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New year, new chances for
Koizumi
By Richard Hanson
TOKYO - Among those ringing in the year 2003
(Heisei 15 by the Japanese calendar), none was more
relieved to say goodbye to the old one than Prime
Minister Junichiro Koizumi.
As the Diet
(parliament) opened its 156th regular session this week,
Japan faces a legacy of a poorly performing economy,
dogged by falling prices. Deflation has become the
buzzword for Public Enemy No 1. The world is threatened
by war in Iraq and nuclear tensions on the nearby Korean
Peninsula.
For Koizumi, however, the Year of the
Goat offers up a rare opportunity for a Japanese
government leader. He is more firmly in control of
government than at any time since he assumed the
position in April 2001. The nominal opposition political
camp, led by a weakened Democratic Party of Japan (DPJ),
is no threat.
Rivals within his own ruling
Liberal Democratic Party plus its coalition partners
have been outflanked. They dislike him and his tattered
reform-minded agenda, but they cannot dislodge him
unless he makes some horrible mistake between now and
the next LDP convention this autumn, when the party
leadership is up for grabs.
Even hardened
enemies, who were bloodied last year in parliamentary
battles over reform legislation, pose little threat.
Koizumi has lost some of his luster, but has learned
lessons in political humility as well as power. He
humbly accepts that only about 50 percent of those asked
in media polls support him.
"That is natural,"
he says with humility.
At the same time, he
jealously husbands the power of his office, seeking to
enhance it by further use of direct appeals to
electorate. This month he launched what will be a
monthly Saturday evening, eight-minute radio talk -
shades of the late US president Franklin D Roosevelt's
famous depression-era fireside talks, his publicists
hope.
Topics included a successful trip this
month to meet with Russian President Vladimir Putin. He
used the visit to pray before monuments in Moscow and
Khabarovsk in memory of Japanese who died while being
held by the former Soviet Union after Japan's surrender
in World War II. That bolstered his polls.
The
prime minister didn't talk about a quick trip made last
week soon after his return from Russia to Tokyo's
controversial Yasukuni Shrine to pay his respects to
Japan's war dead. No need to hype that among his
listeners. That "surprise" public visit was timed, it
seems, to mute as much as possible a harsh reaction from
South Korea and China before their new leaders
officially take charge in February and March
respectively. It seems they will have to live with
Koizumi's genuine belief that respect for the spirits of
the dead is good politics.
The radio chat
covered his government's still pending economic reform
plans and prepared the people for his newly energized
battle against the national scourge of deflation -
Koizumi's moral equivalent of George W Bush's battle
with terrorism.
In the background, there was a
soothing violin concerto by Niccolo Paganini, said to be
his favorite Italian composer. Koizumi will be seeking
what ever soothing he can get.
One year ago, in
January 2002, Junichiro Koizumi, then 60, didn't know it
but the charmed, almost idolized, movie-star-quality
aura that wrapped his prime ministerial reign since
being selected as the leader of Japan (in April 2001)
was about to go plunk into a political morass. The prime
minister - dubbed the Teflon Kid, who for the first few
months in office was carried along by a seemingly
untouchable wave of popular support - was soon to be
unclothed.
Nominally, this was sparked by the
messy - and tearful - midnight firing of his mercurial
female foreign minister Makiko Tanaka, daughter of the
former premier, in a party tiff involving a
once-powerful lawmaker cum political fundraiser Muneo
Suzuki, who subsequently was arrested on bribery
charges.
The legacy of that year was to be
political paralysis of the normal workings of one of the
world's most important parliamentary bodies. Koizumi's
enemies within the LDP, a party that rules by co-opting
two minor coalition partners, pounced on a sudden
collapse in Koizumi's 80 percent-plus ratings in the
monthly media polls - especially among women. They
attacked his ambitious agenda of "structural reforms"
that would deny the "old guard" party factions and their
leaders of lucrative sinecures of protected industries,
such as construction and public road works road
building, and giant governmental monopolies, symbolized
by the postal system.
The prime minister limped
through the spring and summer sessions of the Diet,
settling for half-victories on a fraction of his
legislative agenda, notably a watered-down plan to
privatize the post office. Koizumi's political fortunes
turned positive again only when he unveiled a surprise
breakthrough in relations with Japan's neighbor, the
isolated and rogue state of North Korea.
A
one-day summit on September 17 on normalizing ties with
Pyongyang did wonders for his standing in the polls.
This also produced revelations about and the release of
a small group of Japanese who had been kidnapped by
North Korea a couple decades ago. Their plight has
riveted the public, which is not a bad thing given other
bad news on the economic front. Disclosures on North
Korea's nuclear-weapons ambitions, however, would soon
heighten tensions in the region.
