Japan’s prime minister, Yukio Hatoyama, resigns. Impact?

I’ve read somewhere that salesmen of used cars change jobs about every sixteen months.  I’ve never tried my had at it, but I imagine the rapid turnover comes from the job’s high pressure, low status and low income.

If you were a Japanese prime minister, used car sales must be looking like pretty steady work.  The country that once called itself the land of Wa (harmonious balance) is looking for its fifth PM in four years.  The last PM to hold onto his job for any length of time was Junichiro Koizumi, a Kennedy-esque political reformer who left office in late 2006 when his own party, the Liberal Democrats (LDP), thwarted the continuation of Koizumi’s modernization and anti-corruption agenda.

the current mess

I can’t say that it comes as a big surprise that Yukio Hatoyama would be forced to resign less than a year after the landslide election victory of the Democratic Party ousted the LDP from power.  As I pointed out in January, signs of potential trouble were already surfacing late last year, when outspoken finance minister Hirohisa Fujii left his post and was replaced by Naoto Kan, a man who had no financial experience.

Mr. Kan’s chief qualification for the job appeared to be the approval of the Secretary General of the DP, Ichiro Ozawa.  Although Mr. Ozawa has been a powerful politician in Japan for many years, persistent rumors of corruption have prevented him from attaining high national office himself.  The suggestion that Mr. Ozawa was controlling the DP from the shadows clashed sharply with the anti-corruption platform the DP was elected on.

As it turns out, both Mr. Ozawa and Mr. Hatoyama have been embroiled in a recent bribery scandal.  Neither has been indicted so far, but, according to the Financial Times, a civilian review board has characterized prosecutors’ failure to charge Mr. Ozawa as “extremely illogical, unnatural and thus unbelievable”  and has returned the case to the prosecutors for further consideration.

Apparent lack of leadership, a weak economy, scandal, and furor over US troops stationed in Japan have all contributed to the plunge in approval ratings–in advance of an upper house election expected next month–that sealed Mr. Hatoyama’s doom.

what comes next?

I don’t know what I’d do if I were a Japanese citizen.  The DP has been voted in on a reform platform twice in the past twenty years or so (they were the Socialists last time around) and proved a disappointment.  The third attempt at structural change by the electorate, the Koizumi election, also succumbed to the power of the status quo.

From a stock market perspective, my view remains unchanged from January.  Tokyo has marginalized itself as a world stock market.  The best strategy is still to look for entrepreneurial, niche companies.  Ideally, these will be raising money in Japan and exporting their expertise to countries like China or Korea.

It’s hard to believe that this is the same Japan that was touted to dominate the world in the late Eighties.

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