Japan’s new leader backs fiscal regulation

Japan’s next prime minister said Friday the financial sector must be regulated to foster healthy growth and ensure no repeat of the global economic crisis, and vowed government handouts would not push the country toward socialism.

Yukio Hatoyama’s Democratic Party of Japan won a landslide victory in last week’s elections making it the largest party in the lower house of parliament. He is expected to be formally voted in as prime minister on Sept. 16 and to name his Cabinet in the days that follow.

Hatoyama told a World Economic Forum symposium that while financial regulation was necessary, it should not be excessive or hinder growth and healthy competition.

“One of the reasons for last year’s global financial crisis is that there was not enough regulation of derivative products,” Hatoyama said. “We cannot just leave everything to the markets. We need to have a balance between government regulations and free market activities.”

His speech Friday was one of the first glimpses since polling day that Japan has had into the direction Hatoyama will take on the economy, which is in its worst slump since World War II and is facing the threats of rising unemployment and deflation.

Hatoyama did not go into a detailed plan of what he intends to do, but his party has promised to expand the social safety net with handouts for farmers and families with children, do away with toll-free highways and raise the minimum wage.

He insisted Friday that Japan was not becoming a socialist state because of promised lavish government handouts. Rather, Hatoyama said his reforms are aimed at directly and quickly improving nation’s lives.

“I am not turning to socialism,” he said. “I just want to improve Japanese people’s livelihood.”

Some free-market advocates are worried that the party may step away from deregulating the economy, a process that began during the 2001-2006 rule of Prime Minister Junichiro Koizumi. Critics argue that deregulation is needed to foster economic growth and encourage foreign investment.

The retail and auto export industries are heavily regulated.

He will still need to disprove arguments that his party’s economic programs were mainly designed to woo voters and fall short of mapping out a road to growth or tackling deeper issues such as Japan’s aging, shrinking population and its ballooning national debt.

Speculation meanwhile grew as to who would be named to Hatoyama’s first Cabinet. A key member of his left-of center Democratic Party of Japan, former ruling party baron Ichiro Ozawa, was tipped to take a central role in policy decisions.

Media reported that Ozawa would probably be given a key post making him a central figure in the party ahead of upper house elections next year.

Katsuya Okada, the party No. 2, was expected to be awarded a Cabinet post in either finance or foreign affairs, according to Asahi, a major newspaper.