A beleaguered prime minister takes a big gamble on economic reforms

“JAPANESE prime ministers are just like tissue paper,” says Yuriko Koike, a senior member of the opposition Liberal Democratic Party (LDP), plucking a tissue from a box as if to throw it in the bin. Her cold disdain sums up the mood of her party. Since the start of the year, the LDP has said it will focus on destroying the government of Naoto Kan.

For Mr Kan, whose Democratic Party of Japan (DPJ) ended the LDP’s long grip on power in 2009, the opposition is just one of many headaches. On January 31st his bane within the DPJ, Ichiro Ozawa, a former party boss, was indicted on political-funding charges but has so far refused to give up his seat, saying he will clear his name in court. That gives the LDP an excuse to continue throwing accusations of sleaze at the DPJ.

What is more, opposition parties have threatened to block implementation of the spring budget for the next fiscal year. Without big concessions, it could mean the government is unable to issue bonds to pay for public services. Budget paralysis is still a distant prospect, but on January 27th Standard & Poor’s, a rating agency, downgraded Japan’s sovereign bonds partly because Mr Kan’s government lacked “a coherent strategy” to improve the fiscal situation. The prime minister hardly helped matters when he said, on learning of the news, that he was “clueless” about it.

Undeterred, however, Mr Kan has stuck to the gamble of his political career. By mid-year he hopes to commit Japan to joining an ambitious free-trade pact including America. He also hopes to produce a plan to raise the consumption (sales) tax to help pay for an overhaul of the social-security system, which is about to face an onslaught of retiring baby-boomers.

By itself, a decision to join the Trans-Pacific Partnership (TPP) would, in the words of a trade official, be “epoch-making”. Mr Kan has told the nine countries in the negotiations (America, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam) that if Japan decides to join, it will put “everything on the table”. In other words, it may not demand special protection for its rice farmers, who shelter behind tariffs of nearly 800%. Japan may, however, seek a slow phase-in of the farm cuts.

The prime minister has also promised to draw up a plan for farm reform aimed at promoting export-oriented agriculture, rather than precious yet unproductive paddy fields. Elderly farmers form a powerful voting block, and analysts say they are likely to create a ruckus against reform. Yet Mr Kan’s ministers are expected to tour the country this month in order to drum up support for free trade. According to opinion polls, at least half the country is already in favour.

If Japan does join the talks, it will be running to catch up. America hopes to conclude its TPP negotiations, which have already started without Japan, in time for a regional summit in Hawaii in November. Mr Kan’s government argues that, despite the handicap, Japan has little choice but to join. Neighbouring South Korea has negotiated free-trade deals with the European Union and the United States, and Japanese industry fears being left behind. Businessmen note that whereas the value of trade with Japan’s free-trade partners represents 16% of the total, South Korea’s corresponding level is more than twice that.

If free trade is not ambitious enough, Mr Kan has set out to confront another taboo by June, with plans to raise the consumption tax. At 5%, the tax is the lowest in the rich world, and in the past leaders have paid a high price for meddling with it. Prime ministers who introduced it in 1989, and raised it in 1997, both lost their jobs fairly soon afterwards. When, ahead of upper-house elections last year, Mr Kan unexpectedly discussed a tax increase, voters punished the DPJ at the ballot box.

Yet Mr Kan has ploughed on. He has appointed Kaoru Yosano, an LDP exile and fiscal hawk, to broker cross-party consensus on his reform plans. Both the LDP and parts of the DPJ have reacted scathingly to the appointment. Even those who back fiscal consolidation have doubts about Mr Kan’s ability to pull it off. “They can say whatever they like,” says Takahira Ogawa, the analyst at Standard & Poor’s who downgraded the debt. “I seriously doubt how much groundwork they have done.”

Mr Kan has some influential supporters, however. Keidanren, the business lobby that was once firmly in the LDP camp, has switched sides. Its chairman, Hiromasa Yonekura, recently suggested that in rural areas the LDP may be sowing “misleading” information about the TPP. The country’s biggest newspaper, the Yomiuri Shimbun, is also promoting the merits of TPP and a higher consumption tax to its 10m readers. Its ancient chairman, Tsuneo Watanabe, is an ally of Mr Yosano; the paper has been notably kinder to Mr Kan since the former LDP finance minister joined the cabinet.

No one predicts a smooth ride between now and June. Municipal and prefectural elections are due for April, and opposition parties are loth to do deals with the government beforehand. Though the DPJ has the votes in the lower house of the Diet (parliament) to secure passage of the budget, it lacks the upper-house majority to pass laws to implement it. If the opposition blocked the budget, it would have the excuse to demand that Mr Kan stand down.

To pre-empt that, some people believe he might call a snap election and run on the strength of his reform plans. The prime minister himself insists that is not on the cards. Yet if push comes to shove, there is a chance that Mr Kan—or a more charismatic substitute—might pull it off.