Japan's lower house elects Noda new prime minister - BusinessWeek

TOKYO

Japan's lower house has elected former Finance Minister Yoshihiko Noda as the country's new prime minister.

The less powerful upper house, controlled by the opposition, still needs to vote. If it rejects Noda, the lower house will vote again, where Noda is virtually assured of winning again. The vote took place Tuesday.

Noda, seen as a fiscal conservative, will face a host of daunting problems, including the post-tsunami recovery, nuclear crisis, sluggish economy and yen's surge.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

TOKYO (AP) -- Japan's prime minister and his Cabinet resigned en masse on Tuesday ahead of a vote in parliament to install former Finance Minister Yoshihiko Noda as the country's new leader.

Noda, seen as a fiscal conservative, will face a host of daunting problems, including how to fund the recovery from Japan's devastating March 11 earthquake and tsunami, the ongoing nuclear crisis touched off by the disaster, and the rapid strengthening of the nation's currency on international markets.

Noda was elected Monday to head the ruling Democratic Party of Japan, virtually insuring that he would be named prime minister in the parliament vote expected later Tuesday. He succeeds the unpopular Naoto Kan, who quit after 15 months in office.

He must seek to unify the fractious ruling party and restore public confidence in politics amid widespread disgust over squabbling in parliament and perceived lack of leadership in the wake of the triple disaster.

Noda is a "moderate voice" in the ruling party, Sheila Smith, a senior fellow at the Council on Foreign Relations in Washington, wrote in a comment. "He has a steady temperament and a reputation for fairness in a party where loyalties have been severely tested of late."

On Monday, Noda defeated Trade Minister Banri Kaieda -- who was backed by an influential party powerbroker -- in a run-off election 215-177 among ruling party members of parliament after none of the initial five candidates won a majority in the first round.

After the vote Noda, 54, called for party members to put aside differences and "sweat together for the sake of the people."

He will become Japan's sixth prime minister in five years. The last five have each lasted about a year.

Noda supports free trade and building a stronger partnership with the United States, but given the pressing needs at home, "diplomacy is not likely to be at the top of his priority lists," Smith wrote.

Noda has angered China and South Korea for comments about convicted wartime leaders revered at the Yasukuni Shrine in Tokyo, where the souls of all Japan's war dead are enshrined. Earlier this month, he reiterated his claim that the wartime leaders had paid their debts and should no longer be seen as war criminals. He made similar comments in 2005.

Yasukuni visits by postwar politicians have often enraged Japan's neighbors, who bore the brunt of Japan's colonial aggression and are sensitive to any efforts by Japan to whitewash its past. Noda made his comments in response to a reporter's question on the Aug. 15 anniversary of Japan's World War II surrender. He and the rest of Prime Minister Naoto Kan's Cabinet chose not to visit the shrine this year.

China's official news agency warned Noda on Monday to not to ignore Beijing's "core interests" or seek to portray it as a threat to regional peace and stability. In a harshly worded editorial, Xinhua demanded Noda not visit Yasukuni and said Tokyo must recognize China's claim over Japanese-controlled islands known as Senkaku, or Diaoyutai in Chinese.

The two countries got into a spat last year when a Chinese fishing boat captain was arrested -- and later released -- by Japan after his boat sailed close to the islands.

Noda will likely be preoccupied with tackling the huge tasks at home. Nearly six months after the quake-spawned tsunami devastated Japan's northeastern coast, dozens of towns are still cleaning up and struggling to come up with reconstruction plans. The nuclear plant in Fukushima has displaced about 100,000 people, and the quake-prone country is also striving to hammer out a clear stance on the future of nuclear power generation.

Japan's economy, the world's third-largest, has been sluggish for the last 20 years and its population is aging, putting a greater tax burden on the younger generation.

As finance minister, Noda has been battling the yen's recent rise to record highs against the dollar, which hurts Japan's exporters. Earlier this month, he authorized Japan's intervention in global currency markets to try to weaken the yen.

Noda has also said Japan must rein in its huge deficit -- twice the country's gross domestic product -- and has voiced support in the past for raising the country's 5 percent sales tax, but has toned that down lately.

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Associated Press writer Eric Talmadge contributed to this report.

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Japan elects new PM, may be ruling party's last chance (Reuters)

TOKYO (Reuters) – Japan's parliament voted in a new prime minister on Tuesday, perhaps the last, best chance for the ruling Democratic Party to begin pulling the country out of decades of stagnation.

