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Updated: 2010-09-13 14:45
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Kan wins ruling party vote

Japanese Prime Minister Naoto Kan will keep his job after an unexpectedly strong victory in a ruling party leadership vote on Tuesday, but must now strive to unify his party and forge deals with the opposition to pass laws in a divided parliament.

Kan won just over half of the votes cast by DPJ parliamentarians, but trounced Ozawa in voting among the party rank-and-file.

Kan, 63, who has promised to curb spending and cap borrowing, is already struggling with a strong yen and fragile recovery and will now have to try to unify his fractured party while forging deals with the opposition to pass laws in a divided parliament.

Policy Matrix of Both Candidates





Pledged to boost jobs to increase incomes, stimulate consumption and revitalise the economy.
Implement already announced growth strategy and create jobs in areas such as medicine, nursing care and the environment.
Try to implement policies from the party's 2009 campaign manifesto but warns efforts to cut waste may mean there is insufficient resources.
Promises to be frank with public on where funding axe may have to fall.  


Take all possible measures, including currency market intervention, to protect the economy from the impact of rapid yen rises.
Use 2 trillion yen ($24 billion) of reserve funds in the budget for the current fiscal year to March for economic steps.
Measures to include making it easier to obtain housing loans, extending a programme to promote sales of environmentally friendly household appliances and renovating schools and hospitals to strengthen resistance to earthquakes. 

Consider drastic tax reform.
Hold a debate on how to fund the social welfare system.
Seek a public mandate when implementing tax reform.
Seek a virtuous cycle of reforms on economic growth, fiscal consolidation and the social security system.
Cut waste to promote fiscal reform, including seeking to cut personnel costs for public employees by 20 percent.

Fiscal Reform and Social Security

Consider major cuts in income and residential taxes.
Thoroughly cut wasteful spending and use the funds to implement campaign pledges.
Avoid raising the sales tax from 5 percent before the next general election, due by late 2013.
Consider securitising government assets as a way to find funds.
Debate social security reform and present an outline by the end of the year.
Raise monthly childcare allowances to 20,000 yen per month from the current 13,000 yen starting from April and implement the full amount of 26,000 yen from April 2012.  

Deepen US-Japan ties while building trust with Asian nations and promote an East Asian Community.
Make utmost efforts to lessen the burden on the people of the southern islands of Okinawa while sticking to a US-Japan agreement on relocating the US Futenma airbase in Okinawa.  


Build closer relations with the United States.
Deepen relations with China and South Korea.
Hold talks with Okinawa and Washington, aiming to find a solution over Futenma that is acceptable to both. 


Previous Analysis: Poll Trends and Vote Scenarios

Media reports say that Kan, 63, who is more popular among the general public, has secured more votes than Ozawa, 68, from local lawmakers as well as party members and supporters who needed to submit their votes by Saturday.

The leadership poll is based on a point system and those eligible to vote are the 411 Democratic members of parliament, local Democratic lawmakers and party members and supporters.

In hopes of swaying around 30 parliamentarians who are still undecided, Kan will focus on Monday on preparing a speech for the party election, while Ozawa will visit lawmakers and interest groups, NHK said.

The two have secured the backing of about the same number of parliamentarians so far, the Nikkei business daily said in its online edition. Whoever wins the vote that has underscored a rift in fiscal priorities is expected to become prime minister because of the DPJ's majority in parliament's lower house.

If PM Kan Wins   If Ozawa Wins

Kan has a shot at victory even though Ozawa heads the biggest DPJ group, because his opponent faces possible indictment in a funding scandal and is plagued by an image of an old-style wheeler-dealer that makes him unpopular among ordinary voters.
Roughly half of all respondents to a Reuters poll last week said a Kan victory would be neutral for stocks, bonds and the yen, but of those predicting an impact, most said it would be bad for shares and lift government bonds and the yen.
The key questions are how decisively can the prime minister defeat the challenger, a critic of his efforts to curb public debt and consider a sales tax hike, and whether Ozawa bolts. 

Ozawa would probably become prime minister because of the DPJ's majority in parliament's lower house, but would start off with extremely low voter support. He has rejected suggestions that he might let another lawmaker become premier to avoid opposition attacks in parliament over a political funding scandal.
A judicial panel of ordinary citizens is to decide as early as next month whether he must be indicted over the scandal.
An Ozawa victory would probably give a short-term boost to stocks while weakening government bonds and the yen, a Reuters poll last week showed. But many market players fear his pro-spending policies would ultimately backfire.

Head Rolls Fast in Japan

In bracket is each former Japanese PM's tenure.

Yukio Hatoyama

Taro Aso

Fukuda Yasuo

Shinzo Abe

Junichiro Koizumi