International Outlook
Edited by Rose Brady
Politics Now, Reforms Later: Koizumi's Waiting Game in Japan
No other Liberal Democratic Party-led government in Japan has enjoyed the stellar popularity ratings of newly elected Prime Minister Junichiro Koizumi's administration. According to a poll released on May 14, more than 90% of eligible Japanese voters surveyed by a major television network approve of the new Cabinet--a sign that the LDP's gamble on the maverick reformer is paying off.
Indeed, Koizumi and other party leaders no longer fear a rout in the upper-house elections scheduled for July 29, a defeat they feared could set the stage for the party's eventual loss of power. The big question now is how the Prime Minister should take advantage of his popularity. In Nagatacho, Tokyo's equivalent of Capitol Hill, speculation is rife that Koizumi may call a snap election of both houses of Parliament to capitalize on his popularity and strengthen his position to carry out reforms. That would be taking a page from his mentor, former Prime Minister Yasuhiro Nakasone. In 1986, he called a joint poll and walked away with a landslide victory.
WATCHING HIS BACK. But old-guard LDP members oppose such a move. Rank-and-file lawmakers in the powerful lower house aren't sure how much of Koizumi's popularity will rub off on them at the polls. Some party elders are still hoping they can depose Koizumi in the next LDP leadership election, scheduled for September. The faction led by Ryutaro Hashimoto, whom Koizumi defeated for the top LDP job in April, is already gearing up for another challenge. "The Hashimoto faction is biding its time, waiting for an opportunity to pounce if Koizumi trips up," says Teruaki Izume, a director of Mitsui Kaijyo Research Institute who closely follows Japanese politics.
So Koizumi has to watch his back, even as he mulls his next move. If he sticks to his word, he is expected to push hard for the LDP to gain a safe margin of seats in the upper house in July and use that victory to secure his position in the LDP leadership vote in the fall. In the meantime, the challenge will be to stave off complacency toward reform now that chances for a rout at the polls suddenly seem remote.
Koizumi will likely play it safe until the dust settles after the July vote. He'll want to avoid the pain that could turn voters away from the LDP if he moves on proposals to deal with bad loans plaguing the banking sector or Japan's declining competitiveness. "There won't be any reforms before the election," says one LDP lawmaker. Yet Koizumi will still raise tough issues to signal where he's headed. In mid-May, for example, he told the Labor Ministry to look into ways to loosen up restrictions that make it hard for companies to fire workers and hire temp staffers as replacements.
To prepare for implementing his agenda later, Koizumi is reaching out to a wide range of constituencies--including the opposition. In fact, the Prime Minister has succeeded in stealing much of the thunder of the chief opposition party, the Democratic Party of Japan. He has even gone so far as to call for joint passage of crucial economic legislation. And he is raising issues that could attract defectors from the DPJ. For example, he's calling for allowing the country's armed forces to fight outside Japan, which has been taboo since the postwar constitution took effect in 1947. That issue is dear to the hearts of many DPJ members, including party chief Yukio Hatoyama.
If Koizumi's tactical political maneuvers over the next few months fail, he may find himself out of a job in September. But if the political instincts that brought him to power stay sharp, Japan may finally have a leader who is strong enough--and wily enough--to push through reforms. Either way, it will be a long, tough summer of politicking in Japan.
By Chester Dawson in Tokyo
GLOBAL WRAPUP
Gazprom Looks to Ukraine
With Russian President Vladimir V. Putin's recent appointment of former Prime Minister Viktor S. Chernomyrdin as ambassador to Ukraine, the stage is set for Russia to establish economic dominance over the impoverished former Soviet republic. The expected vehicle for the takeover: Gazprom, the Russian gas monopoly that Chernomyrdin once headed. It is seeking to acquire prime industrial assets in Ukraine in exchange for cuts in up to $2 billion in unpaid gas bills owed to the company. Chernomyrdin is expected to strike a debt-for-equity deal and to knit closer political ties between Russia and Ukraine. Gazprom has its eyes on everything from steel plants to oil refineries, says analyst Roland Nash of Moscow brokerage Renaissance Capital.
GLOBAL WRAPUP
A Blow to Deutsche Bank
A team of top capital-markets executives from Deutsche Bank (DTBKY
) has defected to rival Barclays Capital, the investment-banking wing of Barclays Bank. Among those joining Barclays are Grant Kvalheim, who was head of global debt issuance, and European bond chief John D. Winter. At least 10 Deutsche executives are moving to Barclays. The defections appear to be fallout from the death last year in a plane crash of Edson Mitchell, Deutsche's head of global capital markets. Kvalheim was a close friend of Mitchell's. Competitors say the departures will be a blow to Deutsche's efforts to remain atop the global bond league tables. The bank's strong position in German domestic bonds, though, is unlikely to be threatened.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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