Finance chief Naoto Kan, straight-talking populist, seen emerging as Japan's next leader

Published June 02, 2010

| Associated Press

TOKYO (AP) — The man who appeared on the cusp Thursday of becoming Japan's next prime minister is everything Yukio Hatoyama was not — decisive, outspoken and a populist with common roots.

A day after Hatoyama's sudden resignation, Finance Minister Naoto Kan emerged as the only major candidate to lead the country, with potential key rivals throwing their support to the 63-year-old political veteran.

The ruling Democratic Party of Japan will hold party elections Friday to choose a new leader to replace Hatoyama, who succumbed to public disgust over broken campaign promises after just eight months in office. Because the Democrats control a majority in the more powerful lower house of parliament, the new party chief will almost certainly be named prime minister.

Should he win the top job, Kan will face daunting choices in how to lead the world's second-largest economy, which is burdened with massive public debt, a sluggish economy and an aging, shrinking population. He also must quickly revive his party's tarnished image before upper house elections are held next month.

Within his own party and among analysts, Kan is seen as the Democrats' best hope for restoring confidence in its ability to govern and delivering a viable roadmap for the future.

"He has a record of acting on the basis of his beliefs and not backing down," said Tobias Harris, a political analyst who once worked as an aide to a Democratic lawmaker in Japan. "Those are good signs for a prime minister, and I think those are qualities that Hatoyama did not have."

With his ordinary upbringing, Kan would represent a break with the past several prime ministers, including Hatoyama, whose fathers or grandfathers were also prime ministers. The son of a businessman, Kan was born in Yamaguchi prefecture in southwest Japan and graduated from the Tokyo Institute of Technology's science department.

He began his political career as a civic activist in the 1970s, "toiling on the margins of Japan's reformist left," Harris said. Kan ran for office three times before winning a lower house seat in 1980 for the now-defunct Socialist Democratic Federation.

He gained fame in the 1990s when as health minister, he exposed a government cover-up of HIV-tainted blood products that caused thousands of hemophilia patients to contract the virus that causes AIDS. During an E-coli outbreak that hit sprouts growers hard, he appeared on national television and ate sprouts to dispel rumors that they were unsafe.

Kan, along with Hatoyama, was one of several members in 1996 to found what eventually became the Democratic Party of Japan.

"I grew up in a typical Japanese salaryman's family," Kan said at a news conference Thursday after officially announcing his candidacy. "I've had no special connections. If I can take on a major role starting from such an ordinary background, that would be a very positive thing for Japanese politics."

He's proven to be a quick study as finance minister after taking the job in January with little background in economics or fiscal policy. Some former skeptics, who had worried about his preference for spending, now express cautious optimism about his potential as prime minister.

"After he got the job as finance minister, he realized how serious Japan's fiscal problem is and will be," said Masaaki Kanno, chief economist at JPMorgan Securities Japan and a former senior official at the Bank of Japan.

Japan shoulders the biggest public debt burden among industrialized countries with the country's debt expected to balloon to 115 percent of gross domestic product over the next several years.

Kan has repeatedly expressed the need for Japan to hike its 5 percent consumption tax and has said the government should not issue more than this year's budgeted 44.3 trillion yen ($478 billion) in bonds. He was the first to declare deflation in Japan last year and has been openly critical of the central bank for not doing enough to fight falling prices.

"Now it's time for us to push forward economic, social and fiscal reforms that the people have high expectations for us to tackle," Kan said.

To be sure, he has made his share of political missteps. Nicknamed "Irritable Kan," he is known for his fiery temper. He stepped down as head of his party in 2004 after admitting he failed to make pension payments while he was health minister.

Economists also wonder just much he will be able to deliver, particularly if the DPJ loses its majority in the upper house, making it harder to pass legislation. Japan must cut "lots of red tape" to spur growth, including opening more investment to foreigners, said Martin Schulz, senior economist at Fujitsu Research Institute.

"Kan has been talking about this," he said. "How tough he will be on this, especially when creating a platform for the election, is still a very open question."

Kan's election is also not quite a done deal. Internal party jockeying continued into the night Thursday. Supporters of Ichiro Ozawa, who resigned as the party's No. 2 figure Wednesday but is still seen as a power broker, were lining up behind little-known Shinji Tarutoko, chairman of the party's environmental committee.

The DPJ roared into power amid high hopes last August when it crushed the conservative Liberal Democratic Party that had ruled Japan for most of the post-World War II era. Voters were inspired by the party's vision to bring more accountability to politics-as-usual and rein in powerful bureaucrats.

For a while the public seemed satisfied with the Hatoyama government's attempts to cut back huge public works projects.

But in recent months his Cabinet's approval ratings tumbled amid political funding scandals and, most critically, Hatoyama's backtracking on a campaign pledge to move a key U.S. Marine base off the southern island of Okinawa. He also reneged on other promises such as cash handouts to families with children, halving the money from the initial proposal, and toll-free highways, which have been postponed.

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Associated Press writers Malcolm Foster and Mari Yamaguchi contributed to this report.

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