Japanese debt discord

In the great Japanese debate on how to balance the contradictory demands of reining in the deficit and continuing stimulative spending, chalk up another political point for Shizuka Kamei, Japan’s minister for financial services. Mr Kamei has a knack for getting a bigger share of the headlines than you’d expect given his status as head of the tiny People’s New party, a minor coalition partner of the ruling Democratic party. And the former policeman’s vociferous objections appear to have put paid to rivals’ hopes a formal limit might be put on initial plans for a supplementary budget to be introduced early next year.

Mr Kamei insists the spending spigot must stay open to keep the economy going even after a better than expected third quarter, while cabinet colleagues including Hirohisa Fujii, finance minister, have been stressing the need for fiscal rectitude. In recent days, the argument has centred around whether or not to put a limit of Y2,700bn on the budget, and — when it comes to the first vague outline — Mr Kamei won. No cap has so far been imposed.

The open dispute and Mr Kamei’s apparent ability to set the agenda has a price for Yukio Hatoyama, the prime minister, whose collegiate style and cautious approach to decision-making is already being taken by critics as a lack of leadership. But it would be unwise to assume that Mr Kamei’s view will prevail. The minister’s very outspokenness may well be a reflection of his political weakness. The DPJ’s landslide victory means it does not need the PNP’s support in the Diet’s more powerful lower house. And many political observers say it has a good chance of picking up PNP-free working majority in the upper house in summer elections next year, if not before.

Not to mention the fact that actually drawing up the budget and financing it will be Mr Fujii’s job, not Mr Kamei’s.

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