July 11, 2001	atimes.com

Japan Koizumi's real test come after elections By Yone Sugita OSAKA - Prime Minister Junichiro Koizumi campaigned for the leadership on a policy of breaking factionalism within the Liberal Democratic Party (LDP) he leads, and he has challenged the Hashimoto faction, the largest in the party, by promoting the privatization of the massive postal services. To date, the premier has been able to contain opposition from within the LDP to his approach as he enjoys an 80 percent approval rating among the population at large, and the LDP needs this support if it is to successfully contest this month's Upper House elections. People have taken to his unconventional, even maverick image, hoping he has some magical powers to end the country's protracted economic crisis without too much pain. This perception, however, might prove to be nothing but an illusion. Koizumi's popularity may indeed hold long enough for the LDP to win the Upper House elections, but once these are over he can expect a vicious backlash from the Hashimoto faction as it will attempt to water down his drastic plans to farm out the postal services. Further, once the Koizumi administration begins to implement its economic reform plan, the short-term painful side-effects will be felt immediately, including bankruptcies, unemployment and slower, if not negative economic growth. In the face of such adversity, Koizumi's popular support, which is like floating grass, will likely quickly blow away, and strong disappointment will surface. Koizumi clearly understands this fragility of his popularity, and with a relatively small power base within the LDP, he has had to look for solid outside support to implement his agenda, that is, to the United States. At the end of June Koizumi visited Washington for a meeting with President George W Bush, taking with him the sad statistics of the country's economy. Japan faces the highest level of deflation since the Great Depression of the 1930s, and accumulated government debt has risen to 130 percent of gross national product. The most important problem for Koizumi are banks - nonperforming loans amount to hundreds of billions of dollars and writing them off will surely precipitate a series of bankruptcies in many industries, including the financial, distribution and service industries, which will likely lead to widespread unemployment. Before leaving Japan, Koizumi unveiled a "plan of sacrifice" which will curb spending and compel Japan's banks to dispose of more than 11 trillion yen (US$88.53 billion) in bad loans within two years. President Bush demonstrated his clear support for Koizumi's economic structural reform policy. Koizumi, for his part, openly expressed his deep pro-US position in public. Both Koizumi and Bush praised each other, trying to postpone confrontations on more controversial issues, even though Washington had already announced its plan to reject the Kyoto Protocol on global warming. Koizumi disguised their differences by proposing that high-ranking officials open talks to discuss the matter. The Bush administration has announced its intention to pursue unilaterally, if necessary, a National Missile Defense (NMD) plan even though European countries, as well as Russia and China, have clearly expressed their opposition to it. Koizumi did not wish to make a fuss about this sensitive issue, only expressing his "understanding" without giving full endorsement of the US's comprehensive approach to deal with the proliferation of weapons of mass destruction and ballistic missiles. Koizumi had to minimize the differences between Japan and the United States in order to woo American support for his economic reform scheme. But he is not the first high-ranking Japanese politician to try to use external power to establish his own power base in Japanese politics. Fifty-two years ago then finance minister (later prime minister) Hayato Ikeda successfully used the same tactics: He became closely connected with Joseph Dodge, a financial adviser to the Supreme Commander for the Allied Powers, General Douglas MacArthur, in order to implement his tight monetary policies. Even though Ikeda was only a first-year House of Representative member, he was chosen as finance minister in 1949. Surrounded by political enemies both within and outside his party, Ikeda had been looking to create his own power base, and Dodge provided just what he needed. Supported by the powerful American, Ikeda pushed through his economic reforms, overcoming pro-planning bureaucrats in the Economic Stabilization Board as well as the Reconstruction Finance Bank. Ikeda was successful in using this tactic primarily because the United States was an unprecedented hegemonic power and Japan was under the occupation of the Allied Powers in which the US was the dominant country. Today, the US economy is in decline and it is questionable whether the country is powerful enough to assist the Koizumi administration in containing anti-reform forces. The real battle will not be fought in the upcoming Upper House elections. It will take place later between the pro-structural reform, pro-Koizumi forces and pro-vested interest, anti-Koizumi factions both within and outside the LDP. ((c)2001 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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