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Sunday, Oct. 3, 2010


Mr. Kan's to-do list trumps vision

As Japan faces serious domestic and diplomatic challenges, a 64-day extraordinary Diet session started Friday with Prime Minister Naoto Kan's policy speech. The speech drew particular public attention because it was his first policy speech following his re-election as head of the Democratic Party of Japan on Sept. 14, beating former DPJ Secretary General Ichiro Ozawa and thus securing his job.

He pointed out in his speech that, at home, Japan faces economic doldrums that have lasted 20 years, a high suicide rate, and poor progress from measures aimed at coping with the low birthrate and rapidly graying population.

In the row with China over the Sept. 8 arrest of a Chinese fishing boat captain following the fishing boat's collision with two Japan Coast Guard patrol boats inside Japanese territorial waters near the Senkaku Islands in the East China Sea, Japan demonstrated a lack of dexterity in handling the matter and was criticized for being weak-kneed to China.

Mr. Kan's policy speech largely turned out to be a list of policy measures that people had heard earlier. This is understandable because Mr. Kan must quickly implement measures to help Japan overcome such problems as a strong yen, persistent deflation and deteriorating state finances.

Thus he was short in presenting a grand vision of what kind of nation he wants to build after Japan overcomes the pressing problems. He also failed to show a grand diplomatic strategy to help secure Japan's stability and prosperity in the rapidly changing international environment. He must be mindful of the danger that some people's sense of helplessness will continue unless he presents inspiring goals — political, social, economic and cultural — for the nation to pursue.

Spelling out his basic thinking about the economy, Mr. Kan said that enterprises' cost-cutting efforts amid a demand shortage will worsen deflation. He called for shifting emphasis from the supply side to the consumption side, which appears reasonable. He said that government measures to create jobs in such fields as medical, nursing care and child rearing-related services and eco-friendly industries will help increase demand and enliven economic activities.

He will follow three steps to attain economic growth and increase employment. In the first step, he will spend a ¥920 billion emergency fund in the fiscal 2010 budget to cope with a steep rise in the value of the yen against the dollar and pull the economy out of deflation. In the second step, he will ask the Diet to approve a supplementary budget for fiscal 2010. He did not mention the size of this budget. It is expected to be as high as ¥4.6 trillion. The third step will be the passage of the fiscal 2011 budget.

Mr. Kan said that Japan has procrastinated on important policy issues. He must see to it that his economic policy measures produce results. But with regard to deflation, he only expressed the hope that the Bank of Japan will closely work with the government. One also wonders whether a ¥1 trillion special fund to "revitalize Japan" in the fiscal 2011 budget will be enough to create new growth and new jobs in new economic fields.

Mr. Kan hinted at lowering the corporate tax. But there is no guarantee that enterprises will use the saved money to increase employment. It might lead only to enterprises' increasing their internal reserves, which are estimated to have totaled more than ¥240 trillion at the end of March. Priority should be given to simplifying the corporate tax.

Mr. Kan said he will push discussion of tax system reform, including the consumption tax, to secure funds for social welfare. As he said, it will be important to present people several choices, each showing both the financial burdens and the welfare benefits.

Mr. Kan said that the international community is at a "historical watershed" in both security and economic matters and called for proactive diplomacy. With regard to China following the Senkaku incident, he expressed the hope for "China's appropriate role and words and deeds" and stressed the importance of acting in a coolheaded manner. But he failed to show concrete ways to build stable Japan-China relations.

As for the relocation of U.S. Marine Corps Air Station Futenma from a densely populated area in the central part of Okinawa Island, Mr. Kan said that the government will explain with sincerity to the Okinawan people the May agreement between Japan and the U.S. to move the Futenma functions to Henoko in the northern part of the island while trying to reduce the overall burden of U.S. bases on Okinawan people. It's as if he deliberately shut his eyes to the fact that Okinawan people's opposition to the agreement by now has made it extremely difficult to implement the plan.

Mr. Kan declared that his Cabinet will follow through on what it has promised. Whether he can live up to his word mostly depends on whether he can get cooperation from the opposition forces, which control the Upper House. He must be prepared to see his political acumen and leadership skills severely tested during this Diet session.

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