Finance Minister Yoshihiko Noda is Japan's new PM

Japan’s ruling party chose Yoshihiko Noda to be prime minister, the nation’s sixth leader in five years. Noda, 54, who must tackle a long list of economic ills while coping with a nuclear crisis, is finance minister in the administration of outgoing Prime Minister Naoto Kan. Noda, a fiscal hawk, was the preferred candidate of financial markets. He was alone among the five contenders in consistently calling for Japan to face painful reforms to rein in the country’s ballooning fiscal deficit. He becomes prime minister by virtue of the ruling Democratic Party’s majority in parliament’s lower house, which is due to approve his appointment in Tuesday. Noda as finance minister since June 2010 has backed the government’s proposal to double the 5 percent sales tax by the middle of the decade to fund bulging social security costs and curb massive public debt, which is double the size of the $5 trillion economy.  Key facts Noda has said Japan will need to raise taxes temporarily to help pay for rebuilding from the devastating March 11 tsunami. But he has grown more cautious about the timing of any rises, saying economic growth and fiscal reform are both vital. He has promised firm steps including intervention against excessive and rapid currency moves and wants to work closely with the Bank of Japan. The new premier will have to cope with a resurgent yen that threatens exports, forge a new energy policy while ending the worst nuclear crisis since Chernobyl, and find funds to rebuild from the devastating March 11 tsunami at a time when ballooning public debt has already triggered a credit downgrade. He faces a divided parliament and internal party rifts, raising concerns that he will join a gallery of short-lived prime ministers. No Japanese prime minister has lasted much more than a year since 2006. [caption id=“attachment_72130” align=“alignleft” width=“380” caption=“Japan’s Finance Minister Yoshihiko Noda who was chosen as the new leader of Japan’s ruling Democratic Party, speaks during a news conference after the party’s leadership vote in Tokyo August 29, 2011. Reuters”]  [/caption] The Democrats swept to power two years ago promising to change how Japan is ruled. But the party quickly lost momentum, dogged by internal divisions and a hung parliament as its novice team confronted the global financial crisis and the March disaster that left 20,000 dead or missing and pushed the economy back into recession. Moody’s Investors Service cut Japan’s sovereign credit rating last week citing a buildup of public debt and a lack of leadership and a long-term strategy to cope with its fiscal challenges. One of the new leader’s first challenges will be seeking opposition help in parliament, where the opposition controls the upper house and can block legislation. Noda has floated the idea of a “grand coalition” with opposition rivals.  Below are the reactions to Noda being selected as prime minister KAZUTO DOI, ASIA-PACIFIC HEAD OF PORTFOLIO MANAGEMENT, WESTERN ASSET MANAGEMENT

“Fiscal discipline has been a big factor of instability. With (Noda’s) victory we’ve been able to see some clarity. There are concerns about the downward pressures on the economy. But there’s now some stability in the mid to long-term.

When asked  about the biggest differences with the previous cabinet in terms of fiscal discipline, he said consistent policies are very crucial.  Before the March disasters, corporate taxes were headed for reduction. But after the disasters, we saw some inconsistencies in terms of corporate and sales taxes during the Kan administration. But Noda is looking at cutting corporate taxes and raising sales taxes to 10 percent by the mid 2010s, which shows some consistency. " TAKAYOSHI KITADA, GROUP LEADER, INDUSTRIAL STRATEGY CONSULTING GROUP, MITSUBISHI RESEARCH INSTITUTE

“Noda was a member of the previous cabinet and I don’t see any drastic changes in direction for the country’s energy policy. I think he shares with (outgoing PM Naoto) Kan a view that Japan should wean itself from nuclear power. An immediate issue is when and how Japan will be able to restart idled reactors. I don’t think Noda’s view on this is far from the government’s current position, which is to try to minimise the risk of power supply shortages this winter and into next year.”

JEFFREY KINGSTON, DIRECTOR OF ASIAN STUDIES, TEMPLE UNIVERSITY, JAPAN CAMPUS

“I don’t think he’ll last a whole year, but who knows … Noda has inherited all the same problems – a divided parliament, a divided party, a strong yen, a Tohoku (northeastern Japan) desperate for progress on reconstruction and an early end to the nuclear crisis. I think the honeymoon will be very short-lived.”

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TOMOMICHI AKUTA, SENIOR ENERGY RESEARCHER, MITSUBISHI UFJ RESEARCH AND CONSULTING, TOKYO

“He seems to be the safest choice, and I mean this in a good way. There seems to be a continuation in policy as he served as finance minister. I also think that unlike his predecessor he is unlikely to make statements off the top of his head, which should give a sense of stability.

TAKAHIDE KIUCHI, CHIEF ECONOMIST, NOMURA SECURITIES, TOKYO

“The outcome is seen as positive for financial markets. The risk of Japan’s fiscal discipline being undermined sharply has decreased. Policy cooperation between the ruling and opposition parties will be strengthened under Noda, who has called for a ‘grand coalition’. That will be positive for Japan’s economy and the stock market as it will help smooth passage of a third extra budget.Given his track record of actively intervening in the currency market, the choice of him as leader will be somewhat of a weak-yen factor and positive for the stock market.”

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MASANAGA KONO, CHIEF STRATEGIST AT AMUNDI JAPAN, TOKYO

“The fact that we will have a new prime minister is positive as things that have been stalled under Kan’s administration will start rolling soon. The market has been worried about a potential tax hike supported by Noda, but regarding steps to curb the strong yen, there are hopes that he will come up with swift measures using his expertise.”

NAGAYUKI YAMAGISHI, INVESTMENT STRATEGIST AT MITSUBISHI UFJ MORGAN STANLEY SECURITIES:

“Noda as finance minister has gained a reputation as a fiscal conservative, so his election could be a negative factor weighing on stocks. But we don’t see a big impact on stocks from political developments.”