Prime Minister Naoto Kan's struggle to fund the nation's budget and avoid an early election suffered another setback when his foreign minister quit Sunday over illegal donations and a poll showed fewer than one voter in four supports him, and a stock slide heightened the sense of unease.
Foreign Minister Seiji Maehara, 48, resigned late Sunday after admitting he had received ¥250,000 ($3,038) since 2005 from a South Korean national in Japan he has known since childhood. The ruling Democratic Party of Japan was already hit by former leader Ichiro Ozawa's indictment on unrelated charges of violating political fund reporting laws, which also ban foreign contributions.
Kan has failed to persuade the opposition to authorize ¥44.3 trillion in government bonds to finance the budget and faces dissent in the DPJ over a push to raise the sales tax to cope with soaring debt costs. The stalemate has increased the possibility Kan will have to step down, becoming the fifth straight prime minister to last no more than a year.
Stocks fell partly on concern that increased political gridlock will hamper efforts to reign in debt that is set to exceed twice the size of Japan's gross domestic product this year.
The Lower House passed Kan's record ¥92.4 trillion budget on March 1. Kan, though, has failed to persuade the opposition to support the financing bills, which require approval of either the opposition-controlled Upper House or a two-thirds majority in the Lower House, which the DPJ-led bloc lacks.
The impasse may force Kan to either resign or dissolve the Diet and call a snap election. Maehara, a former DPJ leader, was a likely candidate to replace Kan.
Moody's Investors Service on Feb. 22 lowered Japan's debt rating outlook on concern over the stalemate. Standard & Poor's cut Japan's debt rating in January, citing the stalemate and the possibility the financing bills won't be passed. Failure to pass the legislation could cause bond yields to rise, damaging an economy already hampered by social security costs that have increased by more than 60 percent since 2000.
"Yields are low so the problem doesn't feel that immediate, but further political turmoil could lead to more rating downgrades, and that would obviously reduce the value of Japan's debt," said Azusa Kato, an economist at BNP Paribas in Tokyo.
Maehara, in resigning, said he "cannot allow a delay on Diet budget debates because of my political donation problem."
Kan's efforts have been complicated by an intraparty rebellion. Sixteen DPJ lawmakers, who last month announced their opposition to his push to raise the sales tax, abstained from voting on the budget. The group is loyal to Ozawa, whose suspension from the party amid the turmoil over alleged campaign funding violations provoked a backlash.
Maehara was the most favored person to become prime minister in a Sankei newspaper survey published March 1, preferred by 10.2 percent of those polled. He was followed by DPJ Secretary General Katsuya Okada with 8.1 percent.
Kan's approval rating dropped to 24 percent, the worst since he took office in June, from 27 percent last month, the Yomiuri newspaper said Monday. The nationwide telephone survey of 1,052 voters was taken between March 4 and March 6, the report said.
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