The Takenaka Effect and the Foreign Press

John de Boer (University of Tokyo & GLOCOM Platform)

With the government's fiscal rescue package due by the end of the month (October 30), this week's Media Review has taken a look at what expectations are like overseas. Initially, Prime Minister Junichiro Koizumi's decision to name Heizo Takenaka as the Financial Services and Economics Minister was met with wide-spread support both in and outside of Japan. However, following Takenaka's seemingly careless remarks such as "no bank is too big to fail", both the Japanese market and its workers have started to reappraise Takenaka's approach with some coining the phrase "the Takenaka Shock" and labeling his economic task force "the Demolition Team".

The question is how has the foreign media portrayed the tumbling fate of Takenaka's image over the past two weeks? The answer in short is with considerable worry.

Business Week described the "Takenaka Effect" in its most recent issue in the following way: "Call it the Takenaka typhoon. Since Heizo Takenaka became Japan's top bank regulator on September 30, nearly $200 billion worth of market value has vaporized from the first section of the Tokyo Stock Exchange (TSE) through October 9" ("Anatomy of a Crackdown", 21 October, 2002). George Nishiyama of Reuters characterized the situation in similar terms questioning whether Takenaka was a "reformer or a destroyer". He highlighted the fact that share prices on the TSE had fallen by 9 percent since September 30; levels unseen since 1983 (George Nishiyama, October 13).

Once viewed as Japan's only hope, Takenaka's ability to handle the gravity of the situation is being put in doubt even overseas. Worsening matters is the assessment that Koizumi is doing nothing to stabilize the situation and is "just leaving it all up to Takenaka" (George Nishiyama, October 13). Howard French of the New York Times also highlighted these concerns and warned that "if Koizumi doesn't introduce a stimulus plan soon, a swooning stock market will crash the economy, rendering banking reforms meaningless" ("Koizumi, Popular Again, Pushes Economic Change", 13 October).

Amidst worrying indicators that point to a slowing export market, increasing personal and corporate bankruptcies and wavering public confidence in its government's fiscal aptness, outsiders are starting to give up on hope for Japan and are starting to concern themselves with protecting their own economies from "Japan disease". William Pesek Jr. of Bloomberg News devoted his article to this topic and highlighted the level of concern in the US, Hong Kong and Germany. His assessment was one that treated Japan as a terminal patient stating that "no one knows how to fix an economy like Japan's once all the fiscal tools have been used" (October 15). Instead of trying to work with Japan to help it recover he warned of a growing risk that other major economies could go the way of Japan. He then claimed that, "there were few ailments more frightening than Japan disease".

With no positive signs existing, the dominant analysis on Japan abroad is one that predicts an unemployment rate that may rise to as high as 7 percent and a record number of corporate and personal bankruptcies. The problem is that no one is certain whether the pain associated with writing off the bad loans and cleaning up the economy will be worth the risk. In essence, no body knows what to do with Japan's economy. For the time being, the international press seems content to wait for Takenaka's proposal to come out and in the mean time to concern itself with trying to enlighten its own constituency on how to protect themselves from "Japan disease". The overwhelming sense one gets from reading the foreign press is that most have given up on Japan.

Articles:

• George Nishiyama, "Is Japan's Takenaka a reformer or a destroyer?", Reuters, 13 October 2002
• "Anatomy of a Crackdown", Business Week, 21 October 2002
• Howard French, "Koizumi, Popular Again, Pushes Economic Change", The New York Times, 13 October 2002
• "Japanese factory closings surge in 2002", The Associated Press, 14 October 2002
• Peter S. Goodman and Akiko Kashiwagi, "Japanese Wary of Reforms", The Washington Post, 15 October 2002
• William Pesek Jr., "How will others attack 'Japan disease' symptoms?", Bloomberg News and the International Herald Tribune, 15 October 2002
• Ken Belson, "Big banks assail plan for restructuring Japan", The New York Times, 17 October 2002
• Ken Belson, "Panel is set to prescribe Japan's economic medicine", The New York Times, 17 October 2002
• "Koizumi promises 'bold' action on economy", The Associated Press, October 18 2002