Kan, 63, will become Japan’s fifth prime minister in three years, taking the helm as the country struggles to rein in a huge public debt, engineer growth in an ageing society, and manage ties with security ally Washington and a rising China. The Democratic Party of Japan picked Kan by an overwhelming majority to succeed unpopular Prime Minister Yukio Hatoyama, who quit this week ahead of an upper house poll expected in July that the ruling bloc needs to win to avoid policy deadlock. He was later voted in by parliament’s powerful lower house.
“With all of you, I would first would like to compile firm policies or plans to rebuild Japan ... ahead of the upper house election,” Kan said in his acceptance speech before leaving the stage and pumping his fist in the air.
Kan’s rise to the top job could spell bolder steps ahead to rein in a public debt that is already twice the size of the economy, although he faces opposition from many in his party ahead of the election. Hatoyama, his voter ratings in tatters, resigned on Wednesday just eight months after the Democrats swept to power pledging to cut waste, wrest control of policy from bureaucrats, and give consumers more cash so as to stimulate domestic demand.
His abrupt departure has raised concerns among investors that the government will delay efforts to thrash out plans, due out this month, to cut public debt and craft a growth strategy.
Financial market players generally welcomed Kan as Japan’s next leader. His selection improves the ruling bloc’s prospects at the polls, though many wondered how much would change. “If Hatoyama had remained the party would have had a big loss at the election and the political situation would have been chaotic,” said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research.
“But with Kan in charge now, the sense of stagnation in politics and the economy is receding somewhat, even though much will depend on the makeup of the cabinet.” Kan, a former health minister who got his start in politics as a grassroots activist, has forged an image as a fiscal conservative and occasional central bank critic since assuming the finance post in January.
He was among the few cabinet ministers to urge early debate on raising Japan’s 5 percent sales tax, a step economists say is vital to fund the huge social welfare costs of a greying society. Kan was likely to pick a fiscal reformer, Deputy Finance Minister Yoshihiko Noda, as his finance minister, a move that would be welcome for bond markets worried about too much debt.
Kan said in a statement that he would work with the Bank of Japan to beat the deflation bedeviling Japan’s economy. As finance minister, Kan has pressured the central bank to do more in the battle against deflation, although for now the government and BOJ seem to be on the same page. He also said he would keep Japan’s policy to cut greenhouse gas emissions by 25 percent by 2020 from 1990 levels.
Financial markets will be watching the new leader’s comments on currencies as well. “[Kan’s] appearance of being in favor of a weaker yen is being viewed positively by the stock market. For the Nikkei to move much over 10,000, we need currencies to move towards a weaker yen,” said Kenichi Hirano, operating officer at Tachibana Securities.
Unlike many recent premiers, Kan does not hail from a political dynasty. That could appeal to voters weary of leaders born with silver spoons in their mouths who proved inept at governing.
He got his start in politics as a grassroots student activist, later joining small political parties before helping to found the then-opposition Democratic Party in 1996.