Political Dirt Might Be Gold for Koizumi

Scandals involving two party bigwigs are just the opening he needs to press his stalled reforms -- if he's up to it

By Brian Bremner

Even by the usual standards of gold-plated corruption in Japanese politics, these are mind-blowing times in Tokyo. Not one but two Liberal Democratic Party heavyweights are now mired in kickback and tax-evasion scandals that are garnering plenty of headlines and portentous commentary in the Japanese press.

Less noticed are the travails of Katsutoshi Matsuo. This former Foreign Ministry bureaucrat gets my vote for Japanese rogue of the year. On Mar. 11, he received a seven-and-a-half year prison term for embezzling about $5 million from a special expense fund used for overseas state visits by Japanese Prime Ministers. For much of the '90s, Matsuo thought it would be more fun to spend the taxpayer money on racehorses, several condos, and the company of young women.

All of this is happening on the watch of Mr. Reformer himself, Prime Minister Junichiro Koizumi. The dashing Premier with the Beethoven-like locks, whose poll numbers were plummeting already thanks to his stalled economic reform drive, is dead meat now -- or so says the conventional wisdom among the political sages.


  Well, maybe not. Koizumi surely has his problems, but I would argue they come largely from Japan's grinding recession, which is eroding its national wealth and is a life-altering event for millions of Japanese now out of work, be they young college graduates or middle-aged salarymen with fat mortgages and kids in college.

The latest outbreak of political sleaze is actually an opportunity -- if Koizumi decides to seize the day. And make no mistake: While hardly a whiz on economic policy, Koizumi is no slouch as a pol. Those who argue that the unflattering spotlight on the LDP by extension harms Koizumi are overlooking his tactical talents.

The biggest threat to his government isn't from a clutch of opposition parties led by the Democratic Party of Japan. True, they're gleefully uncovering all sorts of LDP dirt. But they're prone to infighting and haven't mounted a serious threat to the long-dominant LDP in years. No, Koizumi's enemies are closer to home -- namely in the big, conservative LDP faction led by Ryutaro Hashimoto.


  Koizumi will never push through his reform agenda unless Hashimoto & Co. signs off. Hashimoto challenged Koizumi and failed in a LDP party race about a year ago that elevated the latter to the Premier's chair. Since then, relations between both sides have been frosty. More important, Hashimoto's faction is full of party hacks, beholden to the construction industry and not terribly interested in reform.

Muneo Suzuki is one of them. This LDP bigwig could face charges of lying to the Japanese Diet, given his sorry performance in sworn testimony on Mar. 11 over allegations -- pretty credible ones -- that he steered contracts to construction companies (campaign contributors as well, natch) in his home district on the northern island of Hokkaido.

On budgetary matters, Suzuki has served as a kind of a political godfather to the Foreign Ministry. He would make sure that the bureaucrats and diplomats were given the resources they needed to represent Japan abroad -- or in the case of Matsuo, buy a really sweet bottle of Veuve Clicquot at some Ginza hostess bar for his latest love interest.


  Suzuki also routinely tangled with the popular reformer and ex-Foreign Minister Makiko Tanaka, whom Koizumi fired under intense pressure from the Hashimoto gang. Now, Suzuki likely will be pushed out of the LDP altogether. That, plus the fact that Hashimoto is recovering from major heart surgery at a Tokyo hospital, makes it less likely that this big antireform faction will cause trouble on policy matters in the coming months. Koizumi could work this to his advantage.

The other scandal of the moment involves a former aide and fund-raiser to Koichi Kato, a reform-minded but ambitious LDP leader with his own designs on becoming Prime Minister. Kato's former lieutenant has been arrested on charges of tax evasion and meddling in the bidding of construction projects in the pol's home district in Yamagata prefecture. The suspicion in the Japanese press is that Kato knew about this -- or at least looked the other way.

In purely Machiavellian terms, that's good news for Koizumi, too. Kato has always been considered Premier material. He's fluent in English and Mandarin, and if Koizumi tripped up in a big way, he could be an alternative among reform-minded LDP lawmakers. Though Kato may not be forced to resign, his aspirations for the top job now look pretty shaky going forward.


  Here's the tough part: Koizumi won't regain his reformist credentials with the public unless he pounces on these scandals to his political advantage. That means making a lot of noise about the corrupt nexus between the LDP and the construction industry.

Is the Prime Minister up to it? What better opportunity is there to redouble his efforts to slash Japan's bloated public-work budget more deeply, privatize or shut down a vast network of pork-driven, state-owned companies, and make sure road taxes and toll revenues aren't diverted into money-losing white elephants? Koizumi might also argue that unholy alliances between bureaucrats and the LDP heavies need to be smashed once and for all, thus shifting even more clout to the Premier and his Cabinet.

So far, he hasn't said much publicly about Suzuki or Kato, and Koizumi may later rue the day. Better to get on national TV to remind voters that these scandals underscore what his crusade is really about. Corruption runs deep in Japan's political world, and this is precisely why nothing gets done while the country continues to stagnate economically.

If Koizumi can silence his critics and rivals inside the LDP, while getting his approval ratings back up from about 50% to the 70% level he once enjoyed, he and his government might yet again be a force to reckon with. If all this sounds rather improbable, well, perhaps it is. But then again, what else has Koizumi got to lose?

Bremner, Tokyo bureau chief for BusinessWeek, offers his views every week in Eye on Japan, only for BusinessWeek Online

Edited by Douglas Harbrecht

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