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Investors favor Japan PM Hatoyama’s resignation

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Analysts say the markets are reacting positively towards Japanese Prime Minister Yukio Hatoyama’s resignation, despite today’s 1 percent drop in the Nikkei.

Yukio Hatoyama has been in office for less than nine months, and has taken an office held by four prime ministers in four years. Hatoyama stepped down amidst controversy surrounding the U.S. military presence in Japan and vocal critics. Hatoyama led the opposition Democratic Party of Japan into office last summer, pledging to kick-start one of the hardest hit economies of the global recession.

Investors excited for the news feel the market has a chance to turn around, now that the drama of Hatoyama’s term is over. “I think there has been relief that the uncertainty has been removed,” says stock analyst Stephen Church at Japan Invest. Church says the prime minister lacked the political power to take on Tokyo’s powerful bureaucracy.

The new prime minister’s first task will be to tackle the Japanese debt, which as a percentage of the economy is more than 250 percent — worse than the U.S. debtload. “The issue is dealing with that very high public debt by increasing the total tax burden,” Church says.

Japan’s economy been going sideways for over 20 years. Later this year, it’s expected to be surpassed by China as the world’s second-largest economy after the U.S.

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