Whoever takes over as Japan's next prime minister faces daunting challenges

The successor to Prime Minister Shinzo Abe faces a daunting list of economic, diplomatic and security issues. PHOTO: NYTIMES

TOKYO (REUTERS) - The successor to Japanese Prime Minister Shinzo Abe, who is resigning because of poor health, faces a daunting list of economic, diplomatic and security issues.

Abe's Liberal Democratic Party (LDP) will choose its next party president on Sept 14.

The winner will serve out Mr Abe's term as party leader until September 2021 and is all but assured the premiership by virtue of the LDP's majority in Parliament.

A look at some of the main issues the new leader will confront.

ECONOMY AND CORONAVIRUS

Mr Abe's signature "Abenomics" growth strategy was facing headwinds because of an export slump and a sales tax increase even before the Covid-19 outbreak, highlighting the problem of lifting the economy out of decades of stagnation.

Critics said Mr Abe's "third arrow" of structural reforms - the first two were hyper-easy monetary policy and government spending - was not bold enough in the face of a fast-ageing population and a rigid labour market.

Japan has not seen an explosive Covid-19 outbreak, but cases have been rising and the government must balance containing it and restarting the economy. The pandemic brought Japan's biggest economic slump on record and a third quarter of declines knocked real gross domestic product growth to decade-low levels, wiping out the benefits of "Abenomics".

Policymakers are short of ammunition with a big public debt limiting new government spending and the Bank of Japan running out of options to hit its elusive 2 per cent inflation target.

Japan is also struggling with a rock-bottom birthrate, shrinking labour force and low global ranking on women's empowerment.

DIPLOMACY

Japan's ties with China had improved ahead of a planned visit by President Xi Jinping, but the trip was postponed because of the coronavirus pandemic.

Some LDP members want the visit cancelled over China's tighter grip on Hong Kong and its push to assert claims in the East China Sea.

China is locked in a confrontation with the United States over rights, trade and security, and Washington may press Tokyo to take sides.

But while Japan shares US concerns about China, the Asian neighbours' economies are deeply intertwined, so the next leader must balance security and economic priorities.

Mr Abe had forged close ties with US President Donald Trump. The next leader will be starting afresh no matter who wins the US election.

Pressure on Japan from its main security ally to take on a greater share of the burden of its defence and pay more to host US troops is unlikely to ease.

Japan's ties with US ally South Korea are frigid due to disputes over Koreans forced to work for wartime Japanese firms and "comfort women", a euphemism for those pushed into Japanese military brothels, and the feud has spilled over into security and trade.

SECURITY, CONSTITUTION

The government has begun a review of its National Security Strategy following a June decision to scrap a plan to deploy the US-made Aegis Ashore ground-based missile defence system at two sites.

An LDP committee wants the government to consider a strike capability to stop ballistic missiles within enemy territory, a controversial issue for a country that renounced the right to wage war after its World War II defeat. The proposal is also likely to anger China and Russia, which could fall within range of any new strike weapons.

Mr Abe engineered a historic policy shift by reinterpreting the pacifist Constitution, passing laws to end a ban on exercising the right of collective self-defence, or defending a friendly country under attack.

But he failed to achieve his goal of revising the post-war, US-drafted charter's pacifist Article 9. Amending that is divisive and the new leader must decide if it is a priority.

PUBLIC OPINION, GENERAL ELECTION

Mr Abe's successor is likely to lead the LDP in a general election that must be held by October 2021 and could come sooner.

The weakness of fragmented opposition parties helped Mr Abe hold power by leading the LDP-led ruling bloc to repeated election victories, and the LDP is expected to hold a majority in the next election.

But whether it can keep its nearly two-thirds majority in the Lower House is a question and will likely hinge on the handling of the coronavirus outbreak, the economy and the new leader's image.

If the LDP does badly, it may choose a new leader, reviving revolving-door premierships that plagued Japan before Mr Abe's nearly eight-year rule.

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