Asia’s largest economy was left rudderless again yesterday after Japan’s prime minister quit suddenly, sparking concerns that free-market reforms will be put on a backburner as a recession looms.
There was a weary sense of deja vu on financial markets, as the return of the revolving door politics of the recession-ridden 1990s left the country searching for its third prime minister in less than two years.
Whoever replaces Yasuo Fukuda will inherit the same problems — a deadlocked parliament, a worsening economy, an ageing population and huge public debts.
PHOTO: EPA
The Nikkei stock index ended down 1.75 percent while the yen was higher.
“The political uncertainty may add volatility to the market in the short term,” warned Kenichi Kawasaki, chief economist for Lehman Brothers in Tokyo.
“However, we do not expect economic policies to change significantly as a result of a change in the prime minister,” he said, predicting the ruling party could be forced to hold an autumn general election.
Fukuda’s surprise announcement late on Monday came after he failed to reverse a slump in his popularity despite unveiling a major economic stimulus package.
Many investors had already been disillusioned about the prospects for further economic reform given the legislative deadlock and signs that the ruling party is more concerned about the next election.
“There is already political deadlock and elections are expected in the coming year,” said Kazuhiro Takahashi, head of equities at Daiwa Securities SMBC.
Former foreign minister Taro Aso, seen by many as the front-runner to replace Fukuda, would be likely to push for increased government spending to support the economy if he takes office, analysts said.
Aso would “appeal for an increase in budget-spending to support economic activity,” predicted John Richards, head of Asia-Pacific Strategy at RBS Securities.
Until recently, Japan’s economy had been recovering from a slump stretching back more than a decade. But a contraction in the second quarter left the country teetering on the brink of recession.
Some experts said the change of leadership could be positive in the long run if it helps to bring about a realignment of Japanese political forces, with reform-minded politicians taking power.
Fukuda’s resignation “will be a disruption for Japanese politics and markets in the short run, but provide support in the medium to long run,” Morgan Stanley economists wrote in a note to clients.
Reform efforts lost momentum after Junichiro Koizumi stepped down as premier two years ago.
He set out to slash public works spending and break up the post office with its US$3 trillion in assets, which were used to bankroll often wasteful but politically popular public works projects.
The political stalemate has heightened nostalgia on the market for Koizumi, although observers say chances are low he would mount a comeback.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary
THUGGISH BEHAVIOR: Encouraging people to report independence supporters is another intimidation tactic that threatens cross-strait peace, the state department said China setting up an online system for reporting “Taiwanese independence” advocates is an “irresponsible and reprehensible” act, a US government spokesperson said on Friday. “China’s call for private individuals to report on alleged ‘persecution or suppression’ by supposed ‘Taiwan independence henchmen and accomplices’ is irresponsible and reprehensible,” an unnamed US Department of State spokesperson told the Central News Agency in an e-mail. The move is part of Beijing’s “intimidation campaign” against Taiwan and its supporters, and is “threatening free speech around the world, destabilizing the Indo-Pacific region, and deliberately eroding the cross-strait status quo,” the spokesperson said. The Chinese Communist Party’s “threats
RSS