Time for Koizumi to Jump Ship


By Brian Bremner Prime Minister Junichiro Koizumi, who swept into office in April, 2001, with a popular mandate for shock-therapy economic reform, is pretty much a spent force. He looks flat out exhausted on television. His current legislative efforts to overhaul Japan's tax code and privatize its massive state-run postal savings system seem vague and listless. The banking sector? Don't ask. People are anxious about the future. And his approval rating has been more than halved, to about 40%, over the last 13 months.

The scent of blood is in the air. Political rivals such as former Prime Minister Ryutaro Hashimoto, who runs the biggest faction in the Liberal Democratic Party, and other bosses displeased with Koizumi are playing a classic game. First, feint left and right to make sure no meaningful reforms get off the ground in the Diet. Second, make noises to the political scribes about Koizumi's do-nothing Cabinet.

DAYS ARE NUMBERED. Finally, wait for the inevitable tipping point in public opinion, when just about everybody wants to push the mop-topped Premier right off the stage. In Japan, everyone can be Prime Minister, it seems. Over the last 10 years, the country has had eight of them. When it comes to matching that kind of political instability and gridlock, only Italy and maybe Thailand come to mind.

Make no mistake: This is what's in store for Koizumi unless he's willing to bring the LDP crashing down. That means dissolving the Diet, calling a general election, and then pulling together a reformist government of younger LDP members and opposition parties into a workable majority.

Sound risky? Absolutely. But it's testing time for Koizumi. The fact is, he doesn't have a prayer of pushing through his key reform goals as leader of the LDP in a three-way coalition. That means no speedy resolution of the banking crisis, no cutting the biggest budget deficit in the rich world down to size, and no way to dismantle all manner of state-run boondoggles.

VESTED INTERESTS. Reason: The LDP's political base is anti-reform. Construction workers in rural Japan don't want to turn off the spigot of public-works spending. Postal workers, who turn out the vote for the LDP, don't want to trade in cushy government jobs for private-sector positions. Fix the banks? That means turning the screw on loads of of small and midsize construction companies, retailers, distributors, and others that employ 80% of the workforce.

Reform just isn't going to happen under the current setup. The LDP has plenty of younger lawmakers who understand the situation. Some think that a generational change could eventually get the LDP moving in the right direction. A quicker solution would be to meld the reformist base inside the LDP with that of the Democratic Party of Japan and other opposition parties.

A new reform party that clearly spelled out its agenda and the economic sacrifices needed to get Japan growing again could offer up its platform vs. the LDP's. Koizumi might have to offer the Premier's job to somebody else in this new party and make a few sacrifices of his own. But if the gamble paid off, a reform government would have the team -- and the plan -- to actually get something done.

GO FOR BROKE. Don't say it can't be done. Korea fixed its banking crisis in about four years and took other steps to revive the economy. Japan could, too, with a little nerve and focus. What if Koizumi takes this risky gambit and fails? Well, he's finished politically, relegated to the wilderness. Then again, what does he have to lose?

Right now, Koizumi is getting the kind of death by a thousand cuts that has taken out one predecessor after another over the last decade. He doesn't have to call another election until next June. But he can't survive that long by making sounds about reform and not delivering. Better to suck it up and roll the dice, Mr. Prime Minister. Just do it. Bremner, Tokyo bureau chief for BusinessWeek, offers his views every week in Eye on Japan, only for BusinessWeek Online


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