Economy key as Japan goes to the polls

Analysis
By Duncan Bartlett
BBC World Service business reporter

Mr Koizumi is proud of his achievements

Japan's Prime Minister Junichiro Koizumi is hoping that the Japanese will give him credit for the recent dramatic improvement in the country's economy when they go to the polls next month.

And he has pledged that if he wins the election, he will continue to push for economic growth.

After more than a decade during which Japan has drifted in and out of recession, the country's economy is now growing at an annual rate of 3.9%, according to figures from the latest quarter.

That is much faster than the United States or most of Europe.

Unemployment has stablised.

The stockmarket has risen sharply since April.

And there are even signs that one of the most acute economic problems, that is falling prices or deflation, is slowly coming under control.

Challenges

However, there are problems too.

The Japanese yen has been rising in value against the US dollar, to the dismay of Japanese exporters who say it makes their goods seem more expensive when sold abroad.

Interest rates remain at close to 0%, meaning savers get no interest on the cash in their bank accounts.

The government is also still vastly in debt.

And Japan's banks are still in a mess because they have lent money to customers who may never be able to pay it back.

Luck

Mr Koizumi has promised to address these issues.

But his political opponents say he has got little to show for his promise of reform made when he first because prime minister in 2001.

Critics insist the economic turnaround has been more by luck than clever political management by the country's leader.