ANALYSIS - New Japan govt has problems with chain of command

TOKYO Tue Oct 6, 2009 3:44pm IST

Japanese Prime Minister-elect Yukio Hatoyama makes an opening speech at Asahi World Environment Forum 2009 in Tokyo September 7, 2009.  REUTERS/Toru Hanai /Files

Japanese Prime Minister-elect Yukio Hatoyama makes an opening speech at Asahi World Environment Forum 2009 in Tokyo September 7, 2009.

Credit: Reuters/Toru Hanai /Files

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TOKYO (Reuters) - Japan's outspoken banking regulator, Shizuka Kamei, known for his anti-market rhetoric, is proving a serious thorn in the side of new Prime Minister Yukio Hatoyama's government just three weeks after it took power.

While Kamei may be an extreme case, Hatoyama's Democratic Party-led government could face similar, if less jarring, headaches as it introduces a new governing style that puts politicians in the driver's seat when it comes to making policy.

Already this week, Kamei has grabbed headlines by blaming Japan's biggest business lobby for a spate of murders within families because companies put profits ahead of people.

Kamei had previously jolted financial markets by proposing a loan moratorium aimed at helping small firms, a move experts worry could hurt banks and keep inefficient firms afloat.

And on Tuesday, he engaged in a blatant bit of verbal jawboning against the Bank of Japan (BOJ) reminiscent of the long-dominant Liberal Democratic Party in its heyday, telling a news conference now was not the time for the central bank to discuss ending support measures for corporate funding.

Those comments may well have reflected the government's desire for the BOJ to keep its funding-support schemes in place given the fragility of Japan's recovery from its worst recession in 60 years -- but analysts said Kamei sounded far too blunt.

"The Democratic Party of Japan (DPJ) is trying to introduce a new form of political leadership, but this is old-style," said Yasunori Sone, a Keio University political science professor.

"It's a performance to raise his profile, but it's not good for the cabinet, and it's not good for the DPJ."

Finance Minister Hirohisa Fujii has expressed doubts about Kamei's loan moratorium and a government task force is scurrying to come up with a plan that will save his face but not upset financial markets and bankers too much.

Hatoyama's Democrats must put up for now with Kamei's party and the pacifist Social Democrats, both of whose support it needs in parliament's less powerful upper house to enact laws smoothly.

DISSONANT MESSAGES

That means ditching the outspoken minister would be tough, if not impossible, unless and until the Democrats win an outright majority in an upper house election next year, although his more extreme proposals are likely to be toned down, analysts said.

Market players seem to be learning to take Kamei's comments with a grain of salt, not least because of his personality.

Once an LDP heavyweight, the gravely voiced 72-year-old lawmaker bolted the then-ruling party in 2005 to oppose a plan to privatise the giant postal system.

"Kamei doesn't speak based on logic, he makes very emotional appeals," said Katsuhiko Nakamura, director of research at think-tank Asian Forum Japan.

But Hatoyama's cabinet risks sending similarly dissonant messages if it fails to put in place a clear chain of command for a new governing structure that gives cabinet members more clout.

The change in governance, a sharp shift from the long-dominant Liberal Democrats' reliance on bureaucrats, is intended to help cut wasteful spending and reprioritise policies to cope with the tough challenges of a fast-ageing society.

However, it is also opening the door to confusing remarks by cabinet ministers eager to make their mark, analysts said, although they added teething problems for the new government were hardly surprising.

"Kamei is particularly problematic, but all the new cabinet ministers want to show that they are working hard," said Mikitaka Masuyama, professor at the National Graduate Institute for Policy Studies. "Everyone wants to make their own appeal."

The seeming dissonance extends to the diplomatic front, too.

Defence Minister Toshimi Kitazawa told reporters on Tuesday that extending a naval refueling mission in the Indian Ocean in support of U.S.-led operations in Afghanistan was not an option, just one day after a parliamentary defence secretary said the government should explore ways to keep the mission going.

Foreign Minister Katsuya Okada has said Japan would not "simply" extend the mission, the legal mandate for which expires in January, but has declined to elaborate on what "simply" means.

Political analysts said the government needed to clarify where the ultimate responsibility for decisions lay.

"Hatoyama is trying to create a system of decision-making led by the prime minister and the cabinet, but it is not yet unified," Nakamura said. "They need to quickly formulate rules."

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