wounded by a political donation scandal that has already led to the arrest of his three secretaries, along with the party's then-leader and prime minister, Yukio Hatoyama.

Ozawa still has past accounting violations at his political fundraising organization, or Rikuzankai, hanging over his head. He could be brought to trial, depending on a ruling by a citizens' panel expected as early as October. But should he become the next prime minister, the law could protect him from indictment for the duration of his tenure for a questionable land transaction by his implicated fundraising body.

Strong-arm tactics and risk-taking
Although he conjures up tainted images as a politician among ordinary people, more than a few lawmakers and some business leaders expect Ozawa to boldly address national problems through his strong-arm tactics and risk-taking - by confronting and reining in the bloated bureaucracy, including the Ministry of Finance and the Bank of Japan, and then taking more pump-priming measures.

Ozawa decided to throw his hat into the ring for the presidency of the DPJ as he felt a restless urge about the future of his fading political influence, Minoru Morita, a noted political analyst based in Tokyo, said.

"Heading into the party election, Kan refused to accept Ozawa’s demands, such as the dismissal of chief cabinet secretary Yoshito Sengoku and current secretary general Yukio Edano, both Ozawa foes," Morita told Asia Times Online on Friday. "This made Ozawa decide to run for the election. For sure, he is damned if he does so because he resigned as the DPJ's secretary general less than three months ago. But he would also by damned if he doesn't, because he surely faces the end to his career by losing his political power."

"If the presidential election were held today, Kan would beat Ozawa because of the strength of the incumbent premier holding power and position," Morita said. "But in the DPJ presidential election scheduled for September 14, there would have been a major reversal in this situation. Ozawa may win."

Japanese economists and market participants are divided over the prospects of the economy should Ozawa take over as prime minister.

Critics view Ozawa as a fiscal expansionist by sticking to the party's 2009 platform that was criticized as rampant spending. They predict extra spending could trigger selling in Japanese bonds and the yen, just like with Greek bonds and the euro.

Proponents, meanwhile, say Ozawa would be better to tackle the rising yen and falling Japanese stocks by taking aggressive measures, much more so than Kan, who seems to have fallen behind the curve since taking over in June this year, even though Kan was a finance minister.

A Japanese proverb says, "One poison drives out another." Ozawa may be a tainted hero who could cause major political and economic change. People are increasingly focusing on the DPJ presidential race - it could be a good measures of how much ordinary people want a leader to revive the fading country, once called an "Economic Animal" and now facing a "lost three decades".

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