by Scott Tong

Financial markets may be cheering Japanese Finance Minister Naoto Kan’s election to prime minister, but the role places some limitation on what he can do within Japan’s parliament.

Japanese bonds rose upon Kan’s election. Markets are hoping he can do what his predecessor couldn’t: Pay down Japanese debt, which by some measures is the largest in the world.

Kan’s known for a strong personality. He promotes fiscal discipline and currency policies to help companies like Toyota and Sony compete against the Americans. But Robert Dujarric at Temple University’s Tokyo campus says the office of the prime minister has limited power. “The prime minister of Japan is not the president of the United States, he’s not the prime minister of the United Kingdom. The personality of the prime minister has less of an impact on policy.”

Dujarric says the economic agenda is clear: Japan’s debt, and its aging society. “The numbers of Japanese of working age is going down very rapidly. The number of elderly is rising and every year there are fewer and fewer births in the country.”

How Japan fares is being watched closely. Most of the entire developed world is aging, and peering over the same demographic cliff.