The good news in Europe is that they've finally realized the seriousness
of their fiscal woes. The bad news is that it may be too late. The good news in
the United States is that we have considerably more fiscal rope to hang
ourselves with. The bad news is that we seem intent on not using it. The good
news in Japan... Well, there really hasn't been much good news in Japan lately.
But last week might be a start. The resignation of Prime Minister Yukio Hatoyama and perhaps more importantly, the sidelining of Ichiro Ozawa, secretary-general of the Democratic Party of Japan (DPJ), was widely expected, but not quite so early. Their departure, and the passing of the upper-house election in July, now finally allows the new government to focus on policy rather than politics. It also gives the DPJ a three-year window before another national election will be required.
It will be a long road before Japan gets its act together. But the policymaking process will probably be less self-destructive under new Prime Minister Naoto Kan, benefiting from greater popular support (the DPJ grabbing a sudden 15-point lead over the liberal democratic party following the shakeup), a likely coalition shakeup after the upper-house election that makes new coalition partners better aligned with the DPJ available, and collaboration between the cabinet and the professional bureaucrats (some of the world's most competent and hard-working), who have been essentially left out in the cold for about a year.
Does it make me positive on the yen? I wouldn't go that far. For putting the budget back on a sustainable path? It's a step in the right direction. But with DPJ leadership change improving the likelihood of coherence in Japanese policymaking, I'm less overtly negative. And for Japan right now, that's saying something.
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations?
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