Sat, Oct 01, 2005 - Page 8 News List

Impact of the Koizumi landslide

By Li Thian-hok 李天福

After his pet legislation to privatize Japan Post was defeated in the Upper House of the Diet on Aug. 8, Prime Minister Junichiro Koizumi took two decisive actions. He expelled 37 rebel lawmakers from his Liberal Democratic Party (LDP) who had opposed the bill and called for a snap general election on Sept. 11. Observers at the time thought Koizumi was taking a grave, possibly suicidal, risk. Yet he won a stunning landslide victory.

The LDP won 296 seats in the 480-seat Lower House, up from the 249 seats before parliament was dissolved. The LDP's coalition partner, the New Komeito Party, won 31 seats. The LDP's coalition holds a total of 327 seats, more than the two-thirds majority required to override the Upper House.

The main opposition party, the Democratic Party of Japan (DPJ) suffered a severe setback, winning only 113 seats, down from 177.

Koizumi skillfully focused the public debate on postal and other reforms as a symbol of doing away with old, status quo politics. The Japanese public is impatient with the decade-long economic stagnation and politics-as-usual.

By betting his political career on a vision of a resurgent Japan through reforms, Koizumi came through as a determined leader deserving of support, especially among the floating urban and young voters. Koizumi also showed his media savvy by fielding younger, telegenic and mostly female candidates against the expelled postal rebels. All 26 female candidates won.

The Japanese voters have given Koizumi a broad mandate to implement overhaul of the postal service, as well as the healthcare and Social Security systems. The latter reform is important due to Japan's changing demography.

The workforce is shrinking due in part to a low birthrate, while the population is rapidly aging. Next year, 20 percent of Japan's population will be over 60.

Japan's postal service does not just deliver mail. It also operates as the world's largest public bank and insurance company with combined deposits of US$3 trillion. The huge assets have long been used by some LDP leaders to finance pork barrel projects in their home districts. Some postmasters, whose jobs are often passed from father to son, have functioned as campaign aides.

Koizumi is now expected to rapidly push his postal privatization package through the Upper House, thus removing this source of patronage and corruption and reducing the bloated public sector. The economy can also benefit from better allocation of the US$3 trillion investment. Postal privatization will commence April 2007 and divestiture of the banking and insurance operations will be completed by 2017.

After some15 years of deflation and doldrums, the Japanese economy has slowly begun to recover, growing by 2 percent in both 2003 and last year. It's headed for similar expansion this year. Koizumi is credited with facilitating this turnaround by cleaning up bad bank loans. With the postal privatization and other reforms he may initiate during the rest of his term as prime minister, Koizumi is now embarking on a more substantial phase of Japan's structural reform.

The Japanese economy is the second largest in the world, nearly three times larger than China's economy. A growing Japanese economy can serve as one of the engines of global prosperity. For the rest of the world, Koizumi's victory is a welcome development.

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