Sept. 3 (Bloomberg) -- Japan’s revolving-door politics may be diminishing the nation’s global influence after Jun Azumi was appointed the eighth finance minister since 2008.
In the Group of Seven nations, Japan’s tally compares with one finance chief for Canada and two each for the U.S., U.K., Germany, France and Italy in that time. Azumi, 49, was named in Tokyo yesterday to replace Yoshihiko Noda, who became prime minister, the sixth person to have that job in five years.
Already eclipsed by China last year as the world’s second- biggest economy, Japan may be impeded at international forums such as the G-7 and Group of 20 nations by the lack of continuity in its representatives. After attending a G-20 summit in June 2010, Noda, who was then finance minister, said he was concerned that the Japanese face most familiar to his counterparts belonged to a translator.
“Japan’s dismal economic performance of the last two decades has greatly eroded its influence in the global economy and has contributed to the turnover in finance ministers,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “The good thing is that the bureaucracy is very disciplined, which will help ease the transition.”
Azumi’s debut on the international stage may be at a Group of Seven meeting in Marseille, France next week. Global policy makers are struggling to sustain the economic rebound from the 2008 recession, with U.S. unemployment in excess of 9 percent and European confidence in the outlook the weakest since 2008.
Noda has suggested that frequent changes of leadership hurt the nation’s case at international conferences.
“It’s difficult to aggressively carry out economic diplomacy when leaders that attend important international meetings change positions right away,” Noda wrote in his blog after the 2010 G-20 meeting.
Japan’s concerns include the yen’s advance to a post-World War II high against the dollar last month, as the stronger currency may may hurt exporters’ earnings and endanger the nation’s economic recovery after the March 11 earthquake.
Azumi said late yesterday he will closely watch the yen’s strengthening trend as it’s negative for companies.
The G-7 jointly intervened in the currency market on March 18 after the yen surged following the disaster in the northeast. Japan’s government sold yen unilaterally last month, spending 4.51 trillion yen ($59 billion), the most for any month since 2004.
China’s currency policy is also a concern for Japanese policymakers, Noda said Aug. 23. “I think the yuan’s still not flexible enough so I want to keep discussing that at international meetings,” such as G-20 conferences, he said.
Azumi, a former head of parliamentary affairs for the ruling party, will be faced with the task of ensuring a rebound in Japan’s economy after three straight quarters of contraction.
A government report yesterday showed that capital spending tumbled 7.8 percent in the second quarter, bucking the median forecast in a Bloomberg News survey of economists for a 1 percent gain. The unemployment rate unexpectedly rose for a second month to 4.7 percent in July.
Azumi may be met with calls by corporate leaders to take further action on the yen.
“I want the new government to show a firm stance against the strong yen, which isn’t reflecting Japan’s economic fundamentals at all,” Toshiyuki Shiga, head of Japan Automobile Manufacturers Association, said on Aug. 31. “The strong yen will cause significant damage to the auto industry,” said Shiga, who is also the chief operating officer of Nissan Motor Co., Japan’s second-largest automaker.
Among Azumi’s tasks will be preparing a third package of post-quake spending, after two supplementary budgets totaling 6 trillion yen so far -- about one third of the 16.9 trillion yen of damage from the disaster, according to government estimates.
The size and financing method of the next round of reconstruction may affect the nation’s credit rating. Moody’s Investors Service already lowered the nation’s rating last month on concern that the government will fail to rein in its debt. The one-step cut to Aa3 left the grade at the same level as China’s. Standard & Poor’s has the sovereign rating under review for a downgrade.
Azumi said the government must find a way to fund rebuilding that doesn’t “leave the burden for the next generation.” The timing of any tax increases for reconstruction should depend on the economy’s state, he said.
Japan’s public debt is projected to reach 219 percent of GDP next year even before accounting for borrowing to fund reconstruction, according to the Organization for Economic Cooperation and Development.
“Azumi doesn’t have much experience in economic and fiscal areas, but it probably won’t be a big problem as officials at the finance ministry are steady hands,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Azumi will likely follow the ministry’s line on things like fiscal reform.”
--With assistance from Sophie Leung in Hong Kong. Editors: Ken McCallum, Paul Panckhurst
To contact the reporters on this story: Toru Fujioka in Tokyo at firstname.lastname@example.org; Keiko Ujikane in Tokyo at email@example.com
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