Japan`s re-elected PM moves on yen, faces China`s fury

Last Updated: Wednesday, September 15, 2010 - 14:08

Tokyo: A day after Japan`s Prime Minister survived a leadership challenge, his government Wednesday moved to tackle the yen`s damaging surge but faced new protests from China in a bitter territorial row.

Naoto Kan, in office just three months, received a fresh mandate from his Democratic Party of Japan (DPJ) Tuesday when it confirmed him as party president, adding a measure of stability to Japan`s turbulent politics.

Most media broadly welcomed Kan`s defeat of scandal-tainted veteran party powerbroker Ichiro Ozawa, which should give him a free hand for the foreseeable future, with no national Diet or party elections due for two years.

But commentators also warned that the centre-left leader, after the distraction of the party election campaign, must now quickly tackle a series of pressing challenges on both the economic and diplomatic fronts.

On his first day after the bruising leadership showdown, Kan`s government moved quickly to tackle the yen`s rise to a fresh 15-year-high, intervening in currency markets for the first time since 2004.

The yen`s recent surge has threatened Japan`s spluttering recovery by hurting exports, eating away at companies` repatriated overseas earnings, and worsening already entrenched deflation by making imports cheaper.

The intervention -- estimated by traders at 200-300 billion yen (2.4-3.6 billion dollars), according to Dow Jones Newswires -- quickly drove the yen back to around 84 against the dollar from 82.86 earlier in the day.

But even as the Kan government moved to tackle its currency woes, a diplomatic stand-off with rival China deepened.

China said it had summoned Japan`s ambassador a fifth time to demand Tokyo release a Chinese fishing boat captain arrested after a collision between his boat and two Japanese coastguard vessels in disputed waters last week.

Japan says captain Zhan Qixiong last week rammed two Japanese coastguard patrol vessels intentionally near a disputed island chain in the East China Sea, which are claimed by both countries as well as Taiwan.

The September 7 incident has badly strained relations between the two regional heavyweights and led Beijing to postpone planned talks with Tokyo on joint energy exploration in the East China Sea.

China`s Assistant Foreign Minister Liu Zhenmin called in ambassador Uichiro Niwa on Tuesday to complain again over Japan`s continued "illegal detention" of the skipper, said a statement posted on the ministry`s website.

The United States called Tuesday for talks to settle the dispute.

"On this narrow issue, we hope that would be resolved peacefully through dialogue between China and Japan," said a State Department spokesman.

"In the latest row, Japan has to be very careful, considering China is an important neighbour," said Yoshikazu Sakamoto, professor emeritus of international politics at the University of Tokyo.
"Japan needs to have a long-term strategy of patience with China, which has mounting domestic problems and discontent among the socially weak while it is increasingly behaving like a superpower," he said.

"Anti-Japan rhetoric is the easiest way for China`s leaders to contain domestic discontent. Japan has to be very careful not to become a scapegoat."
Kan, not known as a foreign policy expert, will meet with world leaders, including US President Barack Obama and Chinese President Hu Jintao, when he heads to New York next week for the UN General Assembly meeting.

"It`s good that the prime minister remains unchanged in terms of diplomacy after a slew of leadership changes in the past few years," said Sakamoto.

Had Ozawa won the election, he would have become Japan`s sixth premier in four years, continuing a "revolving-door" leadership system often blamed for reducing Tokyo`s influence on the world stage.

Bureau Report



First Published: Wednesday, September 15, 2010 - 14:08

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