THE Democratic Party of Japan (DPJ) may face a “mission impossible” as it takes charge of a weak economy with deep-seated ills, but can probably keep voters happy for a while by meeting one challenge — looking competent. Yukio Hatoyama's Democrats won a huge victory in an election Sunday over the long-ruling conservative Liberal Democratic Party (LDP), promising to give consumers more money to boost economic growth and to prise policy away from bureaucrats. Voters punished the LDP for a series of scandals, policy flip-flops and a lack of ideas for tackling challenges such as a fast-aging and shrinking population. “I think the Japanese public just wants to see a competent government -- someone who gets things done,” said Jesper Koll, CEO of investment adviser Tantallon Research Ltd. Longer term, though, the untested Democrats will need to craft policies to generate growth in a society that is aging faster than any other advanced country and is set to lose its status as the world's No. 2 economy to rival China next year. Japan's industrial output grew for a fifth month in July as global stimulus spending boosted export demand, but analysts warned the effect of spending steps taken after the financial crisis would probably wane next year. “In the investment world, what we all need to see are growth policies. We need to see concrete policies to create new entrepreneurs,” Koll said. “On that front, basically there is nothing in the Democrats' manifesto.” Topping the list of tasks for Hatoyama will be choosing a credible Cabinet line-up once he's voted in by Parliament, probably in about two weeks, and getting down to the nitty-gritty of drafting a budget for the fiscal year from April 1, 2010. “Of the challenges that the Democrats are facing, the one drawing the market's biggest attention is how the Democrats' government will rearrange the budget for fiscal 2010 and secure the financial resources needed to carry out the policy objectives in the party's manifesto,” said Yuichi Kodama, chief economist, at Meiji Yasuda Life Insurance. “The party says that it plans to reform the way key decisions are made, including budget compilation, from a bureaucrat-led system to a top-down approach, but whether this goal will be achieved is still uncertain,” Kodama said. The new government will need to meet its campaign promises including allowances for families with children and cheaper gasoline prices to make sure voters don't turn away in an upper house election less than a year away. That's what happened to the LDP in 2007, when the Democrats and allies won control of the upper chamber, creating a deadlock two years after the LDP had won a massive lower house victory. “They should focus on their manifesto commitments and look like they are delivering some or they will very quickly find themselves ... already a lame duck,” said Koichi Nakano, a professor at Sophia University in Tokyo. Financial market participants worry that the Democrats' ambitious spending plans will inflate Japan's already massive public debt and push up longer-term interest rates, so keeping pledges to cut waste will also be vital. The Democrats have promised not to raise the 5 percent sales tax for the next four years, although economists say an eventual increase is inevitable given burgeoning social security costs. Hatoyama, who has pledged to end the haggling between the ruling party and Cabinet that typified the LDP's reign, must take care not to appear under the thumb of predecessor Ichiro Ozawa, 67, a skilled campaign strategist responsible for much of the Democrats' election victory. A funding scandal forced Ozawa to step down as Democratic Party leader in May. Once a rising LDP star, Ozawa bolted the party in 1993 and helped to replace it briefly with a reformist coalition the same year. Ozawa held no cabinet post in that administration, but many agree he ran the show from the shadows. Hatoyama could also come under renewed scrutiny over a funding scandal in which an aide reported donations from people who were later found to be dead. “The risk is they fall back under Ozawa's rule into old-time back-office politics,” said Martin Schulz, a senior economist at Fujitsu Research Institute. “It's not policies, it's not the economy. It's internal politics that could kill them if they look like the LDP in style.”
