Prime Minister Yukio Hatoyama’s leadership and political resilience will be severely tested from this point as his administration deals not only with the upcoming regular Diet session but also with general government operations. The resignation of Finance Minister Hirohisa Fujii, for health reasons, just before the start of Diet discussions on the second fiscal 2009 supplementary budget and the fiscal 2010 budget, only makes Mr. Hatoyama’s task more difficult.

Mr. Hatoyama will personally face an offensive from opposition forces over problems related to his political funds management, including how he used the ¥1.26 billion that he received from his mother since 2002.

Mr. Hatoyama has chosen Deputy Prime Minister Naoto Kan as the new finance minister. Administrative Reform Minister Yoshito Sengoku will double as national strategy minister, a post vacated by Mr. Kan. Mr. Hatoyama has also appointed Mr. Yukio Edano, who served as the leader of the budgetary requests scrutiny unit, as an aide to help Mr. Sengoku.

The economy will of course be a central factor. Facing such problems as a deflationary trend and a bad employment situation, the administration must do its utmost to prevent the economy from sliding into a second dip. As the March deadline for businesses’ accounting settlement nears, the employment situation may worsen and many companies, especially small and midsize ones, will likely face difficulty in securing operating funds.

With this in mind, Mr. Hatoyama and Mr. Kan bear the heavy responsibility of ensuring that the supplementary budget is enacted at the earliest possible date and the fiscal 2010 budget finalized before April 1, the start of the new fiscal year.

Mr. Hatoyama apparently picked Mr. Edano — who, along with Mr. Sengoku, stays at arm’s length from Democratic Party of Japan Secretary General Ichiro Ozawa — in order to dilute the impression that the administration is under Mr. Ozawa’s control. But in shoring up his own position for the challenges ahead, the prime minister must take care to ensure a schism does not develop in the administration around Mr. Ozawa.

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