Yoshihiko Noda, a 54-year-old former finance minister who wants to curb Japan's huge public debt, becomes the country's sixth prime minister in five years.

While tackling myriad ills dogging the world's third-biggest economy, he must unify warring factions in his own party and win over the opposition, which can block bills in parliament.

The hurdles to governing are high and the policy problems legion, but some optimists suggest that the low-key Noda might succeed where his combative predecessor Naoto Kan failed.

"In Japanese tradition, the less lustrous politicians have tended to be more effective," said Andrew Horvat, director of the Stanford Japan Center in Kyoto, comparing Noda to the late Keizo Obuchi, who was dubbed "cold pizza" when he took office in 1998 but used his "Everyman" image to win voter support.

"This is not a time for big talk and inappropriate action."

Noda's unassuming image contrasts with that of the famously irascible Kan, while his humble origins -- his parents were both from poor farming families -- set him off from the Democrats' first prime minister, the aristocratic Yukio Hatoyama.

But other analysts warn that the compromises Noda needs to win over opponents in the party -- he was one of five candidates for PM -- could dilute his fiscal reform agenda. He placed second in the first round of party voting and only won in the run-off.

The novice Democratic Party of Japan (DPJ) swept to power just two years ago promising to change how Japan is governed but quickly faltered due to diplomatic missteps, policy flip flops, internal bickering -- and the sheer scale of Japan's problems.

Now, as its third prime minister takes power, the DPJ's support rates lag behind those of its main rival, the long-dominant Liberal Democratic Party (LDP). If Noda fails, his party would probably lose the next general election, which must be held by late 2013.

Noda faces a mountain of challenges: coping with a strong yen that threatens to hit exports, forging a new energy policy while ending a radiation crisis at a crippled nuclear plant, rebuilding Japan's tsunami-devastated northeast and finding funds to pay for that and vast social security costs of the aging society.

He acknowledged on Tuesday that the economy faces risks, but repeated his call for "prudent fiscal management."

Media said he was considering appointing DPJ Secretary General Katsuya Okada or ex-chief cabinet secretary Yoshito Sengoku, both fiscal conservatives, as finance minister.

REACHING OUT TO RIVALS

Noda also told his last news conference as finance chief that he wanted to consult opposition parties, who control parliament's upper house and can block bills, on legislation to double the 5 percent sales tax by mid-decade as well as on funding for reconstruction. He has previously floated the idea of a coalition with the two biggest opposition groups.

Noda's party rivals in the race for PM were opposed to raising taxes to pay for reconstruction. They agreed on the need to raise the sales tax but were more cautious about the timing.

Opposition parties are also against a reconstruction tax, but the biggest opposition group, the LDP, is on the same page as Noda on a sales tax hike.

"... there is quite a lot of consensus both within the factions of the DPJ and between the DPJ and the opposition, the LDP, on the need for fiscal consolidation and the type of measures that need to be done," said Andrew Colquhoun, head of Asia-Pacific Sovereign Ratings for Fitch Ratings.

"However, 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," Colquhoun told Reuters Insider Television.

Noda was not the most publicly popular of contenders in the party leadership race, nor did he have the strongest support base inside the party. But he has been opposed to party strongman Ichiro Ozawa and critics of the strongman rallied around Noda in the second round to vault him to victory.

Noda now appears ready to reach out to Ozawa's backers.

Azuma Koshiishi, an upper house lawmaker close to Ozawa, has agreed to take on the key post of DPJ secretary-general, the party's No.2 position.

Noda also tapped former Foreign Minister Seiji Maehara for the party's policy chief post. Maehara ran against Noda in the first round of the DPJ's leadership election, but backed him in the run-off.

But despite hopes that Noda might fare better than his five predecessors, none of whom has lasted much more than a year, many pundits are already predicting his political demise.

"The difficult structural problems remain -- a divided party, hostile opposition parties that deprive the government of a majority in the upper house, and mountains of difficult and divisive problems facing the country," said Sophia University professor Koichi Nakano.

"These present a very high hurdle for anyone who wants to stay in office. Noda is rather more likeable and less tainted ... but how long he will last, I don't know."

(Additional reporting by Shinichi Saoshiro, Tetsushi Kajimoto and Kiyoshi Takenaka in Tokyo and Lucy Hornby in Beijing; Editing by Nick Macfie)

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