Japan Prime Minister Naoto Kan delivers a speech to his party lawmakers during their party's leadership vote in Tokyo September 14, 2010.[Agencies] |
Kan, 63, who has promised to curb spending and cap borrowing, is already struggling with a strong yen, a fragile recovery and public debt that is twice the size of Japan's $5 trillion economy.
Markets had been braced for a shift toward more aggressive spending if Kan lost to Ichiro Ozawa, a scandal-tainted powerbroker who had said he would consider issuing more debt if the economy worsened.
Japan's Prime Minister Naoto Kan (R) and ruling Democratic Party of Japan's powerbroker Ichiro Ozawa arrive at their party's leadership vote in Tokyo September 14, 2010.[Agencies] |
The Democratic Party of Japan (DPJ) has floundered since sweeping to power a year ago, and the DPJ and a tiny partner lost their upper house majority in a July election. Kan took over in June as Japan's fifth leader in three years.
Kan won just over half of the votes cast by DPJ parliamentarians, but trounced Ozawa in voting among the party rank-and-file. Voters had been put off by Ozawa's scandal-tainted image.
"If people trust the Democratic Party, they can understand policy proposals even if they are tough," Kan had said in a speech ahead of the vote. "We can overcome deadlock only when we can get the public to trust this party."
Kan, who is expected to reshuffle his cabinet, has vowed to cap spending and debt issuance to rein in huge public debt. He also wants to debate raising the 5 percent sales tax to fund the growing social welfare costs of a fast-ageing population.
Kan's team has repeatedly expressed concern about the yen's climb to 15-year highs against the dollar but so far has refrained from stepping into the market.
The DPJ last year ousted the long-dominant Liberal Democratic Party (LDP), ending more than 50 years of nearly non-stop rule by the conservative party, but the government's popularity plunged under Kan's predecessor Yukio Hatoyama.
Kan has also disappointed many with his lack of a convincing message for how to engineer growth, despite hopes that the former grass-roots activist was a pragmatist who could get things done.