Will PM's reforms save Japan?

On the Tokyo talk circuits, he's being dismissed as a has-been.

In the countryside, languishing small businessmen call him a "god of poverty," says a top Japanese political analyst.

But Prime Minister Junichiro Koizumi, the unconventional politician who seized Japan's top office last April with a plan for reform and the personality to implement it, is not giving up so easily. Yesterday, the prime minister introduced an antideflation package that aims to stop dwindling stock and consumer price levels that threaten to dash hopes that Mr. Koizumi can rescue Japan's sinking economy. The package hints at injecting public funds into debt-laden banks.

Despite the report's release, however, Japanese political commentators remain more than skeptical that the prime minister, who won fame for his charismatic talk and perm-waved tresses, will be able to rescue his own premiership for more than just a few months.

"Koizumi is already a man of the past," says Minoru Morita, a senior political commentator and leading opinion-maker on Japanese interview shows.

Unable to make the sweeping changes he originally promised, Koizumi is beset by a spiraling banking system that's plagued by nonperforming loans. Critics say "structural reform" remains more of a catchphrase than a reality. To make matters worse, new scandals are shaking the public's faith in Koizumi's promise of clean government. His decision to dismiss popular but controversial foreign minister Makikio Tanaka - whose public appeal helped draw support for Koizumi during his rise to power - has cut his popularity ratings in half, with some polls giving him as little as 44 percent support.

The prime minister, once hailed as the best thing since take-out sushi, is now being treated like last season's hemlines - no longer all the rage and not long for this political world. Aides and party loyalists say that polls are not the be-all and end-all, and that Koizumi simply needs more time to make a difference. After all, as Koizumi himself pointed out last week during President George Bush's visit - one that gave the premier far less bounce than his administration had hoped - the reforms of Ronald Reagan and Britain's Margaret Thatcher took years to implement.

Those reforms also caused much social turmoil. And, some would argue, they broke down parts of the safety net which Japan might not be ready to give up.

"No matter how much cosmetics Koizumi may put on the face of poverty, it will not be able to affect the time span of the administration for more than just a few months," says Mr. Morita.

Politicians within his own ruling Liberal Democratic Party (LDP), not to mention leading opposition parties such as the Democratic Party of Japan, are already jockeying for Koizumi's seat. The expectation among most commentators here is that he will not be able to recover from the drop in ratings. Popular support was the key base of his mandate because he was never widely supported within his own conservative political party.

"It is no exaggeration for me to say that the regional economy of nearly every area [of Japan] is almost dead," says Morita. "And since the prime minister has thrived on a very high approval rating that has now dropped by half, this makes null and void the very foundation of his administration."

Koizumi's promises of reform, however, have been far from a total failure. He has managed to cut government spending. The government in December endorsed a 81.23 trillion-yen (US$603.2 billion) budget for fiscal 2002, the smallest budget since 1988. He also won approval in December to begin the process of downsizing bloated government agencies or deleting them altogether. Of about 118 such agencies, called special administrative corporations, the government agreed to demolish 17 of them and privatize another 45.

However, many of those plans have yet to be finalized, and are already locking horns with big business.

Another plan is to use the Resolution and Collection Corporation (RCC) to help encourage companies to weather reforms. "The idea is to buy the stocks of firms that came up with strict plans for reconstruction and help them revive," says a spokesperson from the prime minister's office.

Many market analysts, however, dismiss this, as well as the deflation package, as a way to prop up stock market prices until the end of the business year - also the deadline for passing the budget.

Most of these reforms are gradual; many of the agencies to be closed down will have up to five years to do so. The idea, says Koizumi's deputy press secretary, Misako Kaji, is that "you make sure it can shrink and fade away in an orderly fashion."

However, some say Koizumi should be trying to move faster. His pace of reform may be so gradual that he will not have time so see it through.

"We support the structural reform. We acknowledge it will cause dislocation, but we believe doing it promptly and doing it quickly is much better than dragging it out," US Ambassador Howard Baker told reporters.

"There is also an old American saying, 'Fast loss is the best loss.'"

Koizumi's aides say that changes are under way, even if the prime minister is not getting credit for them.

"It's not a quick-fix, bounce-back economy," says Ms. Kaji. "He wants sustained economic growth. None of these measures happen overnight. People need to give it more time."

Still, there is no doubt that, for many here, Koizumi has lost some of the pizzazz he had only months ago. Yohsiyuki Nakamoto, a publishing-industry executive in Tokyo's political hub, says he still supports the prime minister, but giri-giri, Japanese for "just barely."

"Maybe we got bored with him," says Mr. Nakamoto. "He said we would have structural reform, but it turned out to be something he was just talking about."