The intervention came a day after the leadership of Australia’s second most important trading partner was left as confused as it was before the win by Prime Minister Naota Kan over party backroom boss, Ichiro Ozawa.
The intervention is tokenistic and probably a sop to Mr Ozawa who was an enthusiast for taking on the huge forex markets.
But it won’t have a lasting impact and it will send a message that the country’s muddled leadership hasn’t improved.
The narrowness of the win (not apparent from the reported figures), adds to the confusion and will make the government indecisive, especially if dramatic moves like intervention in the forex markets are paraded every now and then as policy initiatives.
On the bald figures from the leadership poll, Mr Kan won easily by. When votes of parliamentarians and Democratic Party of Japan members across the country were included, the margin was 721 points to 491.
Seeing Mr Ozawa challenged and lost, he should have been seen as being in a weakened position.
But he didn’t
The fact that the victor from Tuesday’s poll’s first major move was a highly dubious move advocated by his opponent, tells us a lot about the real and continuing clout of Mr Ozawa.
But a breakdown of these totals reveals the problem for Mr Kan and Japan: he only managed to win by just 6 votes in the vote on Tuesday of the DPJ MPs, 206 to 200.
That is a bit more than was expected for Mr Ozawa and it confirms that he is now the divisive force in the government, especially if he remains inside and doesn’t leave and set up a new party, as some Japanese analysts have suggested.
Mr Kan won sweeping support from ordinary party members and supporters, picking up 249 of their “voting points” to Mr Ozawa’s 51.
The PM secured the backing of DPJ delegates to local government assemblies as well, winning 60 points to Mr Ozawa’s 40.
Diet members account for around 70% of the voting points in the DPJ poll, meaning that the loss of a few votes there could very well see another challenge and a change of leader.
While both candidates stressed that they would continue to work together and Mr Ozawa appeared to accept Tuesday’s result in good grace, he was schooled in politics by former PM Tanaka who was the dominant Japanese politician in the 1970s and 1980s, despite being corrupt.
Mr Tanaka had as a nick name, ‘The Bulldozer’, for his straightforward over the top of opponents approach.
Mr Ozawa is considered to be more subtle, but is the dominant political operator in the current government (with a few corruption allegations of his own, but nothing as substantial as those against his mentor).
So what does this mean for Japan?
Bloomberg reported that Mr Kan promised to end 20 years of deflation that has crippled the Japanese economy and its growth path.
That lack of growth was apparent before the GFC and the recession, but the problem has been compounded by the intensification of the deflationary pressures.
After a strong rebound from the slump, Japan’s exports and growth are slowing.
That was underlined this week when the government released figures reversing the small rise in industrial production for July, which is now negative.
The government said output fell 0.2% in July, instead of the 0.3% first estimated.
That was after the 1.1% drop in June, so the slowing in momentum in the economy continues.
Japan’s economy expanded at a 1.5% annual rate in the second quarter, less than half the pace of the previous period, and consumer confidence slid to a four- month low in August.
But the growth was better than the first estimate of 0.4% annual.
Japanese nominal GDP is no higher now than it was 20 years ago and is now behind China’s.
By this time next year, China’s economy will be around 10% or more larger, given the growth in that economy and the impact of deflation on Japan’s.
Public opinion polls overwhelmingly favored Mr Kan, but Japanese politicians are notorious for talking about respecting the will of the voters, and ignoring it at their convenience.
