Its pledge to end Tokyo's reliance on stopgap strategies quickly gave way to extra government spending.
Koizumi even passed the buck on Japan's biggest problem: bad loans. Instead of taking the lead, he deferred to bureaucrats from the Financial Services Agency. The FSA, mind you, is the agency that can't even come up with a credible estimate of how big the problem is. It claims Japanese banks hold ?151 trillion in bad and risky loans; some in the private sector think the figure might be double that.
Upsetting the neighbors
About the only thing Koizumi accomplished this year was upsetting Japan's neighbors in Asia. Last August's visit to the Yasakuni Shrine, where several convicted war criminals are among those honored, strained relations with China and South Korea. Koizumi's shrine visit was a wink to his party's right wing, but its cost to his stature on the global stage is still being counted.
Roiling China is the last thing Koizumi should be doing these days. Japan's giant neighbor sucked up more of its jobs and capital this year. A growing number of Japanese companies are shifting production to China, where labor and land costs are a fraction of Japan's. Even individual investors from Tokyo to Hiroshima are shunning Japanese stocks and buying Chinese shares.
On the bright side, this year seemed to mark the beginning of the end of Tokyo's denial about its financial problems. International ratings agencies came out of the woodwork to lower Japan's credit rank. The downgrades were a wake up call for politicians who thought they could issue as much debt as they wanted, prop up hundreds of zombie companies and postpone reforms indefinitely.
Eventually, ratings downgrades will spook investors, push up Japanese government bond yields and undermine a stock market that has little going for it now. Japan joined Italy as the worst credit risk among Group of Seven members, and there will be a price to pay. In this way, this year may have been pivotal year for Tokyo.
It was also a year women will long remember. By giving birth to a girl days before her 38th birthday, Crown Princess Masako may have started two revolutions. One was ending the cultural stigma attached to delaying childbirth. The other was resurrecting the debate over whether Japan should amend laws barring women from ascending the royal throne.
It may be the 21st century, but Japan is still a place where women are actively discriminated against in the workplace. It's perfectly fine for an employer to ask a woman how old she is, whether she's married and when she plans to have children. Women can also be told they're not getting a job because of their sex.
`Masako Effect'
It's also considered a national crisis when women choose a career over getting married and having children at a young age.
The "Masako Effect" shouldn't be discounted here, not only for the economy but also in the way Japanese society views women.
The royal birth also gave Japanese households a rare opportunity to celebrate. After a decade of recession and, more recently, rising unemployment and deflation, consumers here have had little to rejoice over. The arrival of a new princess -- and a possible empress -- led to dancing in the streets of Tokyo.
If next year holds any promise for Japanese voters, it's that their days of waking up to the same bad news, day in, day out, may soon end. If not, there's always a Bill Murray flick or two at the video store to cheer them up.
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