New Japan PM faces tests on diplomacy, economy

by Kyoko Hasegawa, Agence France-Presse

Posted at Dec 26 2012 12:33 PM | Updated as of Dec 26 2012 08:33 PM

TOKYO - Japan's new premier faces a long to-do list as he takes office Wednesday, including mending ties with Asian neighbours and reviving a limp economy that bedevilled previous governments, analysts say.

High on the agenda for Shinzo Abe will be addressing prickly relations with China and South Korea, which greeted his rise to power with alarm after a series of hardline comments on territorial disputes and a conservative position on sensitive issues linked to Japan's imperialist past.

Tokyo is embroiled in bitter rows over separate island chains claimed by Beijing and Seoul, which have raised their eyebrows at Abe's musings about revising Japan's post-World War II pacifist constitution.

However Abe, who has been premier before, is unlikely to follow through on his hard-right rhetoric at least until he solidifies his power base after elections in Japan's upper house of parliament next year, said Jiro Yamaguchi, a politics professor at Hokkaido University.

Abe botched the diplomatic file during his lacklustre 2006-2007 tenure in Japan's top political job, sparking controversy by saying he wanted to review the country's previous admissions over the touchy issue of wartime sex slavery.

He argued there was no evidence Japan's imperial army directly coerced thousands of so-called "comfort women" into brothels across Asia during World War II, prompting a call from US lawmakers for a fresh apology from Tokyo.

The now 58-year-old leader quickly backpedalled, saying he supported Japan's landmark 1993 apology over the comfort women issue, expressing similar sympathies during a visit to the United States five years ago.

"If he makes those kinds of gaffes again by professing his conservative beliefs, Japan would be isolated from the rest of the world," said Yamaguchi, a former key policy advisor for the centre-left Democratic Party of Japan (DPJ), which was booted from power this month.

"Voters didn't give him a mandate to pursue his conservative policy agenda but they wanted to punish the DPJ for its various policy failures," he added, referring to the national elections earlier this month.

But even Abe conceded the victory -- based largely on promises to inject life into Japan's moribund economy while getting tough on diplomacy -- was far from a resounding show of support for his LDP.

The party had ruled Japan for most of the past six decades until the DPJ's historic electoral upset in 2009 with promises to shake up Japan's staid political scene.

However, the DPJ stumbled due to policy flip-flops, a failure to turn around the economy and a sometimes confused response to last year's quake-tsunami disaster, which sparked the worst atomic accident in a generation.

"The DPJ failed to realise its own election pledge for social equality and improving peoples' quality of life as the gap between rich and poor widened," said Shigeki Uno, a professor of political thought at Tokyo University.

The world's third-largest economy has been hit hard by financial turmoil in Europe, an export-sapping strong yen and a diplomatic row with China that weighed on trade, dousing hopes Japan had cemented a recovery after last year's disasters.

Tokyo is also grappling with a public debt that is more than double gross domestic product, the worst in the industrialised world and a debt mountain that keeps growing as a rapidly ageing population leans on the social security system.

Abe pledged to boost Japan's fortunes by pressing the central bank to take more aggressive monetary policy measures while promising a huge government spending package worth about $118 billion.

The incoming leader met the head of the Bank of Japan last week, calling on him to strike a policy deal with government.

Two days later, the BoJ announced fresh monetary easing measures, a move widely seen as stoked by comments from Abe who appeared to challenge the central bank's independence.

However, Abe's prescription to cure Japan's woes has been dismissed by some economists as likely to worsen the fiscal situation while doing little to boost growth, especially if the money disappears into white elephant projects.

Another key challenge for the new administration is whether to embrace or reject the pork-barrel politics honed under successive LDP regimes, said Hiroshi Hirano, politics professor at Gakushuin University.

Joining the Trans-Pacific Partnership, a regional free trade deal that has sparked ire in the protected agricultural sector among others, would help force long-called-for structural change in Japan's economy, Hirano said.

"Japan needs a truly functioning growth strategy that prompts industrial sector restructuring," he said.

"But this would collide with demands from vested interest groups.

"If the LDP wants to address the needs of these traditional support groups by spending on infrastructure, for example, it has to show it has the bankroll."

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