Foreign Press Predictions on the Cabinet Reshuffle

John de Boer (University of Tokyo & GLOCOM Platform)

The burning issue in the foreign press concerning Japan over the past week related to the cabinet reshuffle scheduled to take place on 30 September (Monday). In connection with this, most media sources are demanding that Koizumi take "bold action" (Reuters) and use a "strong hand" (Singapore Straits Times) to implement his reforms.

Shortly after Prime Minister Junichiro Koizumi confirmed that a cabinet reshuffle would take place on Monday, multiple sources issued releases and most welcomed the news. In its report on the announcement, the Associated Press noted that Koizumi would seek pro-reform candidates (27 September). The Singapore Straits Times (SST) quoted Koizumi as stating that he wanted a "yes men Cabinet" (27 September). By this, SST explained that the Japanese PM was looking to install individuals who would agree to cooperate "as ministers" and implement his reforms.

Most in the foreign press interpreted this statement as meaning that the financial services minister, Hakuo Yanagisawa, would have to go. Consensus has it that the nation's non-performing loans remain the largest obstacle to economic recovery in Japan and the media suggests that Koizumi will stand with the likes of economics minister, Heizo Takenaka, and finance minister, Masajuro Shiokawa, because unlike Yanagisawa they promote an aggressive banking policy that will introduce public funds into the system in order to get a handle on non-performing loans (Linda Sieg, Reuters, 29 September). The focus of the reshuffle, according to the international media, is on the economic front. Kwan Weng Kin of SST claimed that what Koizumi needed was, "more able economic lieutenants" ("Yes-men Cabinet", 27 September).

In addition to LDP conservatives who have for long resisted Koizumi's reform efforts, newspapers cite Ministry of Finance (MOF) bureaucrats as potential obstacles to his reform plans. These sources position bureaucrats as the prime objectors to wide-sweeping deregulation noting that the farthest they would go would be to accept the idea of special zones where rules would not have to be relaxed on a nation-wide basis (see Kwan Weng Kin, "Bureaucrats stymie Koizumi reform plans", 27 September).

However, after this week's episode involving Shiokawa and senior MOF officials which led to a "yes-no-yes-no" zigzagging as to whether Shiokawa spoke to US Treasury Secretary about Japan's non-performing loans, the media is once again questioning the reliability of the MOF and the likelihood of any serious reforms taking place. On 28 September, one day after this incident, Dow Jones commented on Japanese bureaucrats stating that there was "global distrust" towards Japan's economic information. It then cited government estimates that put the value of non-performing loans at 50 trillion yen, half of that claimed by most private sector evaluators. The outcome was characterized as "potentially damaging the governments credibility over key economic problems" (Dow Jones, 28 September). What this signals is a discrepancy about the seriousness of the problem between bureaucracy and the private sector, potentially leading to more stall tactics.

With public approval ratings having sky-rocketed after his trip to North Korea and the main opposition party in confusion, the general outlook is that Koizumi is in a favorable position to appoint those he thinks can get the job done. In this sense, Koizumi has cleared two hurdles: dissenters in his own party and low public approval ratings. However, the question that remains unanswered is as to whether he will be able to overcome bureaucratic resistance. All eyes will be on the new Koizumi administration over then next several months to see if he will pass the test.

Articles:

• Linda Sieg, "Bank Policy Clues Sought in Japan Cabinet", Reuters, 29 September 2002
• Glenn Somerville, "Japan Bank Meets with US Skepticism", Reuters, 28 September 2002
• Glenn Somerville, "Japan Bank Aid Plan Wins No G' Admirers", Reuters, 28 September 2002
• Takeshi Takeuchi, "Shiokawa Seesawing May Damage Japan MOF's Credibility", Dow Jones, 28 September 2002
• Natilie Obiko Pearson, "Japan PM Confirms Cabinet Reshuffle", The Associated Press, 27 September 2002
• Kwan Weng Kin, "Yes-man Cabinet: That's what I want, says Koizumi", Singapore Straits Times, 27 September 2002
• Kwan Weng Kin, "Bureaucrats stymie Koizumi reform plans", Singapore Straits Times, 27 September 2002