When the history books are written about Japan's revival from stagnation, Heizo Takenaka will surely be mentioned as a pivotal player. As Japan's Joint Economy & Financial Services Minister, Takenaka has been relentless in pressuring Japanese banks to deal with their mountain of bad loans. That has made him highly unpopular among bank executives and some dinosaurs within Prime Minister Junichiro Koizumi's Liberal Democratic Party, who have labeled the former Keio University economics professor a naive academic. Yet Takenaka has held his ground.
When he joined Koizumi's government in 2001, Japan's bad-debt crisis had been lingering for a decade. In 2002, major banks officially had $243 billion in nonperforming loans, or about 8.4% of their total loan books -- and the real number was thought to be much higher. Takenaka pledged to halve the burden by March, 2005, a goal most observers thought was wildly optimistic.
But for the past two years, Takenaka has unleashed SWAT teams of auditors to scrutinize the banks' books and force them to reclassify iffy loans as the dogs they really are. And he has been more than willing to strong-arm bankers who don't go along. "He has created a real crisis mentality in the banks," says Eisuke Sakakibara, an ex-Finance Minister. Few now doubt that he'll meet his ambitious target of cutting bad loans in half.
These days the "naive academic" is a rising political star whose name is bandied about as a future Prime Minister. Koizumi has persuaded Takenaka to run for an Upper House seat in the Diet as an LDP candidate in elections this summer. And if Koizumi shakes up his cabinet as expected, Takenaka will probably be asked to stay on in some capacity as economic-policy czar.
Although a Japanese revival seems to be under way, Takenaka and his team will need to keep a keen eye on a still-fragile banking system if the country is to remain on the road to recovery. But if his performance so far is any indication, Takenaka is up to the task.