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Wednesday, 2 October, 2002, 11:34 GMT 12:34 UK
Is Japan ready to reform?
Economics minister and new financial services head Heizo Takenaka
Can Mr Takenaka act as a new broom?

Outsiders - not least the US government - have long complained that Japan's government is all talk and no action when it comes to unpicking the mess that is Japan's economy.

They remember that the arrival of Prime Minister Junichiro Koizumi in April 2001 was originally hailed as a victory for a reformer.

We understand the words and the form well... Now it is the prime minister's turn to show the substance

Asahi newspaper editorial

Then comes the sigh.

Time after time the decision has been made to muddle through from crisis to crisis, the critics say, and the result has been a steady slump in Mr Koizumi's popularity.

So his decision to replace his cautious financial services minister with Heizo Takenaka - the fiercest proponent of root-and-branch reform in the Cabinet - looks like a return to the form which attracted Japanese voters to Mr Koizumi in the first place.


Not, of course, that anyone has ever had the chance to vote for Mr Koizumi directly.

Lower House elections dictate the premiership, and none are due till June 2004 - although the poll for the Upper House in August 2001 reflected the prime minister's 70%-plus approval ratings, with a resounding win for the incumbent Liberal Democratic Party (LDP).

Or rather for Mr Koizumi.

Having watched the LDP run Japan for half a century, bar a couple of years in the early 1990s, voters enmired in Japan's deflationary economy know who to blame for their ills.

After succession of grey, faceless administrations, the product of factional infighting in the LDP rather than any real policy alternatives, Mr Koizumi was a new breed of politician.

There was a chance, many hoped, that someone might finally take seriously the huge bad debts crippling the banking system, and the steady flow of mass sackings in a society used to full employment.

Ladling out the pork

Special interests within the LDP have crippled all efforts at reform to date.

The construction industry, championed by many politicians, lives off government pork-barrel, drawing on massive and largely pointless public works projects which have contributed to an immense government deficit.

Likewise, the financial services industry has its defenders in the Diet, as do the big retail and real estate companies.

They will fight tooth and nail to stop the radical changes - almost certainly including mass bankruptcies - that are broadly seen as necessary to pull Japan around.

A glimmer of hope

Still, Mr Takenaka has hit the ground running.

He has already set up a task force to report as early as this month on how to deal with the 50,000bn (£260m; $408m) yen bad debt overhang which blocks fresh lending by Japan's banks.

Sackings at the top of the banking sector are likely to be part of the price a cynical public demands, as well as much more honesty about just how serious the debt problem really is.

After recent experience, though, no-one is confident that any real change will come.

"We understand the words and the form well," said the Asahi newspaper in an editorial.

"Now it is the prime minister's turn to show the substance."

We asked for your comments, but the debate has now been closed.

Have you suffered as a result of Japan's economic problems? Are you optimistic that better times are on the way?

In my university in Japan, professors have lost almost all fringe benefits and recently a 1.5 month pay cut. They have also reduced the university pension by 70%. Most of my graduating students in science are having an uphill battle getting a job, and many are accepting positions they would not have considered five years ago.

The general public are tired of inactivity by the government and policies that are plainly naive, and they are tired of corruption at the highest level in financial institutions. The bad debt problem means it is nigh on impossible to get a bank loan, forcing many to go to private loan companies with interest rates at 25-35%.

They especially target people in their twenties, who are the unlikeliest group to get a bank loan. University students cannot get loans for study, even though there is no meaningful scholarship system in Japan. Basically, if your parents cannot afford it, you don't go to university.
Robert Ridge, Japan

There are no poor people in Japan. Only rich spoiled people live there. It is funny to think what those people are suffering from the economic slump.

No money for travelling to Hawaii? No money to buy gadgets? No money to go to Karaoke? Well all of us should think more about the poor people in this world. Because certainly they must be suffering from their circumstances which are totally not applicable to Japan.
Kiichi, Netherlands

As a businessman travelling to and through Japan, I have seen no real changes in over 10 years. Each government comes in with the idea that the economy will turn around on its own. When it doesn't they are stymied by the special interest groups that serve only themselves.

The Japanese people have been educated not to complain or 'make waves' so nothing ever gets done. China will very quickly overtake Japan as Asia¿s economic power and as time passes by Japan will slowly become a third world country.
Stephen Cobb, USA

With the highest proportion of personal savings in the world, even 10 years of stagnant economy is not hurting the general public. In the West, where personal saving is relatively low, any economic change creates an immediate effect on personal spending. But go to any Japanese city shopping area, and you can see no evidence of a problem with the economy. People still have the money in their pockets to spend.

Only when the people start to hurt will there be any change in the mindset of the Japanese at the grass roots level. Despite all the talk of economic reform, what is really needed is a complete overhaul of the political system, a re-writing of the constitution, a new start.

But this is unlikely to happen from within the government, and will only come about through public pressure, which will only occur when the people feel the economic pressure themselves, which is not likely to happen for a long time.
Steve Koya, Japan

An unexpected reply from Hong Kong you may think. But the Japanese tourists here have almost totally vanished in the last 10 years. We used to see coach loads of Japanese visitors filling the shops in the happy days of the 1980s - not any more.

Gone are the Japanese expatriates who used to take up all the vacancies in the medium price range residences and the sight of Japanese school children lining the middle class neighbourhood waiting for school buses. With their companies folding up, these expatriate families were simply repatriated.

Gone too are the Japanese bosses and senior managers in the golf clubs around Hong Kong and Southern China. But there are more and more Japanese restaurants in this previous British colony. Obviously a lot of Japanese prefer to stay behind and work on their own fortune rather than go back to a economic slump which seems to have no end.
Denny Liu, Hong Kong, China

See also:

01 Oct 02 | Business
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27 Sep 02 | Business
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