Japan: US VP Biden visits, PM Kan to resign, Moody's downgrades Japan's rating

Updated On: Aug 24, 2011

US Vice President Joe Biden has visited Japan to show solidarity with its Asian ally, in the wake of the March earthquake and tsunami.

In a speech at the airport in Sendai, the nearest large city to the disaster-hit region, Mr. Biden described Japan as the “anchor” of US interests in Asia and expressed awe at the “legendary industriousness” of its rebuilding effort.

Sendai airport showcases the good will created by the American military’s relief efforts in Japan. US forces worked with Japanese personnel to re-open the airport after the disaster.

Relations between the US and Japan frayed last year over the long-running dispute regarding the US air base on Okinawa. But Mr. Biden stressed the continued close ties between the US and Japan, and expressed admiration for the dignity and perseverance of disaster survivors.

The March earthquake and tsunami left some 20,000 people dead or missing.

Mr. Biden said it was in everyone's interest for Japan to recover and help lift the sagging global economy.

“Some around the world are betting on the decline of America and the inability of Japan to recover,” Mr. Biden added, "they are making a very bad bet.”

Mr. Biden was on the final leg of an eight-day trip to Asia, which also focused on improving relations with China.

Report & Analysis: In Japan, Biden sees recovery and disarray [Washington Post, 23 Aug 2011]
Report & Analysis: In Visit to Japan, Biden Seeks to Inspire Recovery [New York Times, 23 Aug 2011]

But Mr. Biden has been forced to clarify statements he made in China, after criticism from Republicans in the US.

On Sunday, Mr Biden told an audience at Sichuan University in Chengdu that China's one-child policy was "one which I fully understand" and that he was "not second-guessing". This apparent support for Chinese birth policies caused outcry in the US.

On Tuesday, a spokeswoman for Mr. Biden said "the Obama Administration strongly opposes all aspects of China's coercive birth limitation policies, including forced abortion and sterilisation".

Report: Under fire, Biden blasts 'repugnant' China policies [Straits Times, 24 Aug 2011]

During his visit to Japan, Mr. Biden also met with Prime Minister Naoto Kan. According to reports in Tokyo, Mr. Kan apologised for “Japan’s political situation”, a state of affairs that will become even more uncertain next week when Mr. Kan resigns.

A cabinet minister has confirmed that Mr. Kan will step down by early next week. Japan’s fiscal policy minister, Kaoru Yosano, told journalists that Mr. Kan has ordered his cabinet to “do their best with their remaining affairs and prepare for a handoff".

Even before the March 11 earthquake, tsunami and nuclear accident, Mr. Kan had been unpopular in Japan, criticised for poor performance in both foreign and economic policy. The apparent poor handling of the disaster has brought even more disapproval. After the disaster, Mr. Kan promised to step down after three major bills on renewable energy, public debt, and supplemental spending were passed by parliament. The spending bill passed in July, and the other two are likely to be passed by the end of the month.

The leading contenders to succeed Mr. Kan are former foreign minister Seiji Maehara, finance minister Yoshihiko Noda, trade minister Banri Kaieda, and former transport minister Sumio Mabuchi.

The ruling Democratic Party of Japan (DPJ) will choose a new leader by early next week after Mr. Kan resigns, who will then become the country's new Prime Minister.

Mr. Kan's replacement will be Japan's sixth prime minister in five years.

Analysis: Japan leadership race: Key candidates [BBC News, 23 Aug 2011]
Analysis: Maehara joins battle to become Japan’s PM [Financial Times, August 23 2011] (requires login)

Meanwhile, Moody's Investors Service has downgraded its rating on Japan's government debt. The ratings agency cut Japan's grade by one notch to AA3 on Wednesday, with a stable outlook.

Moody's said “weak” prospects for economic growth and rebuilding costs from the March disaster will make it hard for officials to rein in debt that has been building up since the 2008 global recession.

Japan's public debt is now twice the size of its $5 trillion gross domestic product.

The ratings agency also warned that frequent changes in Japan's government have hampered its ability to tackle economic problems.

"Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies," Moody's said.

But analysts said the downgrade was hardly a surprise and the bond market reaction should be muted. The yen barely moved on the news, trading at around 76.7 against the dollar.

The downgrade brings Moody's rating for Japan in line with rival agency Standard & Poor's, which cut Japan's rating in January.

Moody's downgrade of Japan was its first since 2002, when it reduced the rating to A2, six notches from the top of its scale. The agency has upgraded Japan three times since then, with the last upgrade as recent as May 2009.

Report & Analysis: Japan Debt Rating Cut to Aa3 by Moody’s [Bloomberg, 24 Aug 2011]
Report & Analysis: Moody's cuts Japan rating one notch to AA3 [Reuters, 23 Aug 2011]

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