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Japanese Government Promotes Economic Reforms - 2001-08-02


On the strength of Japanese Prime Minister Junichiro Koizumi's popularity, his coalition government won a convincing victory in parliamentary elections last Sunday. But as the celebrations die down, Mr. Koizumi now confronts his biggest and most difficult challenge: pulling the Japanese economy back from the brink of a recession.

Prime Minister Junichiro Koizumi says he is viewing the election victory as a public mandate to pursue painful economic reform. The coalition took 78 out of 121 seats up for grabs in last Sunday's election, while his Liberal Democratic Party (LDP) achieved its best results at the polls in 15 years.

Mr. Koizumi has vowed that this verdict, the first national test of his popularity, will result in a series of measures to fix the country's troubled financial sector and trim government debt. Years of economic mismanagement and low consumer confidence have stalled the once-vibrant economy to a stand-still.

The prime minister says that companies and individuals must be patient. The government is now stressing that crisis is the greatest opportunity. He adds that he is asking people to be ready to tolerate pain in order to create a better tomorrow.

When he took office in April, Mr. Koizumi pledged to clean up Japan's debt-ridden banking sector, slash public spending, and deregulate industries which have been artificially propped up with public funds. It is a promise he says he intends to keep.

But analysts say the battle for reform in Japan could get bloody. Many of the powerbrokers within Mr. Koizumi's own party are traditionalists who see him as a threat. They charge that his reform plans are too severe and will eventually turn voters against them.

Stephen Reed is an election analyst at Chuo University near Tokyo. He says the LDP is braced for a drawn-out fight between the pro-Koizumi reformers and those whom the prime minister has labeled as "resisters."

"The future lies with Mr. Koizumi. Nevertheless there are a lot of people who won the election because they support special interest groups and oppose reform. Now there is going to be a big battle within the party," Mr. Reed says.

A survey published Wednesday by Japan's Asahi newspaper underscores this view. It found that only 18 of the 64 newly-elected LDP members actively back Mr. Koizumi's desire to privatize the country's vast postal system.

It also found that nearly half of the recently-elected legislators say they do not fully back the idea of enacting radical measures to revive the economy.

Some legislators are calling for Mr. Koizumi to spell out his reform package, saying he has yet to offer any specifics.

On the streets of Tokyo, a businessman says he, too, would like to know what Mr. Koizumi has in mind. "I want to know what kind of pain the prime minister is referring to. The lack of facts are making many Japanese citizens feel anxious," he says.

Whatever the reform package may be, analyst Steve Reed predicts that it will cost Japan more than one million jobs in the next two to three years as thousands of unprofitable companies are forced to close down. He also believes that the Japanese public will ultimately support the prime minister, currently the most popular Japanese leader in history.

"I think the voters are ready to tolerate the hardships. The only problem will be if they appear unfair and if it looks like some people are managing not to suffer any hardships. If people (LDP legislators) start trying to keep him from reforming, he will go back to the electorate and will have to upset things again to go forward," he says.

Mr. Koizumi has already put anti-reform factions on notice. He says he would not hesitate to call a general election or to split the long-ruling LDP if his goals are blocked.

Since the election, the prime minister has outlined a three-step plan for enacting his reform agenda. The first stage will begin in the coming days when government ministries submit budget requests for the next fiscal year. Mr. Koizumi says he will closely examine them.

The next stage will occur in September, when parliament holds an extraordinary session to consider bills, some related to the economy. The last stage will take place in December, when the final budget is put together. All three steps are devoted to taking control of the budgetary process and the country's finances, so that Prime Minister Koizumi and his economic team can rein in public spending.

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