Watch CBSN Live

Japanese Prime Minister Wins Re-Election

Japanese Prime Minister Naoto Kan was re-elected president of the ruling Democratic Party on Tuesday, surviving a challenge from a veteran powerbroker and sparing Japan another leadership change as it deals with a sluggish economy.

Kan, in office just three months, defeated party heavyweight Ichiro Ozawa by an unexpectedly wide margin, 721-491. Media speculation beforehand was that the vote would be much closer.

The leadership dispute now settled, Kan and his Cabinet should be able to focus on tackling a host of problems confronting Japan, from economic malaise and a surging yen - which Tuesday hit a new 15-year high against the dollar - to an escalating spat with China over a collision near disputed islands.

But Kan still faces obstacles in parliament, where the Democrats and their junior coalition partner lost their majority in the upper house in July elections. That's going to make it tough to get legislation passed.

"The battle is now going to turn to parliament," said Naoto Nonaka, a political science professor at Gakushuin University in Tokyo.

After the vote, Kan appealed to fellow party members to work together to tackle Japan's challenges.

"Japan is currently in serious difficulty. We must rebuild Japan to make a healthy Japan again in order to hand it to the next generation, and I will stake my life to do the job and gain support from the people," he said.

A political fixture for 40 years, Ozawa may have been done in by a political funding scandal hanging over his head. He quit as the party's No. 2 in June for this reason, and could face indictment on allegations of funding irregularities as early as this month.

Had Ozawa won, he would've been Japan's third prime minister in a year.

After the vote, Ozawa rose to the stage with full smile and shook hands with Kan.

A fiscal disciplinarian, Kan is far more popular among the general public than Ozawa, who is widely viewed as a backroom kingmaker with a scandal-tainted image. Surveys show that voters prefer Kan by a margin of 4-to-1.

Famous for standing up to Japan's bureaucrats when he exposed a government cover-up of HIV-tainted blood in the mid-1990s, Kan has pledged to make politics more transparent and accountable.

To revive the economy, Kan has called for Japan to create more jobs, but is viewed by financial traders as less likely to intervene in the currency market to stem the yen's surge - as Ozawa had proposed.

Immediately after the vote, the dollar fell to a new 15-year low of 83.09 yen before recovering slightly. The strong yen cuts into the foreign income of exporters like Toyota Motor Corp. and Canon Inc.

Kan, 63, also sought to mend any internal division created by the vote and thanked Ozawa for his advice as a senior party member over the years. A master strategist, Ozawa is widely credited with engineering the Democrats' landslide victory a year ago, unseating the conservatives that ruled Japan for most of the post-World War II era.

"Now the election is over," Kan said. "I seek full participation and support from all lawmakers and members of the Democratic Party."

While Ozawa has a deep support base within the party, in the end, that wasn't enough.

The vote results showed that rank-and-file members around the country overwhelmingly preferred Kan. Those ballots counted for a third of the overall tally, while parliamentary party members accounted for two-thirds of the votes.

In office for just three months, Kan has not been able to achieve a great deal.

His most noted policy proposal - that Japan needed to seriously consider raising its sales tax - was a disaster, suggested just before July's upper house elections. He was widely blamed for the Democrats' heavy losses in that vote, and Ozawa and other party members have expressed unhappiness with his lack of decisive leadership.

View CBS News In