TOKYO, Feb 22 (Reuters) - New Japanese Finance Minister Kaoru Yosano, a master of the chess-like game of Go, will need all his tactical skills if he is to get the world’s second-largest economy out of its deepest recession in more than a generation.
A veteran politician who favours hiking taxes to repair Japan’s tattered public finances, Yosano is worried that big fiscal spending will only add to public debt now running at about 150 percent of gross domestic product, by far the highest among major developed countries.
Prime Minister Taro Aso picked Yosano as finance minister last Tuesday to replace Shoichi Nakagawa, who resigned after being forced to deny he was drunk at a G7 news conference in Rome last weekend. [ID:nT79787]
Analysts say Yosano’s appointment is unlikely to lead to any major change in economic policy, and his time in the hot seat may also be limited given the plunging popularity of the Aso government.
“Yosano has been forming the basic economic policy of the Aso administration, and his views are seen to be akin to those of the finance ministry,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
But the 70-year-old fiscal hawk may have a tough time finding enough hours in the day to juggle his new finance and banking supervision portfolios with his role as economics minister.
His connections among government bureaucrats may help him, but the workload has already kept him from travelling to Phuket in Thailand to attend the ASEAN+3 finance ministers’ meeting on Sunday.
“It’s a huge problem that Japan is unable to send a finance minister to international meetings at a time like this,” said Koichi Haji, chief economist at NLI Research Institute.
Grandson of two well-known poets, Yosano started his political career in 1968 by joining the office of Yasuhiro Nakasone, who was prime minister in the 1980s.
As economics minister, Yosano has tried to strike a balance between fiscal discipline and the need to support the economy amid the worst global financial crisis in decades.
Indeed, he has urged restraint from those calling for extra government spending of up to 30 trillion yen ($322 billion) in the wake of recent data showing the economy shrank the most in nearly 35 years in the quarter to Dec. 31. [ID:nT74412]
But he has also become more flexible about spending to get the economy out of recession, and last year spearheaded the compilation of a stimulus package now in parliament that includes 12 trillion yen in spending for the current year.
Yosano has even signalled that the government could come up with more steps to resuscitate the economy as the fallout from the global financial crisis widens.
“The situation is changing rapidly, and it’s changing due to factors the Japanese government cannot control,” Yosano told a television programme earlier this month, adding that it would be wise to examine further spending to support the economy.
Yosano backed the Bank of Japan in 2006 when it wanted to raise interest rates in the face of a pick-up in inflation, in contrast to some ruling party lawmakers.
He is thus unlikely to put explicit pressure on the central bank to ease credit, especially when Japanese interest rates are near zero and the bank is already adopting a range of steps to free up cash.
Still, Yosano’s time in office may be short. Polls suggest the opposition Democratic Party of Japan stands a good chance of winning elections for parliament’s lower house that must be held by October. [ID:nPOLJP]
The prime minister’s support ratings have plummeted after a series of policy gaffes and flip-flops as he struggled to deal with the recession, and Nakagawa’s resignation has only made things worse.
With the increasingly feisty opposition already in control of the upper house, Yosano is unlikely to be able to push any major policy initiatives, some analysts say. (Editing by Mathew Veedon)