Japan's main opposition Liberal Democratic Party (LDP) has chosen stability over reform by electingformer finance minister Sadakazu Tanigaki as its new leader on September 28 2009. Tanigaki won 300out of the 498 ballots cast by party legislators and regional chapters. He is only the second-ever LDPpresident not to automatically become prime minister. Until the August 30 2009 general elections, theLDP had ruled Japan almost continuously for 54 years, and its presidency was synonymous with thepremiership.
Although Japan emerged from recession in Q209, it faces a long and erratic recovery ahead. Latest datahas prompted us to revise up our 2009 real GDP forecast to -5.5% from -6.1% previously, and our 2010forecast to 0.8% from 0.7%, but this is a minimal improvement. Moreover, Japan's major structuralweaknesses - especially its fiscal dynamics - mean that even when the global economy gains moretraction, Japan's performance will remain subdued. Thus, the new Democratic Party of Japan (DPJ)government of Prime Minister Yukio Hatoyama cannot expect a political honeymoon. In fact, Japan'swoes are now so severe that it will take many more years - almost certainly more than the government'sfour-year term - to engineer a decisive turnaround.
Japan traditionally suffers few internal security problems, with low rates of crime and rare incidents ofviolent expressions of dissent. However, concern over the terrorist threat remains given evidence that al-Qaeda has considered targets in Tokyo, and the fact that the March 2004 bombings in Madrid targeted asimilar supporter of the US in Iraq. Hostage-taking of Japanese civilians in Iraq has further brought homethe potential consequences of a more aggressive military posture.
Japan’s process of normalising its self-defence force has taken place on an organisation and procurementlevel, with restructuring of the Self-Defence Force (SDF) as well as strengthening of its materialcapabilities. However, Japan has also started to revive ties with key regional military powers; doing sowill help pave the way for the eventual recognition of the SDF as a normal defence force.
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