Last Friday Prime Minister Naoto Kan finally heeded calls for his resignation and stepped down from his post. Kan had been in hot water for the past couple of months prior the resignation as his critics slammed his responses to the deflationary threats in Japan as well as the breakdown of nuclear plants in Japan.
Now that the country’s top post is vacant, the Democratic Party of Japan, Kan’s own party, scrambled to vote for its next leader. Once all was said and done, the DPJ chose Finance Minister Yoshihiko Noda over Trade Minister Banri Kaieda on a 215-177 vote. Since the DPJ holds the majority in the lower house, this put Noda as the top contender for the Prime Minister post.
Who is Yoshihiko Noda?
For those who aren’t familiar with Japan’s next Prime Minister, know that Noda has been serving as Deputy Finance Minister Since September 2009. Only in June 2010 did he get the Finance Minister title, which made him the youngest man to hold the post in two decades. Before that, he had been known to go to his neighborhood train stations daily to talk about policies with his constituents. Awww!
In his term as Finance Minister he has overseen three BOJ currency interventions. In fact, one of them happened in March when the G7 economies collaborated to actively weaken the low-yielding yen in the face of economic uncertainty.
What major concerns will Noda inherit from Kan?
The division in Japan’s parliamentary government will be the first one Noda has to resolve. Recall that around three years ago, the DPJ ended the 50-year ruling of the Liberal Democratic Party.
In spite of the DPJ’s surprising victory, they have had a very difficult time passing legislation in the parliament. In addition, the DPJ is also plagued by internal conflict as members have different views and opinions on the leadership.
Once that is resolved, Noda will then have to tackle Japan’s uber weak economic growth. The effects of the earthquake-tsunami-nuclear disaster are still clearly felt in the economy. Heck, Japan’s GDP growth has been shrinking for the last three quarters!
Finally, Noda will have to tackle the problematic rise of the yen. Since Japan’s economy is heavily reliant on exports for growth, the export industry gets negatively affected whenever the yen appreciates.
With his calm and stable influence, analysts believe that Noda is the safest choice for the PM spot. Sadly, Noda’s appointment might not have a strong impact on the yen since Prime Ministers change about as often as Happy Pip changes her shoes.
But that doesn’t mean that you should shrug off the appointment of a new leader! You can bet that market participants will be at the edge of their seats wondering how the new PM will handle the third largest economy in the world.