Kan and Ozawa Spar Over Japan Economy in DPJ Debate

Source: Bloomberg

Japan’s Prime Minister Naoto Kan and opponent Ichiro Ozawa clashed on the economy in a debate ahead of a ruling party election that will determine who leads the country.

Ozawa criticised Kan for urging his ministers to cut their budget requests by 10 per cent, saying he was following the advice of bureaucrats in making decisions. Kan said Ozawa, the party’s top campaign strategist, must explain his role in a funding scandal for which he is still under investigation.

“Focusing on money and numbers is old-style politics,” Kan said Thursday at the debate in Tokyo ahead of the September 14 election to head the Democratic Party of Japan (DPJ). “Now that he’s in the race, Mr. Ozawa needs to give an expla- nation that convinces the public.”

Polls show Japanese voters favour Kan over Ozawa by a 4-to-1 margin in the contest, to be decided by party members. The winner is assured of being prime minister because of the DPJ’s majority in the lower house of parliament.

Kan three days ago unveiled a planned JPY920 billion (US$10.9 billion) stimulus to boost employment and help businesses threatened by a strengthening yen and persistent deflation. His announcement came hours after the Bank of Japan said it would expand a bank-lending program to safe- guard the recovery.

Kan said he acted in concert with the central bank because of a “sense of crisis” over the yen’s rise to a 15-year high. Ozawa, who on Wednesday kicked off his campaign by saying he would intervene in the currency markets to halt the yen’s gains, repeated his intention while acknowledging the limits of unilateral action.

“We must stop the rapid rise of the yen by all means,” Ozawa

said. “The impact of intervention will be limited without interna- tional cooperation, but the rapid surge of the currency now requires the resolve to do so anyway.”

Domestic Demand

The yen’s strength is hurting the profits of exporters, the driver behind Japan’s economic recovery, and Ozawa said he would advocate policies that stimulated domestic demand.

The contest highlights divisions within the party, which took power a year ago for the first time after ousting the Liberal Democratic Party from half a century of almost unbroken government control. Ozawa advocates keeping a DPJ’s prom- ise to increase social welfare spending, including doubling a monthly childcare allowance to JPY26,000.

Kan, who served as Hatoyama’s finance minister, dropped that pledge in an effort to curtail the world’s largest public debt. Ozawa on Thursday said Kan is letting ministry bureaucrats decide policy “just like the LDP did.”