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Koizumi's poll setback could have silver lining

At first glance, Japanese Prime Minister Junichiro Koizumi's reforms looked headed for trouble on Monday after voters weakened his mandate by reducing his coalition's majority in an election.

Some analysts, however, said the poor performance by Koizumi's Liberal Democratic Party (LDP) and big gains by the main opposition Democratic Party could be a blessing in disguise for proponents of change.

That is because Koizumi's divided LDP -- a blend of reformists and conservative foot-draggers -- must either embrace reform more fully now, or give way later to the pro-change opposition Democrats, they said.

"We were able to build a foundation to continue reforms under the current structure [coalition], having won a stable majority," a weary but relaxed Koizumi told a news conference.

Koizumi's three-way camp saw its strength in parliament's 480-seat Lower House shrink to 275 seats from 287 in Sunday's general election, while the opposition Democrats took 177, up from 137, the unofficial count showed.

In a sign that the popular Koizumi's personal magic had faded, the LDP failed to keep the majority it had held on its own. But it looked set to regain it after three independents said they would join, bringing the total to 240, and the smallest coalition party said it would merge.

The New Conservative Party said late on Monday it had decided to merge with the LDP at Koizumi's invitation, which will increase LDP seats to 244, after it lost five of the nine seats it held before the election.

Six more independents may also join.

Koizumi seems certain to remain premier when the Lower House convenes, probably next week. He also said the present cabinet lineup would stay.

But several analysts were quick to predict that his reform agenda of reduced public spending, privatization and cures for the nation's ailing banks faced rough going.

"He won't be able to push ahead with his reforms at full speed now," said Tokyo University Professor Ikuo Kabashima.

The LDP had hoped Koizumi's popularity plus signs of an economic recovery would translate into a decisive win.

Some investors in Japan's stock market feared the LDP's limp performance meant reforms would stumble. The Tokyo market's main indices fell more than one percent by the end of trade.

More reform, or less?

Others begged to differ, arguing that Koizumi's LDP critics would hesitate to attack him for fear of driving even more voters to the Democrats ahead of an Upper House election in mid-2004.

"For Koizumi, the message is clear: talk doesn't work," said Jesper Koll, chief economist at Merrill Lynch in Tokyo.

"I don't believe the anti-reform group will become more vocal. I think it's good for reform, not bad," he added.

Jiro Yamaguchi, a professor at Hokkaido University in northern Japan, agreed that voters wanted change, but questioned whether the LDP could provide it.

"Koizumi's leadership may decline within the LDP, but there is a consensus among the people that there must be reforms to break the old systems. There is no going back to the old ways of pork-barrel politics," he said.

A godsend for the LDP after its support sank under his wildly unpopular predecessor, the media-savvy Koizumi, 61, sprang to power in 2001 on a wave of public support for his reforms.

But the lion-maned leader has had a mixed record when it comes to matching words with action.

Pictures of a grim-faced Koizumi were splashed across the front pages of Japan's leading newspapers, twinned with the beaming face of Democrats' leader Naoto Kan.

A tired Kan, 57, conceded before dawn on Monday that the ruling camp had prevailed numerically.

He vowed, however, to keep working to take power.

"As the biggest opposition party, we will strive to build a responsible party capable of governing," said Kan, his voice hoarse from the 12-day campaign.

Two party system

The Democrats deployed a pro-reform policy manifesto including pledges to slash public spending and pry policy out of the grip of bureaucrats to try to persuade voters to give their novice party a chance.

The election sets Japan on track for a true two-party system after decades of what in effect was one-party rule by the LDP.

Small parties on both the left and right were decimated.

The exception was the New Komeito, the larger of the LDP's two coalition partners, which increased its seats by three to 34, vital to ensuring the ruling bloc a comfortable majority.

The clout of the Buddhist-backed centrist party was likely to increase in the coalition, and its emphasis on welfare could affect pressing debate over the creaking national pension system.

But the outcome clouds the future for the LDP itself, which has ruled for most of the past half century by catering to core supporters such as farmers, businesses and builders.

The LDP has failed to win a majority in the past four elections for the Lower House, although each time it later lured independents to the fold to make up the gap.

Voter turnout was 59.86 percent, just above the record low 59.65 percent in 1996.
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