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November 25, 2002

Koizumi Deserves More Time

Kenzo UCHIDA (Political Commentator)

The political situation is beginning to show signs of yearend tumult. At the beginning of the fall, Prime Minister Junichiro Koizumi was doing fine. In September he visited Pyongyang and managed to extract an apology from North Korean leader Kim Jong Il for the abduction of Japanese nationals in the 1970s and 1980s, an issue long shrouded in mystery. After that, however, the North Korea problem became more and more blurred. Talks between Japan and North Korea on normalizing diplomatic ties ran into difficulties, and the United States, pursuing suspicions of Pyongyang's nuclear weapons development, made it a three-party affair.

Japan's diplomacy toward North Korea should have enhanced support for the Koizumi administration; instead, the subsequent confusion has led to remarks about the limpness of Koizumi's diplomacy. Even more, public uncertainty and distrust are being exacerbated by Koizumi's economic and fiscal management.

At the beginning of October, he reshuffled the economic lineup in his Cabinet, which had come under criticism for discord and a lack of unity. Hakuo Yanagisawa, the minister in charge of financial policy, was replaced by Heizo Takenaka, who also is in charge of economic and fiscal policy. Following this reshuffle, Koizumi was criticized for a lack of economic knowledge; critics said he had thrown all his eggs into one basket.

Although the Koizumi-Takenaka team decided on a comprehensive package of antideflation measures specially designed to accelerate the disposal of banks' nonperforming loans and to ensure economic stability, including employment, deflation has not stopped.

In its monthly economic report for November, the government had to make a downward revision, stating that signs of recovery were evident in the economy but that the tempo had moderated.

On Nov. 14, the Nikkei Stock Average closed at 8,303.39, its lowest since the collapse of the "bubble." Reflecting the stock market's deep-rooted concern about the financial system, the Nikkei dropped as low as 8,292 range on Nov. 18, crashing through the 8,300 barrier as it did temporarily on Oct. 10.

There have been rumors for some time about problems plaguing the nation's four main banks: UFJ Holdings, Mizuho Holdings, Mitsui Sumitomo Bank and Mitsubishi Tokyo Financial Group. Some observers have speculated that only Mitsubishi-Tokyo Group will survive. If so, it will be nothing less than the "Japan sinks" story coming true.

The nonperforming loan problem should be the result of deflation, not the cause. Moreover, the materialization of a supplementary budget is taking far too long. We must hope for some wise steering from Takenaka, who has Koizumi's complete trust. As it faces crucial stages in diplomacy and on the economic front, the Koizumi administration is coming under increasing fire not only from within the Liberal Democratic Party, but also from opposition parties and partners in the ruling coalition.

Former Prime Minister Yasuhiro Nakasone, now the doyen of the LDP, has been stepping up his criticism of Koizumi of late. However, the situation confronting Japan has not yet reached the stage where we should be hastily talking about leadership change.

The Koizumi administration, which was inaugurated out of the blue in April 2001, should be given at least another six months -- until April. Many people no doubt believe that Koizumi is reaching his limit. Yet the public is aware that there is nobody to replace him. My personal opinion is that at the present stage we have no option but to entrust Japan's fate to Koizumi's all-out efforts for at least another half year.

(This article originally appeared in the November 22, 2002, issue of The Japan Times)

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