Japan: After The Vote, The Long Knives
Japan's prime minister, Junichiro Koizumi, hasn't lost his knack for electrifying voters. In campaign appearances, he draws huge and adoring crowds, and most Japanese voters think their well-coiffed leader is decidedly cool. With the economy reviving, the Nikkei up 26% so far this year, and corporate earnings thriving, Koizumi's three-party coalition government is expected to cruise to victory in Japan's general election slated for Nov. 9.
Still, besting the opposition Democratic Party of Japan (DPJ) and its uncharismatic leader, Naoto Kan, is practically beside the point. Koizumi is really at war with the antireformist elements within his own ruling Liberal Democratic Party (LDP). And that reality will linger on after Koizumi and other LDP top brass take their victory lap on Nov. 10. "Koizumi will win, but his true enemies are still inside the party," notes Barclays Capital Chief Economist Mamoru Yamazaki.
No slouch as a political tactician, Koizumi certainly understands this. He has recently outflanked the LDP's weakened factions on several fronts. In a September Cabinet shake-up, he enraged party conservatives by promoting 49-year-old Shinzo Abe to LDP secretary general, a powerful position usually reserved for elders. He also ignored calls from factional chiefs to fire Heizo Takenaka, the Economics Minister and Financial Services Agency chief, who has been pushing Japan's debt-besotted banks to quickly write off nonperforming loans and cut off deadbeat corporate borrowers. Koizumi also forced two powerful former Premiers -- Kiichi Miyazawa, 84, and Yasuhiro Nakasone, 85 -- to give up their seats to make way for younger candidates.
So the long knives are out for Japan's dashing Premier -- and the knives are being pulled by party insiders. In response, on the campaign trail, Koizumi finds himself lashing out against some of his own party candidates. One group has even broken from the LDP platform and pledged to fight Koizumi's efforts to privatize both Japan's postal savings system, which controls a staggering $3.2 trillion in deposits, and money-losing, state-owned corporations that have long provided cushy sinecures to retired bureaucrats loyal to the LDP. Another heresy: Koizumi aims to keep a lid on public works spending, which LDP pols have used to keep rural voters and business backers happy.
Is this another Japanese recipe for political paralysis? Koizumi's popularity may yet secure plenty of seats for the Young Turk lawmakers he has fielded, particularly in urban centers that are more open to tough economic reforms. But some of those candidates are in close races with DPJ rivals, who have pockets of strength despite their national weakness. And the LDP dinosaurs still have a lock on the rural vote. That means Koizumi may need to fight some guerrilla-like political battles after the vote if he hopes to halve the $366 billion in bad loans on the books of the biggest banks or cut down the central government debt burden, some 140% of Japan's gross domestic product, as promised. Koizumi has shown amazing resilience. But his real fight begins the day after the election.
By Brian Bremner in Tokyo
Edited by Rose Brady