Junichiro Koizumi's bid to get Japan's banks to dispose of some US$420 billion of bad loans that are holding back recovery in the world's second-biggest economy may rest on the prime minister's popularity with voters.
Already forced to water down a planned hard line that might have led to the government's seizure of some of the nation's biggest banks, Koizumi now faces a battle within his own Liberal Democratic Party to push through what is left of radical reforms proposed by Japan's chief banking regulator, Heizo Takenaka.
PHOTO: AFP
Koizumi has one ace up his sleeve in that battle -- voters who have made him Japan's most popular leader in the post-war era.
A poll on Television Tokyo Channel 12 Ltd yesterday showed 70 percent of respondents back Takenaka's plan to speed write-offs of dud credits.
People on the streets of Tokyo were just as adamant today.
"We need Koizumi to keep going to get out of this rut," said Yukio Fujioka, 61, a small businessman from Tokyo. "Somebody has to do what Koizumi is doing."
Economists acknowledge Koizumi's popularity with voters may help him push through some of the policies recommended by Takenaka, an economics professor hand-picked by the prime minister to return confidence in banks.
"There's no alternative to Koizumi right now within the LDP," said Yukari Sato, a senior economist at JP Morgan Securities (Asia). "The best thing for Japan is to keep pushing ahead with reforms under Koizumi."
Opponents of the Takenaka plan within the party -- anti-deflation panel chief Hideyuki Aizawa called the minister's approach ``radical'' last week -- say voters backing Koizumi's efforts may withdraw their support if reform forces the economy back into recession, its fourth in a decade.
``Basically, speeding up with the bad debt write-off means losing votes for many LDP legislators,'' said Akio Yoshino, a general manager of investment research at SG Yamaichi Asset Management Co, which manages ?1 trillion.
"That's why they're all against it in chorus."
When banks start to call in loans to deadbeat borrowers, economic statistics will turn to reality -- companies will close and jobs will be lost. So, too, will votes, say many within the Liberal Democratic Party, which has ruled Japan for all but 10 months since 1955.
After facing opposition from Japan's biggest banks, including Mizuho Holdings Inc, and factions within the party, Koizumi yesterday released a watered down version of Takenaka's plan and promised measures to ease any pain among voters.
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