The score so far: FILP agencies issued a modest Japanese yen 1.1 trillion's worth of bonds last year and have a target of Japanese yen 2.7 trillion this year. These bonds are implicitly guaranteed by the government, and the first issues had a yield 20 basis points higher than benchmark Japanese government bonds.
FILP reform is considered by many to be a fine piece of bureaucratic craftsmanship. Commercially viable agencies are being pushed into the bond market -- often unwillingly -- and out on their own. At the same time, the government will retain responsibility for agencies providing necessary public goods while refinancing them -- also through the market.
Among the things I like about all this are the political implications. By restructuring sources of funds and forcing market criteria on loan capital, Koizumi or his successors stand to deal a critical blow to the zoku in the Diet and the amakudari system by which bureaucrats take up public sector positions toward the end of their careers.
Greater transparency, prudent management, a fairer financial market as public sector banks go private -- these are all on Analytica's "good news" list. But we can't forget the bad news.
It's staring us in the face.
Inertia and resistance have already started a fight that will leave a lot of political blood on the floor, possibly beginning with Koizumi's. There's also evidence that many agencies are entering the bond market with all the willingness of a spoiled teenager told to leave home.
The markets are going to be flooded with new bond issues, and they are already showing signs of indigestion. The spread of 20 basis points above government bonds on those first issues has already gone to 40 to 50 points, and the near-term schedule for FILP agency bonds is unlikely to be met.
In the end, FILP reform will raise Japan's public debt from its already alarming 130 percent of gross domestic product to more than 200 percent -- uncharted territory for a major economy. In the meantime, risk exposure is rising even as the FILP budget is getting squeezed, a parallel to the bad-loan problem faced by private-sector banks.
As several readers have already pointed out, the sluggish pace of Japan's reform is costing it dearly, even if it can't be avoided. The world's not waiting for Japan, to put it mildly, and many are those who have already written it off.
I come out an optimist nonetheless. Reform this big never comes without problems. And there is a sense of inevitability, Church has found in his explorations into the bowels of the system, even among those recalcitrant tribesmen in the Diet.
"Everyone other than the most obtuse knows the game is up," he tells me.
What a game it was for a good long while. But late-night reruns take you only so far. I'm more interested now to watch as a reinvented Japan comes gradually onto the screen.
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