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Archive for Friday, August 25, 2006

Japan prepares for transition

August 25, 2006

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— Prime Minister Junichiro Koizumi's tenure, which ends next month, has been more remarkable than perhaps most Japanese comprehend. The third-longest serving prime minister since 1945, his five years have echoed aspects of the careers of four Western leaders - Margaret Thatcher, Tony Blair, Rudy Giuliani and Andrew Jackson.

Like Thatcher, of whom it was said she could not see an institution without swatting it with her handbag, Koizumi, 64, cast a cool eye on his country and found it overregulated and enervated by excessive dependence on the state. Like Blair, who came to power disliking his Labor Party even more than he did the Conservative opposition, Koizumi thought that many of Japan's problems reflected the political culture congenial to his Liberal Democratic Party, which has governed Japan for all but 10 months since 1955. Like Giuliani confronting entrenched interests in New York City, Koizumi, who has called himself "Lion Heart," made pugnacity a political philosophy. And like Jackson, America's most pugnacious president, Koizumi had an obsession, an emblematic monster to slay.

Jackson's was the Second Bank of the United States, which he considered a government instrument of political mischief and antidemocratic values. Koizumi's monster was Japan Post, the world's largest financial institution with 24,700 branches and banking and insurance assets of $3 trillion. Koizumi regarded Japan Post much as Jackson regarded the bank - as a slush fund for political elites and, as such, an inefficient allocator of capital. All told, one-quarter of this high-saving nation's savings were allocated by the government.

Jackson destroyed the bank by withdrawing government funds. Koizumi has put Japan Post on a 10-year path to privatization. But to accomplish this he had to threaten to "destroy" the LDP. Japan's 9-11 was a Koizumi-engineered domestic political earthquake. Last Sept. 11, Japan voted in a snap general election he called after 37 LDP members of the upper house of the Diet blocked privatization. In a purge stunningly unlike the LDP's usual backroom brokerings, he endorsed rival candidates against all 37, and most of those he endorsed won.

Koizumi came to power in 2001, near the end of Japan's "lost decade" - actually, 12 years of stagnation that engulfed the 1990s after stock and real estate bubbles burst. As The Economist has written, "No country in modern history has moved so swiftly from worldwide adulation to dismissal or even contempt as did Japan" in the 1990s, when "Japan mutated from being a giver of lessons to a recipient of lectures."

Japan is recovering its vitality partly because it is becoming somewhat less Japanese. Although the LDP is conservative, it has long reflected elemental Japanese values, hewing to what a senior economic official calls a "severe," even "socialist" aversion to large income disparities. In the debate about equity versus economic efficiency, Japan has listed toward equity, as egalitarians understand that.

But Japan is not impervious to the typhoon-strength winds of globalization. Demands of efficiency must be accommodated, particularly now that Koizumi has pruned public works spending as part of his double commitment to smaller government and a less imperial LDP.

Recently, three things happened that suggest Japan's evolved economic engagement with the world. In the first five months of this year, U.S. consumers - excluding rental car agencies and other fleet purchasers - for the first time bought more cars and trucks built by foreign manufacturers, mostly Japanese, than by the three domestic manufacturers. Second, Toyota outsold Ford in July. The third significant thing that happened was that nothing then happened: There was no American political turbulence.

Twenty-five years ago, so alarmed were Americas about Japanese imports that President Reagan, although a supporter of free trade, pressured Japan into "voluntary" automobile export limits. And Japanese auto manufacturers - bowing to American pressure to manufacture where their customers are - began building plants in America. Today many states, including Michigan, compete to attract such plants.

Koizumi, who has compared himself to Galileo, wants Japanese society to revolve less around the LDP and more around private power centers. As Blair has done in Britain, Koizumi has introduced into Japan something like presidential politics - personal and charismatic, claiming a national mandate superior to mere parliamentary majorities.

The peril of such personality-driven politics, however, is that, inevitably, the personality departs and the legislative branch, having bided its time, remains, nursing grudges and planning the reversal of reforms. Koizumi has tried to prevent this by selecting his successor. By appointing Shinzo Abe, 51, chief Cabinet secretary and government spokesman, Koizumi made him almost certain to be chosen prime minister by the LDP next month. But the eventful theater of Koizumi's politics has given Abe a difficult act to follow.

- George Will is a columnist for Washington Post Writers Group,

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