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Past imperfect, future tense

By Liu Junhong (China Daily) Updated: 2011-06-20 08:04

Naoto Kan struggles to hold on to power as Asian neighbors fear Japan's domestic politics could thwart their cooperation plans

Japan's failure to work out a uniform and acceptable-to-all reconstruction plan even more than three months after the devastating earthquake and tsunami and the fierce power struggle in the country that followed have made its economic recovery more uncertain.

Japanese Prime Minister Naoto Kan's government has faced a series of political crises since it took office in June 2010. In September, Kan's Democratic Party of Japan (DPJ) lost its majority in the Upper House following the parliamentary elections. That caused the DPJ-led government's approval ratings to slide and increased its difficulties on the domestic and diplomatic fronts.

The DPJ was embroiled in another serious political crisis when the political fund scandal involving Ichiro Ozawa, Kan's main rival in the DPJ, came to light. Soon, there were allegations that former Japanese prime minister Seiji Maehara had received unidentified donations from abroad. Rivals labeled charges against Kan, too, for not disclosing the sources of his political funds.

Emergency efforts across the country to deal with the March 11 earthquake and tsunami, and the subsequent scare caused by the damaged Fukushima Daiichi nuclear power plant - or the triple crisis - helped the teetering Kan government avoid an immediate political disaster. But its alleged failure to organize timely relief and take effective measures to plug the nuclear leak from the Fukushima Daiichi plant and disorderly post-disaster reconstruction work caused the DPJ to suffer a loss in some local elections, putting the Kan-led government in a vulnerable position.

Besides, the Japanese economy has been stagnating for some time because of its declining exports and domestic consumption. From January to March, Japan's GDP growth was -3.5 percent, the second consecutive quarter of decline. That, according to the International Monetary Fund criterion, means Japan's economy is in recession.

Japanese enterprises, especially small- and medium-sized ones, have suffered huge losses, with some even going bankrupt, because of the triple crisis. Their capital accumulation capability and potential economic growth is on the decline, too. Authoritative market estimates show that Japan's potential economic growth rate, an index of a country's economic strength, is likely to slow down from the current 1 percent to zero percent in five years.

Since early this year, Standard & Poor's, Moody's and Fitch, three major international credit ratings agencies, have successively lowered the ratings on Japan's national debts. They have even warned that Japan's national debt would be lowered to the level of Spain and Italy if it failed to reform its social security and taxation regimes and reconstruct its rocky financial sector.

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