Japanese Prime Minister Junichiro Koizumi was criticized yesterday for his support of young Internet entrepreneur Takafumi Horie after the former business hero was arrested for alleged fraud.
With only eight months to go in office, Koizumi is now faced with a scandal that could cloud his influence just four months after he won a snap election by a landslide, analysts said.
Horie, the 33-year-old once hailed as a younger, brasher kind of Japanese businessman, was arrested on Monday with three other officials of his Livedoor company on suspicion of illegal securities trading and cooking the books to hide losses.
In parliament, opposition parties grilled Koizumi and his Liberal Democratic Party (LDP) for effectively fielding Horie as a candidate in the general election held last September.
Horie ran with Koizumi's blessing, albeit not on the LDP ticket, in an unsuccessful race against one of the premier's top rivals.
Equally important, Horie helped boost Koizumi's image as a reformist in the election, analysts said.
Japanese television networks yesterday repeatedly aired video footage of Tsutomu Takebe, secretary-general of the ruling party and a close ally of Koizumi, making a speech next to Horie in the campaign, describing him as "my son and my brother."
Internal Affairs and Communication Minister Heizo Takenaka, an architect of Koizumi's economic policy, was also criticized for previously saying both Horie and Koizumi were "champions of reforms," the most important being privatization of Japan's massive postal services.
"Secretary-General Takebe and others were in a frenzy to make him a hero," Satsuki Eda, a senior lawmaker of the largest opposition Democratic Party of Japan, told a parliament session.
"Last year's big win by the LDP was in no small part due to such a man. Mr. Koizumi, how do you feel about your responsibility?" Eda said.
Koizumi, in sharp contrast to his trademark vigorous delivery, said in a monotone: "This case and the support by senior officials of the LDP in the general election are different stories."
But Tetsuro Kato, professor of politics at Hitotsubashi University in Tokyo, said the scandal may prove a major blow to Koizumi, Japan's longest serving premier in a generation.
"It was obvious that Koizumi made use of Horie's popularity in the election," Kato said.
"Koizumi's political responsibility is clear," the professor said, adding that the premier could be forced to dismiss close allies, possibly Takebe, to take responsibility.
In a news conference, Takebe apologized for supporting Horie in the election, saying: "I have to humbly reflect on what I have to reflect on."
While Livedoor was a small player in the world's second largest economy, analysts said the scandal drew some parallels in terms of public perception to that at US energy giant Enron, which collapsed in a spectacular bust in 2001.
"People may begin questioning the supremacy of a market-oriented economy, one of the policy pillars of Prime Minister Koizumi," Professor Kato said.
The Enron scandal rocked financial markets and undermined investor confidence in corporations. The Livedoor case sent the Tokyo market briefly into a tailspin last week.
Jiro Yamaguchi, professor of politics at Hokkaido University, said the scandal would affect the LDP race to succeed Koizumi in September.
"As Koizumi's approval rate is largely expected to decline, candidates who have different ideas from Koizumi's can now speak out," Yamaguchi said.
However, Koizumi has proved critics wrong before, last year overcoming modest approval rates to win a crushing majority in the snap election he called over postal privatization.
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