The Hatoyama government is now one month old. It's time to review how the new boys are doing. On surface, it seems smooth work and steady progress on surface and polls show popularity is still over 70%. Yet, behind the facade, some cracks are appearing that are making business observers worried.

In media, ministers are running busy from meeting to another and giving reporters well formulated sound bites how they are tackling the problems one by one as laid out in the DPJ campaign manifesto. First into fire was the boyish looking Land Minister Maehara who quickly went out to cancel two big dam projects as "wasteful spending" - and 46 smaller ones to follow. Faced with criticism that it was even bigger waste to throw away billions worth of work already done, he has bravely stood his ground. Maehara's savings form the bulk of totally JPY 3 trillion (EUR 22 billion) funds from Aso's JPY 11 trillion (EUR80 billion) extra stimulus that DPJ now will re-allocate to new targets preferred in manifesto. Of course, other ministries, too, had to contribute from their areas - it was not all from dam buildings. Reform Minister Sengoku was the one who was responsible for putting it all together and he showed admirable patience in doing this. Yet, the exercise showed that it is just as difficult to squeeze any ministry out of its budget allocations as it was during LDP time.

Another minister who has been much in the limelight - just as his LDP predecessor was - is Health and Welfare Minister Nagatsuma. Sweating under pressure, giving out statements that all is under control much like Masuzoe did, it is said Nagatsuma has lost 4 kilos weight during the first month. Sure enough, A(H1N1) vaccinations to risk groups got started last week but nightmarish pictures are still being painted that it is all too late and hospitals will be soon in overcrowded panic. Time will tell if it's all just horror mongering.

Veteran Finance Minister Fujii, who obviously likes to talk more than necessary, managed to confuse the financial markets saying first he is not against strong yen, then saying he did not mean it. This again sounds familiar from LDP time. Also, faced with the fact that it is not as easy to cut government costs as DPJ thought, he cancelled his early promise that DPJ would not need to resort to new bond issues to finance its spending. In fact, it looks like the new government must issue historical record amount of new debt to make the ends meet as tax receipts will be record low next year because of the recession. It does not help that the requirements from the various ministries are also reaching record level despite all DPJ talk about actively cutting "wasteful spending".

Prime Minister himself has been giving considerate comments on the work progress actively - when ever he has been in Tokyo from his busy travelling to meet other country leaders, even to personally promote Tokyo's 2016 Olympic bid in Copenhagen. He will be there soon again to attend the final (?) talks on the new global environmental agreement. His speech this week at opening of the new Parliament's first session was full of "fraternity" and "love", but less of concrete ideas how to accomplish that according media comments. They all sounded like "honey moon is now over."

Also Foreign Minister Okada has made lightning visits to such countries as Afghanistan and Pakistan, both expected to have central focus in Japan's new approach to "fight against terror" - namely big civil development spending instead of military refuelling. He must have serious jet lag problem or heavy overload of work as he always manage to look so tired, hardly ever any smile.

Maybe Okada's stress come from emerging pressures in U.S relations. As predicted, these - and especially the Okinawa dilemma - are emerging as one of the risk factors in the new government success. Americans were first surprised, then annoyed that its long time pet dog can after all bark and pull its leash. Now they are getting frustrated that the dog does not seem to know which way it would like to go. The 2005 deal to relocate the Futenma base, located right in the middle of Naha City, to artificially built island further up the coast, took 10 years to agree with LDP. Now DPJ seems unable to decide whether to stick to the deal, reformulate it a bit or try come up with a totally new alternative. For USA, this one base location is part of an overall relocation plan that was deemed necessary years ago in the new geopolitical situation after the end of the cold war, and it wants to proceed with the move, one way or the other. Defence Minister Gates himself visited Japan last week to finalize the solution, but had to travel on empty handed. It was reported that on his way out he complained "Japan is now bigger trouble for US security than China". That does not sound good!

Another predicted risk factor is materializing on economy side: Finance Regulation Minister Kamei. He is proving even bigger scare than expected and an outright embarrassment for Japan. The way he has handled the important matters put under his ruling, has made financial markets worried what is going on in Japan today. In this short time, he has 1) said banks should stop require corporate customers pay back their loans as scheduled, 2) said post privatization, well on its way since 2005, will be stopped without saying what will happen instead, 3) said Japan Post operations will be somehow expanded overseas, 4) pushed Koizumi's hand picked Post CEO out and 4) overstepped normal process to personally nominate his friend and ex government bureaucrat as new CEO. In latest news, he said he will personally sack half of the carefully selected corporate board.

As result, markets are confused and media is saying this all reflect not only Kamei's total recklessness but also serious lack of control and leadership from the prime minister himself. The new CEO appointment, is especially embarrassing for Hatoyama and whole DPJ: after preaching it will stop "amakudari" practice - nominating retired bureaucrats to high salary post career positions in quasi-governmental companies - it's exactly what the new government does! From management perspective it is worrisome that 1) normal corporate process was totally skipped and 2) PM was not even notified in advance and 3) he just meekly accepts to rubber stamp all.

Privatization of Japan Post, the world's biggest bank by assets, was the greatest achievement of PM Koizumi's reform drive. It was also an effective move to put a stop on publicly held private funds flowing into political corruption. Now it seems DPJ wants Japan take a step back to socialism. Even in China, government is proceeding to sell out state owned banks and move towards capitalism. Moreover, declining to sell out part of the Post shares on the market as planned, DPJ is rejecting funds that would help to fill the finance gap between its spending plans and the income from taxes. The alternative is to increase taxes or to increase debt, both bad for the Japanese people.

Even the usually left leaning Asahi called the latest move "appalling development". Nikkei that represent the business world views went on to condemn the new postal reform trend as "huge step backward" in matter that is "crucial for the future of Japanese economy". It went on to say that it seems "government simply wants its piggy bank back" and warned that "the DPJ push for more government bloat could disappoint many people who voted for the party in hopes of change". In conclusion, "while the new administration still enjoy public support, the stock market remains uncertain about its ability to re-energize the economy". Especially, "it is the inconsistencies in the government economic program that is troubling the market." This is heavy text!

My conclusion is that the new government is only one month old and its ministers were without much experience in advance, so it is within expectations that they are still finding their way forward. Yet, clear policy outlines are as important in economy as they are in foreign relations. Just buying popularity by increasing child support, re-opening lonely post offices in remote areas or cutting down highway tolls, does not lead Japan to anywhere. Firm leadership, often criticized lacking from the past LDP leaders, is now expected from PM Hatoyama. For Japan and the global economy, not to mention for our business, it is important that "The Alien" and his cohorts make wise decisions, and lift Japan back on track over the next 4 years they are expected to stay in charge. Let voters then give their verdict again in new elections.