Financial experts on Friday were quick to voice their concern over the appointment of Jun Azumi as finance minister, saying the rookie Cabinet member will allow Prime Minister Yoshihiko Noda to push his own fiscal policies and may lack the authority to command the ministry’s bureaucrats.
“Azumi’s abilities are unknown, and it doesn’t seem like he has (financial and economic) experience,” said Hisashi Yamada, chief economist at Japan Research Institute Co.
Selecting someone with no ministerial experience for the key post could simply mean that Noda, who was vice finance minister under Yukio Hatoyama, the first Democratic Party of Japan prime minister, and as finance minister in the administration of Hatoyama’s successor, Naoto Kan, plans to take charge of the government’s financial policies himself, Yamada said.
Azumi, 49, the DPJ’s Diet affairs chief under Kan, is considered a potential future leader of the party. The Miyagi Prefecture native graduated from Waseda University and worked at NHK before entering politics in 1993.
Although he served as senior vice minister of defense in Kan’s first Cabinet, he hasn’t been vocal over his fiscal policies or key economic issues, and his views are largely unknown.
Noda is known as a fiscal hawk who advocates doubling the 5 percent consumption tax by the middle of the decade to help fund ballooning social security costs.
The Cabinet lineup may indicate that the prime minister is ready to flex his muscles and push key policies himself. For example, Noda named Yoshio Hachiro, considered a veteran sidekick, as trade, economy and industry minister.
Hachiro, another ex-DPJ diet affairs chief, is an expert on agricultural policies, having worked at a farming co-op in Hokkaido. Placing him in charge of the ministry that handles exports could indicate Noda is backtracking on Japan joining the Trans-Pacific Partnership agreement, a proposed regional free-trade bloc, but Japan Research Institute’s Yamada said that might not be the case.
If Noda is seriously considering steering the government toward joining TPP negotiations, having someone well-versed in agricultural issues such as Hachiro in the Cabinet may “make sense,” as he could help sell the free-trade deal to farmers, who are staunchly opposed to Japan joining the TPP, Yamada explained.
Meanwhile, Noda retained Shozaburo Jimi as state minister in charge of postal reform and financial services. Former Deputy Chief Cabinet Secretary Motohisa Furukawa, another rookie Cabinet member, will serve as economic and fiscal policy minister. Furukawa worked as a bureaucrat at the Finance Ministry before he entered politics in 1996.
Noda’s team must tackle a long list of issues, including countering the surging yen and reconstructing the disaster-hit Tohoku region while compiling both the supplementary and annual budget plans.
Compiling the budget for the next fiscal year is already facing a big delay because of the March 11 disasters. The submission to the Diet of the third extra budget for fiscal 2011, which will include major funds for the rebuilding of the devastated northeast, is also expected to be delayed until October.
Hisakazu Kato, a professor of economics at Meiji University and an expert on finance, said Noda will likely play a leading role in compiling the budget but added that trying to control everything from the prime minister’s office will be tricky.
“Noda was serious about restoring fiscal balance when he was finance minister. Azumi must continue along the same path,” Kato said, pointing out that government debt has exceeded ¥900 trillion and that simply issuing more government bonds to make ends meet will not solve the problem.
Whether to hike taxes to secure additional funds for reconstruction work and to cover swelling welfare costs will be a key issue for the new Cabinet.
Azumi has hinted he will follow in Noda’s footsteps and ask the public to shoulder part of the costs of rebuilding the disaster-hit areas via higher taxes.
“We must not pass on our debts to the next generation,” Azumi told reporters following his appointment Friday. While Noda’s new administration will openly discuss fiscal issues with DPJ lawmakers and opposition parties, the public “must shoulder the burden to some extent,” he said.
Meiji University’s Kato, however, said the real opposition to increasing taxes may come from within the DPJ, even though Noda has tried to avoid an internal power struggle by handing key posts to party members who oppose tax hikes.
“Making progress over raising taxes may come down to a battle against DPJ members who remain opposed,” Kato said. But considering Japan’s worsening fiscal position, which prompted Moody’s Investors Service Inc. last month to lower its credit rating of Japanese government bonds, Noda and Azumi will have to act swiftly, he said.
Regarding market intervention to weaken the surging yen, pundits agreed that Noda’s Cabinet will continue the policy of the Kan administration. As Kan’s finance minister, Noda was the main player in three foreign-exchange market interventions aimed at weakening the yen.
The relationship between the government and the Bank of Japan is also likely to remain unchanged, as Noda has been working closely with the BOJ and has pledged to continue the cooperation.
But the impact of the new team of fiscal and economic ministers on the economy will depend on Noda’s leadership during the early stages of his administration.
“At this point, there are many uncertainties about how this team will work,” Japan Research Institute’s Yamada said. “It’s crucial that Prime Minister Noda delivers a strong policy speech at the Diet, one which will lay out the path along which he intends to lead his administration.”