Japan's prime minister sees off leadership challenge

Japan's prime minister, Naoto Kan, has secured the overwhelming backing of his party after easily seeing off a leadership challenge that exposed deep divisions over economic policy. Kan, who became prime minister three months ago following the resignation of Yukio Hatoyama, beat Ichiro Ozawa by a wide margin, of 721 to 491, in a weighted voting system involving MPs and rank-and-file members of the ruling Democratic party of Japan [DPJ]. As leader of the biggest single party in the lower house, Ozawa would have become Japan's third prime minister in a year had he won today's vote. Despite indications that Ozawa, a political bruiser whose alleged penchant for backroom deals earned him the nickname Shadow Shogun, was gaining ground, he has effectively been abandoned by the party he once led. Kan appealed to the DPJ to unite behind him as he confronts mounting economic problems. "Japan is currently in serious difficulty," he said. "We must rebuild Japan to make it healthy again and hand it to the next generation. I will stake my life on doing that job and on winning support from the people." In recent opinion polls Kan has easily outperformed Ozawa, who is embroiled in a political funding scandal that could see him indicted next month. Ozawa resigned from the party's No 2 position when his ally, Hatoyama, stepped down in early June. The leadership campaign exposed deep differences of opinion on the handling of the economy. Kan, a former finance minister, has called for fiscal discipline and job creation in an attempt to avoid a debt crisis comparable to that experienced by Greece. Ozawa, however, favours old-fashioned government stimulus and appeared more eager to intervene to rein in the soaring yen and bring relief to Japanese exporters. Even with his nemesis sidelined, Kan cannot afford to be complacent. His victory coincided with the yen hitting a 15-year high against the dollar, adding to fears that the Japanese currency's rise was harming the country's export-led recovery. "The big question is whether Kan can jump beyond his shadow and actually prove himself as a reformer, as somebody who can entice risk-takers, entrepreneurs who actually go out and create jobs," said Jesper Koll, at JPMorgan Securities Japan. Kan also faces tricky political challenges. The DPJ suffered a big setback in July's upper house elections over its handling of the relocation of a US marine base on the southern island of Okinawa. It must now work with other parties in the chamber to push through legislation but, say analysts, is likely to encounter more of the gridlock that has stifled Japan's reform attempts in recent years. "This leadership election was just a sideshow," said Jeff Kingston, director of Asian studies at Temple University, in Tokyo. "Kan needs to work with other parties, but the prospects for that don't look good. There could be more policy gridlock, for which he may pay a hefty price. He's not out of the woods yet."