Monday, September 05, 2005

Koizumi: Latent Renegade Reformer

In my own personal conversations with many Japanese people over the last year, I asked a few questions over and over again: How many famous Canadians do you know? Answer: um...just Avril Lavigne. Where have you travelled? Answer(s): Australia,Bali, or Los Angeles. What do you think of Junichiro Koizumi? Answer: (Awkward grin and a shake of the head.)

Digging deeper, I found disappointment with Koizumi, a man that rose to prominance on the world stage in 2001 promising reform of the cozy power system that had failed Japan badly after the Nikkei crash of 1989. But the power brokers of industry, government owned business and finance did not relinquish power over the Liberal Democratic Party. With the rise of the long haired rebel, the people of Japan saw a glimpse of renegade who promised to destroy the old order and bring Japan's government into the same century as its futuristic technology sector.

Of course, part of consumer/voter satisfaction with any good or leader is partly based on expectations. Those in customer service are told to "under" promise and "over" deliver to set low customer expectations and then blow those expectations out of the water with (theoretically) outstanding service. Koizumi, for his part, believed at some point he could take on the huge ship of state that is Japan and muscle it to a brighter future. And like any idealist who achieves power, things began to look very different from the top looking down. Simple solutions to simple problems become simply unworkable, or in some cases not immediately available.

Koizumi decided to start small with reform and began setting low maximum bad debt allowances for the banks in an effort to rid their balance sheets of the "Zombie" companies that have plagued Japan since time began. These poorly run construction and public works entities subsist on a neverending supply of loans from the huge Japanese banks (who were usually coerced by the government into issuing the financing). The zombies could get away with getting more cash with the ever shrewd Enron tactic that goes like this "If you cut off our cash, you won't see a dime of your other loans again". Under the new administration the banks were pressure to start calling in the loans or writing them off-But this is hardly the stuff of revolutions.

No politician gets a great headline out of "New Bank Regulations Put Thousands Out of Work". And even worse, the tangible results of his efforts were hidden because one lender was still (and continues) propping up the zombie companies. One lender was still financing the massive infrastructure programs in Nara Prefecture that saw millions wasted on expensive and redundant public rail lines soaring 20 Meters above the rural towns. The world's largest lender was still crowding out investment in package delivery, finance, banking, and insurance.

The Post Office.

With wide public support, Koizumi has found an issue to shake out the old guard of his party into open insubordination and rebellion: The privatization of Japan's Post Office. And with the old guard vowing to hold a last stand to protect the institution, those rebels have found themselves politically isolated from their party and the Japanese electorate.

Freed of the internal party albatross, Koizumi will be able to finally shake off the inertia that has kept Japan's financial reform in park for 15 years. From the outset it was a gamble by both sides: Koizumi and the old guard. The entrenched conservative leadership believed they would survive by promoting the appearance of reform by hoisting Koizumi on their shoulders, while Koizumi believed he could turn the tables on those who brought him to power. Koizumi, having come out on top, will now have an opportunity to overhaul the stagnant economy and a powerful mandate for reform and rejuvination of the Japanese islands.
Crossposted @ Renegades!

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