One of the first things Yoshihiko Noda said in his victory speech after winning the race for leader of the ruling Democratic Party of Japan was to call time on the internal feuding within the DPJ that has set back urgently needed reforms and delayed post-quake rebuilding.
In sports-mad Japan, Noda used an antiquated Anglo-Japanese rugby term that resonated. ‘No-Saido,’ he told DPJ members, or ‘no side’ – referring to the end of a bruising match. In the context of Japan’s political scrums, Noda’s message was let’s call full-time on the bickering and work for the greater public good.
Admirable sentiments but easier said than done perhaps. The market will be looking for specifics and substance. If Noda fleshes out plans for a grand coalition that cuts across party lines, then this could help smooth the passing of key reforms.
And once unity’s restored there are Herculean tasks to accomplish.
Amongst the challenges - keeping Japan’s currency contained, reconstructing devastated homes and businesses in the quake-hit northeast, thrashing out a sound fiscal framework as well as developing an energy policy amid public unease about nuclear power.
Yes, Noda has been proactive in trying to deal with the strength of the Japanese currency though his last attempt at intervening in the currency markets on August 4 had very limited lasting impact. Still, he has tried to think creatively and the $100 billion credit facility announced last week is a step in the right direction.
Looming large of everything is Japan’s huge public debt burden.
Moody’s – which cut Japan’s sovereign debt last week by one notch – said it would be monitoring the reform very closely. "We will be watching closely to see what policies come out," said Thomas Byrne, the ratings agency’s lead Japan sovereign analyst. "If the roadmap contains more detail, that would be credit positive."
Noda is perceived as a fiscal conservative. As finance minister, he has backed government proposals to double the 5 percent sales tax by the middle of the decade to help fund burgeoning social security costs and curb public debt, which is double the size of the $5 trillion economy.
Nevertheless, many expect Noda to adopt a very cautious strategy on the timing of tax increases. Counting against him is the perception amongst many political analysts that Noda is too close to the powerful bureaucrats in the Ministry of Finance and Bank of Japan, and that he isn’t an independent thinker.
Arguably, the most pressing policy task ahead of Noda is the question of reconstruction of the northeast after the triple disasters of March 11. Public resentment towards Tokyo’s politicians is growing due to the lack of progress made. Almost six months after the biggest disaster in Japan’s post-war history, tens of thousands are still living in temporary shelters.
Noda may survive his term as DPJ leader, which expires in September 2012. But with a general election looming in the summer of 2013, Noda needs to produce solid results to win a mandate from a public increasingly weary of official inaction.