Instability in Tokyo is bad news for the United States, which has come to rely on this vital Asian ally during turbulent times. The political crisis following the resignation of Japanese Prime Minister Yasuo Fukuda could open the door to the opposition Democratic Party of Japan, if Fukuda is replaced with yet another weak Liberal Democratic Party leader unable to manage Japan's deepening economic and security woes.

Resident Scholar  Michael Auslin

Almost a year to the day after his predecessor stepped down, Prime Minister Yasuo Fukuda of Japan has suddenly resigned, stumbling in the same minefield that brought down Shinzo Abe.

Fukuda, 72, who was a consensus candidate without a strong political base of his own, announced his departure Monday over intractable domestic economic and regulatory reform problems, combined with an inability to sell to the Japanese public a broader global role for the country.

He is likely to be succeeded by Taro Aso, current head of the governing Liberal Democratic Party, who served as foreign minister from 2005 to 2007. A staunch conservative, Aso gave voice to Abe's global vision for Japan, calling for an "arc of freedom and prosperity" stretching from Japan to eastern Europe.

At 67, he is one of the more popular politicians in Japan, known for his love of Japanese comic books. He gave Fukuda a run for his money last year when both ran for the leadership of the LDP after Abe's resignation.

Yet Aso is also a controversial figure, known for faux pas that offend Japanese and foreigners alike. One was his call to make Japan a place where "rich Jews" would like to live. He also supported official visits to Yasukuni Shrine, where several World War II war criminals are among the honored. Visits to Yasukuni by the former prime minister Junichiro Koizumi damaged relations with China and South Korea earlier this decade.

In addition, Aso is more popular with rank-and-file LDP members than with the party's power brokers. This could leave him a weak leader, unable to control his party or to come to agreement with the opposition Democratic Party of Japan, which controls the upper house of Parliament.

He could try to lead in the Koizumi mold, reaching out to Japan's voters directly, but to do that effectively he will need a clear reform plan that separates him from both old-style LDP politicians and the populist Democratic Party.

Aso is not certain to become Japan's next prime minister. There is speculation that Koizumi is supporting Yuriko Koike, the former defense minister, who would become Japan's first female government chief--an event that would shatter long-standing taboos in this culturally conservative nation.

Whoever takes power in Tokyo faces four immediate challenges.

First, Japan's economy is sputtering, and a plan for continuing reform is needed. Some senior LDP policymakers want to increase Japan's consumer tax; the last time that was tried, in 1996, it squashed a nascent recovery and sent the country into a steep recession.

The momentum of Koizumi's reforms has been stalled since 2006, and the voting public is tired of inflation and stagnant wages, but neither Abe nor Fukuda had a clear recovery plan. Without one, the LDP will continue to get pummeled at the ballot box.

Second, the special legislation permitting Japanese naval forces to refuel allied ships in Indian Ocean anti-terrorist operations will expire at the end of this year. Both the LDP's coalition partner and the opposition party are against renewing the legislation, and Japanese policymakers fear America's reaction if it fails to pass. Many in Japan are concerned that a Japan that shrinks from acting outside its borders will be replaced by an increasingly confident and assertive China.

Third, political betting must now be on the Democratic Party to win an outright majority in the Lower House in the next general election, which must be held by September 2009. This would allow the opposition and its leader, Ichiro Ozawa, to form a government.

Japan has been ruled by the LDP almost continuously since 1955, and a complete turnover in power would be unprecedented. Many political observers believe the LDP itself would splinter if it lost the election, creating more instability and possibly leading to political gridlock if the Democratic Party could not consolidate its gains.

Fourth, Tokyo and Washington are proceeding with an ambitious realignment of U.S. forces and expansion of the Japanese role. Billions of dollars are needed to move U.S. troops from current bases to Guam or to new facilities in Japan, and Tokyo has pledged to provide much of the funding. In addition, Washington expects Japan to continue its role in missile defense, and Japan's Defense Ministry is looking to upgrade weapons systems from Aegis ships to jet fighters.

A new prime minister must be prepared to tackle these problems and to wage the political wars necessary to fulfill his government's goals.

By any accounting Japan is in for a rough ride in the coming months, and the United States may have significant problems with its key Asian ally. A new American president will have to start working with a new, and possibly weak, Japanese leader. But with economic problems, North Korea's restarting its nuclear reactor, and a growing China, the stakes are too high for the alliance and Japan itself to remain mired in uncertainty.

Michael Auslin is a resident scholar at AEI.