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Wednesday, March 10, 2004

Koizumi reform campaign fails to impress observers

Staff writer

LONDON -- What has Prime Minister Junichiro Koizumi, with his oft-repeated "no pain, no gain" slogan for structural reform, achieved in his roughly three years in office?

News photo
Tetsuro Kikuchi (right) speaks during the Feb. 25 symposium. With him are co-panelist Dirk Nabers (left) and Chris Hood, associate fellow from the Royal Institute of International Affairs who served as chair of the session.   PHOTO COURTESY OF THE ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS

Most of the panelists at the Feb. 25 Japan-U.K. symposium at the Chatham House here gave a bleak assessment, noting that Japan's structural problems still remain very much in place.

While NEC Corp. Chairman Hajime Sasaki said Koizumi's road to reform is "only half trod," many others agreed that the prime minister's reform initiatives have little to do with the recent lift in the economy.

Akira Kojima, senior managing director of the Nihon Keizai Shimbun, said Japan had 11 prime ministers over the past 14 years, with each of them staying in office for little more than a year on average -- obviously too short to implement structural reforms.

Koizumi will soon enter his fourth year in office, and his term as president of the ruling Liberal Democratic Party runs through September 2006.

"For the first time in a decade, this government can afford, if the prime minister is serious, to introduce real reforms," Kojima said. "But (although) his reforms are important symbolically and politically, it's almost nothing in terms of macroeconomic implications."

Tetsuro Kikuchi, chief editorial writer for the Mainichi Shimbun, similarly noted that Koizumi has achieved little.

"After three years into the Koizumi era, what do we find? The results are remarkable in their emptiness," Kikuchi said. "The whole reform program for government enterprises, including privatization of the highway corporations and of the postal services, is no more than a facade."

Kikuchi said Koizumi's reform initiatives are in fact a rehash of a similar drive launched in 1997 by Ryutaro Hashimoto.

After years of stagnation that followed the collapse of the bubble boom in the early 1990s, Hashimoto came up with an ambitious program for reforms in six areas: the financial sector, administration, fiscal structure, social security, economic structure and education.

However, a series of failures of major financial institutions, including Yamaichi Securities and Hokkaido Takushoku Bank, that hit the nation in late 1997 "quickly led to pressure from the old guard to abandon the reforms and rescue the economy with the traditional way -- namely massive infusions of public funds," Kikuchi said.

Then Koizumi was elected prime minister in 2001 as "basically a backlash" against the selection process in which his predecessor Yoshiro Mori was effectively picked by a handful of LDP leaders behind closed doors following the death of Keizo Obuchi about a year earlier, he said.

"People came to think that the only thing holding Japan back from recovery was the presence of the old guard at the top. They wanted new faces, and newness was more important than ability," he said. "So they were readily drawn to the 'maverick' Koizumi."

And although Koizumi's reform agenda was in fact a renamed version of Hashimoto's program, "the public believed that implementing these reforms was all that it would take to put Japan right back on its feet," he said.

"But there was a major catch," he said. "The Koizumi agenda appeared to focus on structural reforms, but in fact the priority was completely different. What Koizumi actually directed his attention to was the crushing of factions within his own party," particularly the biggest group founded by the late Prime Minister Noboru Takeshita and now led by Hashimoto.

"Koizumi himself is not interested in each policy itself. He doesn't care about the results if the (Hashimoto) faction is broken," he said.

Ron Dore, senior research fellow at the London School of Economics, challenged the oft-repeated notion that Koizumi is a bold reformer whose excellent intentions have been thwarted by "resistance forces."

"A gross simplification," Dore said. "It is not clear that Mr. Koizumi's reform intentions are as sweeping and concrete" as he suggested in his first speech to the Diet, in which the word "reform" was used 36 times, he added.

Dore said the major difference between Koizumi and his opponents within the LDP are over balancing public finances and ending deflation.

And the defeat of Koizumi opponents in the LDP presidential election last year, coupled with the retirement of Hiromu Nonaka, a key Hashimoto faction member and the foremost critic of Koizumi, "seems to be the major reason why talk about curing deflation has now largely dropped out of the picture," he observed.

Does the decline in the power of factional leaders mean Koizumi now has a firm grasp of his own party -- potentially a solid footing for him to pursue his reform agenda?

Dirk Nabers, research fellow at the Institute for Asian Affairs in Hamburg, Germany, said now there are no serious contenders to Koizumi's leadership within the LDP.

At the same time, he observed that Koizumi's strong popular support has not directly translated into election gains for his party. For example, the seats won by the LDP in November election under Koizumi were not much different from the number captured by the party in the previous election in 2000, when his unpopular predecessor Mori was at the helm, he said.

Nabers also charged that Koizumi has not lived up to his earlier statement that he would "break the LDP into pieces" if the party fails to follow his reform plans.

"This claim contrasts sharply with his inability to really get the party to commit itself to privatization of postal services" -- one of Koizumi's key reform goals, Nabers told the audience.

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