Japan’s ‘Drunk’ Finance Chief, Shoichi Nakagawa, Steps Down

Japans Drunk Finance Chief, Shoichi Nakagawa, Steps Down

Slurred speech. Long pauses. Answering questions that weren’t directed to him and blurting out others. For days, Japan’s Finance Minister Shoichi Nakagawa’s appearance, during which he appears to be drunk, has been painfully public on the YouTube video of a G7 press conference in Rome last week. Today, it finally cost him his job. At a press conference in Tokyo, he resigned from his cabinet post, delivering yet another blow to the administration of Prime Minister Taro Aso as he struggles to keep control of his party and deal with the country’s ever-worsening economic crisis.

The rudderless finance ministry that Nakagawa’s resignation leaves can’t help an already dismal outlook for the Japanese economy. This week’s figures show that Japan’s economy contracted last quarter at an annualized rate of nearly 13%, exports were down nearly 14%, and that more layoffs are on the books for Japan Inc. But economists and experts predict the ramifications of Nakagawa’s resignation won’t be economic, but political. In a recent poll, Aso’s support rate was 9.7% and many say he is teetering on losing control of the Liberal Democratic Party. “[The economy isn’t] going to be better or worse because he’s gone,” says Robert Dujarric, director at Temple University’s Institute of Contemporary Japanese Studies. “But this is one more nail in Aso’s coffin…It shows that he’s incompetent and so is his administration.”

As word — and video — of the embarrassing incident got out, Nakagawa also stole positive attention away from this week’s historic visit from U.S. Secretary of State Hillary Clinton to Japan. Nakagawa’s press conference Tuesday nearly coincided with the briefing that announced the invitation that Clinton extended to Aso to be the first foreign leader to visit the White House under President Barack Obama’s administration. “The opposition party is looking to make an opportunity out of this big mistake,” says Credit Suisse chief economist Hiromichi Shirakawa. Shirakawa says that if there were economic implications of Nakagawa’s resignation, they might be that the DPJ would “push the reset button” on Aso’s pending budget proposal, which includes an unpopular hand out of $21.7 billion to the Japanese public. The opposition Democratic Party of Japan, he says, “can now argue that the government has already lost their ability to get back on a path to recovery.”

Nakagawa, for his part, has denied that he was drunk in the first place, saying that he was tired, under the influence of cold medicines, and had only “a sip” of wine during the lunch before the G7 press conference. The outraged public, for better or for worse, was not having it. “Japanese are often concerned about negative reactions by other countries,” says Shirakawa. “It’s a kind of shame.” The fact that the press conference was broadcast globally didn’t help. “It’s not like some tourism minister at some conference in Bermuda getting smashed,” says Dujarric. “The economy is tanking and he’s supposed to go to help the Japanese people deal with this. This was the public humiliation of the country. He had to go.”

Aso has already named Minister of the Economy Kaoru Yosano, 70, as Nakagawa’s replacement. Yosano, who claims he taught DPJ leader Ichiro Ozawa to play the chess-like game of Go, will now wear three hats in Aso’s government, running the ministries of economy and finance and the Financial Services Agency, which oversees banking. A fiscal conservative, Yosano was runner-up to Aso in the LDP elections last September. If things get much worse for the Prime Minister, there is even talk that Yosano could become the new head of the party and lead it into upcoming general elections. How well this bodes for the struggling LDP remains to be seen; the last time that Yosano and Ozawa played Go, Ozawa won.
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