Tough task ahead for Japan's prime minister

Ballooning debt, an over-strong currency and a divided party are among the many pressing problems facing Yoshihiko Noda.

He loves judo and has a penchant for bad puns. But then, Yoshihiko Noda, the new Japanese prime minister, will need all his fighting spirit and wacky sense of humour to turn around his struggling country.

Considered one of the young bloods at 54, Mr Noda was chosen yesterday to become Japan's sixth prime minister in five years, and now faces a tough time kick-starting the ailing economy.

"Let us sweat together for the sake of the people," he said after the vote. "This is my heartfelt wish."

Mr Noda will have to overcome a divided parliament and rifts in the ruling party if he is to make more of a mark than his predecessors.

Recognised as a safe pair of hands to lead the world's third-biggest economy, the former finance minister is deeply conservative, works out on the judo mat and has a habit of dropping bad puns in public.

"A divided parliament will continue and Noda wants to seek a grand coalition with opposition parties. It is unclear at this stage whether or how long such a grand coalition will last," said Takahira Ogawa, the director of sovereign ratings at Standard & Poor's. "But Noda would be somewhat better than the past governments given their poor management [of the economy]."

In a close battle, Mr Noda defeated the trade minister Banri Kaieda in a run-off vote in the ruling party, and must quickly turn his attention to Japan's economic and debt problems.

First on the agenda will be the resurgent yen that threatens exports, followed by a new energy policy along with a sustainable rebuilding programme in the north-east of the country, where coastal towns were ravaged by the March earthquake and tsunami disaster and still need billions of yen for new homes, schools, offices and vital infrastructure projects.

But this comes at a time when huge public debt has already triggered a credit downgrading from Moody's Investors Service. The decision shocked markets last week and prompted the resignation of the former prime minister Naoto Kan over the weekend.

"Noda has inherited all the same problems - a divided parliament, a divided party, a strong yen, a Tohoku [north-eastern Japan] desperate for progress on reconstruction and an early end to the nuclear crisis," said Jeffrey Kingston, the director of Asian Studies at Japan's Temple University "I think the honeymoon will be very short-lived."

No Japanese prime minister has lasted much more than a year since 2006 and many market players think Mr Noda will be no exception. He will be the third premier since his ruling Democratic Party of Japan swept to power in 2009, promising change.

Instead of a deep debate over how to jolt Japan out of decades of stagnation, the party been torn apart by allies and critics of Ichiro Ozawa, the power broker who still heads the biggest group in the party despite facing trial on charges involving political donations. "He is still important, though not as important as he was," said Mr Kingston.

Mr Noda's rise to the top job could cause friction with China after he recently repeated that Japanese wartime leaders convicted by an Allied tribunal after the country's defeat in the Second World War were not "war criminals" under domestic law.

Still, markets welcomed the decision for him to take over as he was the only candidate to consistently call for Japan to face painful reforms to curb its massive debt.

"Let's do the utmost to tackle what we have promised and if there's not enough money, we might ask the people to share the burden," he said before the vote.

Mr Noda, who knocked out the telegenic former foreign minister Seiji Maehara in the first round, injected a rare moment of levity into the tense event.

The jowly, stocky politician compared himself to a "dojo" loach fish - an eel-like inhabitant of the deep.

"I do look like this and if I become prime minister, the support rate would not rise, so I would not call a snap election. A loach has its own abilities even though it cannot do as a goldfish does."

On a more serious note, Mr Noda must start to get a grip on Japan's ballooning debt after Moody's cut its credit rating on Japan's government one notch to "Aa3" last week.

The ratings agency blamed in part the revolving-door leadership that has hampered effective economic strategies to deal with public debt now twice the size of the US$5 trillion (Dh18.36tn) economy.

"Unfortunately chances are … that we'll see the same debates in 12 months," said Jesper Koll, the director of equities research at JPMorgan in Tokyo.

But optimists believe Mr Noda's low-key style might be what Japan needs.

"Just because the world never heard of him doesn't mean he doesn't command quiet respect," said Andrew Horvat, the director of the Standford Center in Kyoto.

"That is one of the qualities of a great Japanese leader … This is not a time for big talk and inappropriate actions."

* with Reuters, Dow Jones and Bloomberg News