On the
parliamentary front, the prime minister reshuffled his
cabinet for the first time since taking office and
pledged to attack the problems of bad loans that
crippled the banking system. Koizumi recovered some
ground when the LDP held its own in a round of local by
elections in October.
And his government began
to benefit from the support of important leaders in the
business community, notably the newly reconstructed
Japan Business Federation, known in Japanese as Nippon
Keidanren. The chairman of Keidanren, Hiroshi Okuda
(also the chairman of Toyota Motor), rallied support
within the business community to support Koizumi's
reform agenda.
The support of Big Business will
be the key to much of Koizumi's ambitions to stay in
office long enough to pass his agenda of "structural"
reforms, freeing the economy of many bureaucratic or
legal constraints. Perhaps more crucial will be the
government's handling of more urgently needed attention
to the economy.
The new year presented Koizumi,
now 61 years old, with some disturbing news on the
economic front.
According to the revised
medium-term reform blueprint prepared this week by his
influential Council on Economic and Fiscal Policy
(CEFP), the prime minister, who chairs the council, will
be at least 63 or older before Japan even begins to
emerge from the onerous grip of deflation on the
economy. Deflation is as pervasive as it is hard to
grasp for economic policy makers.
"There is no
magic cure," the prime minister said. "We will continue
to revitalize the economy by building up reforms." That
is a sensible comment.
For the past 12 years,
Japan has experienced almost constant depreciation of
just about everything of value, starting with property
and stocks. In recent years, there has been a steady
decline in prices on the consumer level. Economic policy
makers are relieved that Japan blithely (that is without
a plan) avoided the evils of hyper-deflation. Some in
the Bank of Japan (BOJ), the central bank, have seen
deflation as a positive force in a country that
overvalued just about everything in the high-growth era.
The bubble years of the late 1980s brought
values of everything to fantasyland heights. The danger
now is that the battle against deflation will spawn
policies that could do more damage than deflation
itself.
Within the ruling LDP and even within
the Koizumi government there has been a rising
"anti-deflation" chorus that seeks what many consider
economic quackery rather than sound policy.
This
school of thought has glommed on to the idea of adopting
an "inflation target" policy that would seek to inflate
prices through monetary policy. That idea skates on thin
regulatory and rational ice. Normally, targeting a level
of inflation implies lowering inflation.
What is
being discussed is the uncharted land of creating
inflation through monetary means to fight deflation.
Legally, monetary policy is in the domain of the
BOJ, nominally the independent arbiter of the price of
money (which it buys at deep discount - say the price of
the printed paper - from the Printing Bureau of the
Finance Ministry and "sells" to the public, mostly
through the banking system).
These sorts of
ideas are usually fun to theorize about. They take on a
new dimension when politics intervenes, which is now the
threat. The reason is simple. In the next few weeks, the
Koizumi's cabinet will nominate a new governor of the
Bank of Japan, to be approved by both houses of the
parliament.
The five-year term of BOJ governor
Masaru Hayami is up in March, when he will turn 78. A
short-list of candidates has been bandied around for
several weeks, dividing the names into degrees of
"anti-deflation" thinking. On one side are those who
want to try an "inflation target" and those who think an
"inflation target" is economic voodoo.
This puts
Koizumi in a tight spot. He can name a sensible new
governor who believes in more conventional central
banking. This gives the new person a wide berth given
that the conservative current BOJ has for the past two
years practiced central banking on the far edge. BOJ
lowered the cost of money to zero, and implemented other
unprecedented policies to stem deflation.
The
closest thing to a conventional governor is governor
Hayami himself.
As speculation raged this week
while the BOJ Board of Directors held a two-day meeting,
a voice of reason was heard from the octogenarian former
prime minister (and finance minister) Kiichi Miyazawa.
He said an "inflation target" should be studied
(implying it is a dumb idea). Koizumi immediately said
he would pay attention to this new Miyazawa "policy".
With any luck, this will steer the prime
minister away from making a dumb political/economic
gaffe - worse even than appointing and then firing
Makiko Tanaka as foreign minister. On the issue of the
"inflation target", all he would have to do is fire his
economy minister, Heizo Takenaka, who does not hold a
seat in the Diet. Takenaka is the most vocal advocate of
this form of "anti-deflation" fighting in his cabinet.
That will make the rest of Koizumi's job much
easier, which is to stay in office long enough to foil
his enemies in the LDP.
(©2003 Asia Times Online
Co, Ltd. All rights reserved. Please contact content@atimes.com
for information on our sales and syndication policies.)
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