Japan's next PM to keep focus on reform

Conservative politician Shinzo Abe will become Japan's next prime minister when parliament meets Tuesday.

He was selected last week as leader of the ruling Liberal Democratic Party to continue the economic and political reforms started by outgoing Prime Minister Junichiro Koizumi so that the LDP can win a key election next year. But the international community wants him to prioritize improving relations with neighboring countries.

Analysts in Japan expect him to focus on domestic matters first and say that if he doesn't, he will be out of a job within 10 months. Voters want him to address social welfare, health care, the economy, and education before dealing with foreign relations. "With an Upper House election looming in July 2007, it is essential that Abe get started [on domestic reforms] without delay," says Robert Feldman, chief economist at the Morgan Stanley financial firm in Tokyo.

The first test of his commitment to the overhauls begun by Mr. Koizumi comes Tuesday when he names his cabinet. "If Abe appoints more than four ministers [out of an expected 17] from the private sector, it will send a strong message that he intends to pursue a radical reform program," says Mr. Feldman.

Although keeping the neighbors happy will inevitably take a back seat to local politics, Mr. Abe isn't deaf to international concerns. He said during the leadership race that one item to be addressed early is improving ties with China and South Korea. Relations are at lows because of persistent territorial disputes and arguments over Japan's role in World War II. Koizumi stirred emotions further by insisting on yearly visits to Yasukuni Shrine to pay his respects to the nation's 2.5 million war dead. The fact that 14 Class-A war criminals are also enshrined there led Beijing and Seoul to partially freeze top-level contacts with Tokyo.

Abe has signaled he will aim to meet Chinese leaders in November on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Vietnam in an attempt to patch up relations.

Chinese leaders snubbed Abe's grandfather Nobusuke Kishi during his tenure as Japanese prime minister due to questions over his role in the war in China, but now Beijing appears to be looking for an early signal on how Abe will handle the sensitive regional issue of Japan's past. Unlike Koizumi, Abe has not made visiting Yasukuni Shrine a campaign pledge – but his nationalist rhetoric causes some concern in China.

"I think China is trying hard to give more room to Abe. China expects very much to see Abe choose a different way in dealing with China and this issue of history. To some extent, it's naive, but we have no other choice because China wants to improve relations with Japan," says Jin Linbo, a researcher at the China Institute for International Studies, a government-funded thinktank.

"If Abe is making compromises to improve the relationship, China can meet Japan in the middle," says Huang Dahui, professor of international relations at People's University in Beijing.

But Japanese public interest in international relations is low. Polls show a majority agrees that the foreign relations stance of the Koizumi government needs changing, but less than 10 percent wants the incoming administration to prioritize the issue over domestic matters. By focusing on local issues such as employment and fiscal restructuring, Abe was able to win a landslide victory of 464 out of 703 party votes.

In coming months, Abe hopes to strengthen the office of the prime minister in an effort to circumvent powerful career bureaucrats in the ministries who slow reforms with red tape.

He has also made educational reform a pet project. Taking the British education system developed under the Thatcher administration as a model, Abe plans to introduce a nationwide aptitude test, a ranking system for schools, and accountability procedures for staff at schools with persistently under-performing students.

Other priorities for Abe include relaxing immigration laws to allow more foreigners to work in Japan, and addressing the widening gap in incomes. Abe aims to introduce programs to allow those who can't keep pace in the new environment another chance to retrain or apply their skills in a different area.

"In this respect, Mr. Abe's approach is quite similar to the 'compassionate conservatism' campaign employed by [President] Bush in the 2000 election," says political analyst Hideo Kumano at Daiichi Life Research Institute. "Abe feels a need to alleviate the inherent frictions of a system based around the idea of competition."

Two of Abe's key policy words are 'openness' and 'innovation.' Openness is an indirect reference to allowing more foreign direct investment and competition in an effort to boost production efficiency, says Mr. Kumano. "Abe is alluding to open market principles in terms of external trade and FTA agreements with countries in Asia," he says. Trade agreements are also seen as a key method of opening Japan's labor markets to foreigners. Tokyo and Manila recently agreed to increase the number of Filipino health care workers employed in Japan under such an FTA.

Pushing through an ambitious restructuring program won't be easy. Abe faces an old guard in the LDP who are down but not out, and further intra-party squabbles of the type seen under Koizumi are possible.

But younger lawmakers know that their political future depends on continuing the reform momentum. "We have to move forward," says Taro Kono, deputy minister of justice and contender for a full ministerial position under Abe. "There is no going back to the pre-Koizumi days."

• Simon Montlake in Beijing contributed to this report.