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Monday, Oct. 4, 2004

Buoyant Koizumi makes mad dash for the pole -- but which one?


He was supposed to go to the north pole, but changed directions on the way and ended up discovering the south pole. A connoisseur of polar-expedition literature would immediately say this is a description of Roald Amundsen, the great Norwegian explorer of the early 20th century.

But not on this occasion. In this early 21st century time we live in, this would be a comment on Junichiro Koizumi, prime minister of Japan.

Mr. Koizumi has just reshuffled his Cabinet. By his own definition, the new lineup is totally geared toward postal reform. In this respect, it is also something of a war Cabinet -- Mr. Koizumi's long campaign against the postal services has reached its final stage.

There is no turning back; the prime minister has burned his boats. The battle has to be won. There is no longer any room for concessions to placate the various factions. Such considerations are a luxury he can ill afford at this stage of the game, and one and all must be unflinchingly dedicated to the captain's purpose.

For the captain is making his final dash for the pole.

But which pole?

Amundsen's 180-degree volte-face was carefully calculated strategy. Mr. Koizumi seems to be adrift.

Mr. Koizumi claims to be on the way to achieving all the goals that he had set out for himself as a reformer and revitalizer of the Japanese economy. As evidence of his success, he cites the progress made on the banks' nonperforming loans, industrial revitalization, the highway corporation reforms, the so-called "trinity" of reforms to local government finance, and, of course, the economic recovery.

Put like that, the list is indeed impressive. Yet if one looks more closely at the actual content, doubts begin to mount as to what has actually been achieved.

Yes, the nonperforming loans have shrunk. But this has been accomplished at the cost of growing government intrusiveness into the private sector's affairs.

The same goes for industrial revitalization. The Industrial Revitalization Corporation is the machinery whereby the government, not the market, decides who the winners and losers are to be.

If this is what Mr. Koizumi meant by saying he wanted to leave to the private sector what it can do best and keep unwanted official fingers out of the pie, he is living in cloud-cuckoo land.

And yes, the protracted row over the highway issue has resulted in a reform plan of sorts. Yet it did nothing to prevent uneconomic road-building projects from going ahead as intended. To that extent, the whole exercise ended up defeating its purpose.

The local government financing reforms are turning into a battle of egos between the central ministries and the prefectural governors. Meanwhile, the fundamental issue of greater regional autonomy is rapidly disappearing into the backdrop.

As for the "economic recovery," it has nothing to do with the Koizumi reforms and everything to do with Chinese development demand.

Thus, what Mr. Koizumi says he has achieved and what has actually happened are, upon close inspection, very different. Moreover, the same looks increasingly to be the case with the postal services reform battle he is now poised to enter. For the way it looks at present, the end result could well be the birth of a gigantic monopoly that prevents healthy competition in the financial and parcel delivery services market.

To Mr. Koizumi's creative mind, the difference between the north pole and the south pole may mean very little. They are both poles, both very cold places, and you get cheered for reaching either. But for more conventional, not to say sane, minds, the two are, well, poles apart.

Noriko Hama is an economist and a pro fessor at Doshisha University School of Management.


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