Koizumi strives to save Japan

In a country which had become utterly disillusioned by its politicians’ failure to revive the economy, Japan’s new prime minister, Junichiro Koizumi, has quickly won huge popularity with calls for radical reform. Japan certainly needs this. And Koizumi intends to start at the key point, with the country’s ailing banks. But the consequences of reform will certainly be painful. If slowing growth and rising unemployment erode his popularity, the old political inertia may stifle Koizumi’s efforts yet.

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Junichiro Koizumi

Japan's new prime minister, Junichiro Koizumi, was described by one of his fellow Liberal Democratic Party (LDP) members of parliament as looking "like one of those homeless guys in the park".
It is a remark that may come back to haunt the country, especially since Koizumi's warm embrace of economic reform policies is likely to increase Japan's unemployment rate, which is already at record high levels of around 5%.
No matter: only a few days after Koizumi's new government unveiled a painful blueprint to reform the economy, at an immediate cost of up to 200,000 jobs through getting rid of banks' bad debts, the LDP was the main gainer in key municipal elections in Tokyo. Koizumi himself is enjoying immense popularity, more akin to that of a pop or sumo star than a politician. The Japanese public has bought more than half a million posters of the prime minister and he is winning unheard of 85% popularity ratings.
The change in Japan's political landscape has been remarkable, unexpected and swift. Just two months ago Yoshiro Mori was prime minister, stumbling around and tackling Japan's problems with all the imagination and skill of an ageing rugby prop forward who has bashed his head in too many scrums. His popularity plummeted to levels unseen even for an electorate bored with old polls and dropped into single digits.

The bosses of the ruling Liberal Democratic Party were scratching their heads looking for someone who could take over. The immediate search was for a fall-guy who would be prime minister for a few months, take the blame when the party failed in this month's upper house elections and then allow the LDP to find a new face who could try to pick up the pieces. But none of the putative candidates was stupid enough to want to be an interim leader on these terms, so the party had to look for a real leader, not a stop-gap figure.
Koizumi, who is from the same LDP faction as Mori, entered the lists against former prime minister, Ryutaro Hashimoto, once the brilliantined pinup of Japan's women voters, but now the heir to the largest faction and the consummate master of the smoke-filled back rooms where important LDP policies are still decided - or were.
Showing a splendid streak of imagination, Koizumi took the contest out of the back rooms and into the open and began appealing to the LDP grassroots, cleverly doing so by setting out his stall for the general public too.
The LDP faithful liked the challenger's openness and honesty about his divorce and his love of heavy metal music. His flyaway hair even became a trademark that had women flocking to his hairdresser to ask how he did it.
In his inaugural speech to parliament, Koizumi acknowledged the widespread disillusionment with politics: "Since the 1990s, the Japanese economy has struggled for a long time, people have lost faith in politics and there is an air of stagnation in society. It is becoming clear that the system that worked in the past may not necessarily be suited to 21st century society," he said. He nailed his colours to the mast. "Reform with nothing sacred," he promised.
It's springtime in Tokyo
Some of the most jaded and cynical commentators on Japan were impressed. "It's spring and it doesn't get any better than this," declares Jesper Koll, analyst at Merrill Lynch, who praises the new prime minister's cabinet-making and the new style of leadership, which has taken decision-making away from closed party caucus and to the people, as in a democracy. Koll says that Koizumi's timing has been excellent, giving him a 100-day honeymoon to enjoy before sweeping to victory in the July elections.
An upper house victory will reinforce the prime minister's sway over the traditional factions by underlining who achieved the victory. "The old geezers of the LDP are not stupid; they want to stay in power," Koll declares.
In these heady days of success with change in the air, some people have forgotten that even a popular prime minister will face difficult choices and that pain may be postponed but probably cannot be avoided. Nor is it clear that Koizumi will make the right choices - even though it has been widely assumed that he knows the correct path to take.
Koizumi has long presented himself as a reformer and several years ago called for the privatization of Japan's massive postal savings system, the world's biggest pool of funds. His policy speech to parliament reiterated his commitment to economic reform and singled out the need to improve Japan's fiscal balance and to clean up the bad debts of the banking system. He also promised to curb government bond issues and, as a start, to limit the sum issued to ¥30 trillion in the fiscal 2002 budget.
But most of the speech made splendidly general promises without spelling out the details. Where it was specific, such as the commitment to limit bond issues, it may prove too optimistic without savage cuts in spending or increases in taxes. Even his strongest supporters warn that Koizumi's policies are vague and he has not considered the details let alone the implications.
By the end of June, the economic blueprint was set out. The key points are: to resolve the banks' bad-loan problems within the next three years, using a government corporation to buy bad loans if the banks cannot unload them; to seek 2% to 3% economic growth in the medium term, but to accept minimal growth of zero to 1% in the next three years; to privatize public corporations; to study privatizing the massive postal savings system.
In spite of his promises of economic reform, in the immediate weeks after taking over Koizumi's preoccupation was with political matters. He promised a panel to consider selecting the prime minister by popular vote rather than by parliament. More worrying for some of Japan's neighbours was his staunch assertion of nationalist views. He promised he would pay an official visit to the Yasukuni shrine, where Japan's war dead, including convicted and hanged war leaders, are commemorated. It would be the first such official visit since former premier Yasuhiro Nakasone, who only went once, raising a storm of protest from China and South Korea.
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