Japan’s latest Prime Minister, Yoshihiko Noda, reveals his new cabinet today in Tokyo after being sworn in as the country’s third leader in as many years and the 5th in the past six years.
Noda, who was the Finance Minister in the government headed by Prime Minister Kan, who stepped down last week, will hold a news conference later today which will be vital in setting his agenda.
But the media conference and other statements in the next couple of days will also be vital in convincing his own party, the opposition Liberal Democrats, Japanese voters, businesses and trading partners that he will somehow make a difference to a country still coming to terms with the impact of the March 11 quake, tsunami and the Fukushima nuclear crisis.
He starts with an advantage most other Japanese leaders have lacked since 2006, an appreciation of the country’s terrible deficit and debt burdens from his time as Finance Minister.
And, based on statements so far from him this week and in the previous government, he strongly supports the idea of Japan’s GST being increased to 10% (from the current 5%) over the next five or so years.
That will help not only stabilise the country’s finances, but also pay for much of the added costs (over $US300 billion) to refinance the reconstruction of the areas of the northeastern coast devastated on March 11, as well as the huge costs in supporting the ailing Tokyo Electric Power company (which owns Fukushima Daiichi) in paying compensation and the decommissioning of the damaged complex
On a possible tax increase to finance reconstruction projects, Noda said this week he wants to wait for the government tax panel to present multiple options to the new party leadership.
He ruled out the possibility of calling a snap general election and wants to talk to the opposition and other groups about drafting a third special budget to accelerate the pace of reconstruction.
His attitude to the record level of the yen, which continues to impact exporters, will be a key policy position from the new PM.
Figures out this week showed the Bank of Japan spent a record $US60 billion in August intervening to try and weaken the yen, to no avail.
All this is a reminder that the biggest task confronting the new PM and his government is the economy: specifically from the rebuilding of the damaged areas of the north east, to tackling the yen, controlling spending and coming up with a coherent plan to steady the massive government debt which is twice the country’s annual GDP.
All this matters to Australia. Japan is our second biggest trading partner after China, and yet we have a bigger trade surplus with Japan than with China.
In the year to June, official trade figures showed we had a $A30.07 billion trade surplus with Japan, compared with the $A23.78 billion with China.
Trade with China is bigger: we shipping $A46.7 billion worth of goods to Japan in 2010-11, against $A64.6 billion to China.
We imported $A16.6 billion worth of products from Japan, against $A41.11 billion from China.
So Japan is almost as vital to our well being as China is.
The current power shortage and closure of many of the country’s 54 nuclear power stations has boosted our exports of LNG and this will continue for at least the next year, possibly two.
As of yesterday 78% of the 54 reactors were shut down for maintenance, inspection or decommissioning. That’s a total of 42 facilities.
Coking coal and iron ore exports will be boosted to Japanese steel mills as the reconstruction efforts get underway.
Japanese steel production is running at around 9 million tonnes a month at the moment, its forecast to rise slowly to 10 million in some months as demand from the rebuilding kicks in.
The Japanese economy is still recovering from the impact of the disasters, although the production data for July showed a rise of 0.6% for the month, not the 2% expected by the market.
Japanese household spending though remains weak, down 2.1% in July from the same month in 2010 and the 5th monthly fall in a row.
Car purchases fell in July, electricity consumption eased (but that was due to the appeals from the government for consumers to cut power use in the current summer to prevent black outs).
But incomes rose 1.6% in July, the first rise in five months.
Unemployment in July rose slightly to 4.7% and in a surprise the core consumer price index (which excludes energy and fresh food) rose 0.1% in July and was unchanged from June (instead of falling as it was doing for much of the past two years).
Last Monday Japanese government raised its economic assessments for nine of Japan’s 11 regions from its previous evaluations in May as manufacturing operations and consumer spending has improved since the March 11 earthquake and tsunami.
Japan’s trade surplus reached 72.5 billion yen ($US948 million) in July, a drop of 90.8% compared to a year ago, but the second monthly surplus in a row, confirming that the country is back on track after the March 11 disasters.
Exports fell 3.3% to 5.78 trillion yen in July while imports rose 9.9% to 5.71 trillion.
The recovery was confirmed by a sharp narrowing of the negative growth rate in the June quarter.
Economic growth in the three months to June (the first of the country’s 2012 financial year), fell 0.3% from the first quarter, which was down 0.9% from the December quarter (which in turn was down 0.8% from the September quarter of last year.
On an annual basis though, real gross domestic product fell
