Known as a fiscal conservative in the left-leaning DPJ, Noda had stated an intention to increase taxes to help control Japan’s huge and growing national debt. However, he has recently been backpedaling away from that stance as Japan’s economy has registered its third straight quarter of contraction.
“He doesn’t have much room for maneuver with policies for the economy, even less than the other candidates would have done because of his statements about raising tax,” says Martin Schulz, senior economist at the Fujitsu Research Institute in Tokyo.
However, Dr. Schulz believes any tax rises will be “on the back burner for the next couple of years until reconstruction from the disaster is complete and the economy recovers.”
As finance minister, Noda was vocal in proposing government intervention to weaken the strong yen which has hurt Japan’s exporters when weak domestic demand means that overseas markets offer the only hope of growth. Nevertheless, with foreign exchange markets having grown exponentially in recent years, even the $50 billion spent by the government post-disaster has provided only temporary relief.
“All the intervention does is buy a few days of weak yen for exporters to cash in, and then it carries on back on the same trend of strengthening,” says Dr. Schulz.
With Japan’s national debt already at around 200 percent of GDP – the highest ratio of any country except Zimbabwe – there will also be pressure on Noda to tackle that $10 trillion problem.