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Tuesday, July 24, 2001

LOCALS BACKED WRONG LDP HORSE

Will Osaka bear brunt of Koizumi's reform pain?


Staff writer

OSAKA -- Prime Minister Junichiro Koizumi's repeated warnings of the pain that will accompany structural reforms are especially foreboding for Osaka Prefecture, which already has one of the highest unemployment rates and largest local government debts in the country.

Thousands of Osaka residents gather in front of JR Osaka Station recently to listen to Prime Minister Junichiro Koizumi as he stumps for the July 29 Upper House poll.

Koizumi's popularity and the programs he wants to carry out are making many local bigwigs involved in the upcoming House of Councilors election nervous.

That's because over the past several years, many politicians and senior business leaders have gone out of their way to keep on good terms with the more conservative elements of the Liberal Democratic Party -- especially the faction led by former Prime Minister Ryutaro Hashimoto -- in the belief that it would keep financial support flowing into the prefecture.

Given the current widespread public support for Koizumi and his reform agenda, however, some political insiders here wonder whether that strategy has been a good idea.

"There's a fear among some senior business and government leaders in Osaka that the longer Koizumi stays in power, the worse it will be for Osaka politically," lamented an aide to an LDP member of the prefectural assembly.

"Many here thought Hashimoto and (former Chief Cabinet Secretary Hiromu) Nonaka would continue to be the main powers within the LDP, but they've fallen out of favor" since Koizumi took the helm.

The attempt to draw closer politically to the Hashimoto faction was most clearly seen when Fusae Ota was elected in February 2000 as the nation's first female governor, replacing ex-Osaka Gov. "Knock" Yokoyama, who resigned in disgrace and convicted of sexual harassment.

Ota's candidacy was reportedly suggested by the Hashimoto faction and strongly supported by big businesses and LDP headquarters, as well as ruling coalition member New Komeito, which is relatively strong in Osaka.

But Ota, an ex-bureaucrat with the former Ministry of International Trade and Industry who had never lived full-time in Osaka, was opposed by the local chapter of the LDP, which receives strong support from local small businesses.

"Kansai's big business leaders bet that if Ota were governor, she could call on Hashimoto to hold off angry Finance Ministry bureaucrats who wanted to cut financial support for Kansai International Airport," a senior adviser to the LDP's prefectural chapter said on condition of anonymity.

Now, however, with Hashimoto out of the political spotlight, there is concern about Osaka's political clout in Tokyo's Nagata-cho district Japan's political center.

Even Finance Minister Masajuro Shiokawa, who hails from Osaka, is seen by many local LDP ranks as unlikely to offer support, given his criticism of Osaka's public works projects during a symposium held in February, before he assumed his current post.

Although Koizumi speaks of the need to clean up the problem loans of the banking sector, cut unnecessary public works spending and take other steps to revive the economy, Osaka's political and business leaders have their own ideas about how he should proceed with structural reforms.

Basically, they have two demands. First is a guarantee by the Koizumi administration that whatever reforms carried out are accompanied by steps to support elderly workers who lose their jobs. The second is more -- not less -- financial assistance from the government.

With the Kansai region's jobless rate already one of the highest in Japan at nearly 6 percent, talk of further unemployment scares the local business community.

"It is important that a social safety net be provided to care for workers who are displaced because of the structural reforms," Tetsuro Kawakami, former head of the Kansai Economic Federation, told Heizo Takenaka, state minister in charge of economic and fiscal policy, at a recent symposium.

At the same time, prefectural officials say they welcome the economic reforms themselves, and add that the way to achieve them is to pump more national investment into the Osaka region.

"It's not as simple as just cutting public works projects. There is reason to believe that all that would do is put more pressure on local finances," said LDP Upper House member Shuzen Tanigawa, one of six candidates running in the Osaka constituency in the July 29 election.

Others also appear to be unenthusiastic about any excessive belt-tightening, which they say would further undermine the prefecture.

"More investment in the Osaka region would boost the area's economy, and effectively lead to a revival of the entire country," given the importance of the Kansai region, Kawakami said.



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