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Japan's Democratic Party leader Yukio Hatoyama - Source: Reuters -
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Japan's next leader, Yukio Hatoyama, began talks on forming a
government to tackle challenges such as record unemployment and a
fast-ageing society after voters gave his party a
sweeping mandate for change.
Sunday's historic election win by the Democratic Party of Japan
(DPJ) breaks a deadlock in parliament and will usher in a
government that has promised to focus spending on consumers, cut
wasteful budget outlays and reduce the power of bureaucrats.
The defeated Liberal Democratic Party (LDP), which had ruled Japan
for most of the last half-century, was left to lick its wounds
after suffering its worst election performance since the party was
founded in 1955.
"It's taken a long time, but we have at last reached the starting
line," Hatoyama told a news conference at his home in Tokyo on
Monday.
"This is by no means the destination. At long last we are able
to move politics, to create a new kind of politics that will fulfil
the expectations of the people."
Hatoyama is to set up a transition team to organise the change of
government, but has said he will not announce his cabinet until he
is officially elected prime minister by a special session of
parliament, probably in about two weeks.
Investors welcomed the end to a political deadlock that has stymied
policies as Japan struggled with its worst recession since World
War Two.
The Democrats and its small allies won control of the upper
house in 2007 and were able to delay bills.
The yen rose to a seven-week high, buoyed by the end of electoral
uncertainty.
The Nikkei share average edged lower after hitting a near
11-month high as the stronger yen sent shares of exporters
lower.
Media forecasts show the Democrats won about 308 seats in the lower
house, nearly tripling their strength in the 480-member chamber.
The LDP won only 119 seats, down from 300.
"The problem is how much the Democrats can truly deliver in the
first 100 days. If they can come up with a cabinet line-up swiftly,
that will ease market concerns over their ability to govern," said
Koichi Haji, chief economist at NLI Research Institute.
Spending worries
Despite the Democratic Party's landslide win,
many voters and analysts said the victory was driven more by
frustration with the LDP than broad support for the decade-old
opposition.
"It's not that the Democrats were good. I voted for them as a
punishment for the LDP. The LDP has to change," said Etsuji
Inuzuka, 47, who works in the furniture business.
The untested Democrats, who will face an upper house election in
less than a year, will have to move quickly to keep support among
voters worried about a record jobless rate and a rapidly ageing
population that is inflating social security costs.
Japan is ageing more quickly than any other rich country.
More than a quarter of Japanese will be 65 or older by
2015.
Analysts say the Democrats' spending plans might give a short-term
lift to the economy, just now emerging from recession, but worry
that its programmes will boost a public debt already equal to about
170% of GDP.
Falls in wages and retail sales in data released on Monday
underlined the economy's weakness, although industrial output rose
on the back of worldwide stimulus spending.
"There are some signs the economy is bottoming out in Japan. But
recovery is still weak and it's hard to believe that the worst is
over," said Akihiko Tembo, president of the Petroleum Association
of Japan.
The Democratic Party victory ended the iron triangle - a three-way
partnership between the LDP, big business and bureaucrats that
turned Japan into an economic juggernaut from the ashes of the
country's ruin in World War Two.
That strategy foundered when Japan's bubble economy burst in the
late 1980s and growth has stagnated since.
Reforms in question
Support for the LDP had been on a downtrend for years, but then
charismatic leader Junichiro Koizumi steered the party to a big
election win in 2005 with promises of market-friendly reform.
Those reforms came under fire even within the LDP for worsening
social and income gaps and were further attacked after the global
crisis tipped Japan into recession.
In an essay published in the New York Times, Hatoyama railed at
unrestrained market fundamentalism of US-led globalisation but
after the election victory he played down those comments.
"We are not saying that the market principles are all bad ... But
the current economic situation is one where there needs to be
corrections in areas where reform went too far," Hatoyama
said.
The Democrats want a diplomatic stance more independent of key ally
the United States, raising fears about possible friction in the
alliance.
They have also vowed to improve ties with Asian neighbours,
often frayed by bitter wartime memories.
Budgetary matters will claim much of the government's attention in
its early days. Party leaders have said they might freeze or
redirect some of the 14 trillion yen ($US149.5 billion) in stimulus
spending planned for the year to March 31, 2010.
"It's going to be crucial how they spend the first year in office,
so in that sense they have to get focused very quickly," said
Sophia University professor Koichi Nakan
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