Japan's leadership woes hinder economic reforms: OECD

4th October 2010, Comments 0 comments

Japan's rapid-fire leadership changes have hindered reforms crucial to fixing its finances and reviving the economy, the head of the OECD said Monday.

Japanese Prime Minister Naoto Kan, who took office in June as the country's fifth leader in three years, survived a leadership challenge last month and is struggling to win enough support to pass laws in parliament.

"They have some very complicated economic challenges and also challenges of governability," OECD secretary general Angel Gurria told an economic conference in Madrid.

"How many prime ministers have they had in recent years? Five or six? That does not help."

The lack of a stable government meant the state was usually focussed on "immediate problems, the ones you must tackle tomorrow while medium-term issues are not tackled with the same efficiency," Gurria said.

Japan is struggling with weak economic growth, deflation, a rising yen, slowing exports and a heavy social welfare burden, which has caused its public debt burden to soar during two decades of stagnation.

The country's gross domestic product grew at an annualized pace of just 0.4 percent in the April-June period, far below the previous quarter's 4.4 percent gain.

In the second quarter of this year, China surpassed Japan as the world's second-largest economy.

Last month, ratings agency Standard & Poor's also said Japan's frequent changes of government in recent years complicated efforts to address the growing debt burden and it warned it may review its credit ratings.

S&P downgraded its outlook on Japan's AA credit rating to negative from stable in January.

The Organisation for Economic Cooperation and Development on Thursday appointed Gurria to a second five-year term as the head of the club of industrialised nations.

© 2010 AFP

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