Japan’s prime minister resigns amid continued economic problems


By
 in ,

Japanese Prime Minister Naoto Kan formally resigned last Friday after considerable criticism on his policies dealing with the March 11 tsunami and the subsequent crisis at the Fukushima Daiichi nuclear power plant.

Kan resigned under the condition that parliament approved two pieces of legislation: the deficit-financing bond bill and the new energy promotion bill. Both were passed the day Kan resigned.

Kan’s resignation, however, still leaves Japan in a dire situation, both politically and economically. On Monday, Japan’s leading party is to choose a new prime minister. No single candidate clearly owns the public’s support.

Japan’s next leader will inherit all of the nation’s existing problems, as well as face any new issues that arise. Problems plaguing Japan’s recovery include nuclear clean up, economic recession, the surging yen, increased debt and a shrinking population.

Last Thursday’s auction of 20-year Japanese government bonds assuaged some fiscal fears regarding Japan’s recovery, as JGBs (Japanese Government Bond) remain in demand from many investors,  despite the large degree of fiscal uncertainty of Japan’s financial future.

Still, many remain uncertain about Japan’s future, and act conservatively to protect themselves rather than stimulate Japan’s economy.

Faced by lower demand, falling consumer prices have proved to be a problem for Japanese policy makers. Though not a new problem, decreased consumer demand has not aided in Japan’s recovery.

Many investors have seen recent economic problems as an emphasis on the importance of diversifying assets. In response, some investors have turned to buying gold or other precious metals, which are seen as a sort of stable medium relative to the fluctuating yen. Others have began to increase foreign investments, using low Japanese interest rates to borrow Yen for high-yielding overseas investments.

Japan’s future is not clear. However, what is clear that with the number of issues Japan’s new prime minister must face, especially economic issues, that it will take not just the effort and wisdom of an individual, but the cooperation and understanding of many to fix Japan’s current situation.