Privatization push may topple Japan's leader

The administration of Prime Minister Junichiro Koizumi may be about to hit the wall. A key set of postal privatization bills looks likely to be voted down in Japan's upper house Friday in what would be tantamount to Mr. Koizumi losing a vote of confidence in his leadership.

Long-held resentments against his record of attacking cherished bastions of pork-barrel politics have boiled to the surface in recent weeks as conservative elements in Koizumi's own party blasted the circumvention of traditional consensus forming in the legislative process.

"I give the bills a 70 percent chance of failing," says Kazuhiko Ozawa, a professor of politics at Obirin University in Tokyo. The factional infighting in the ruling Liberal Democratic Party (LDP) has grown too severe and the political strongmen that lead the upper house are losing control of the chamber, he says.

Koizumi has said he will dissolve government and call a snap election if the bills fail, and close aides and political pundits reckon he isn't bluffing. What's more, adds Mr. Ozawa, there is a high risk that the LDP would lose any such vote - and with it the reigns of power for only the second time since 1955.

Koizumi has made privatizing Japan's gigantic postal and postal savings system a central policy platform since he took power in 2001. Aside from delivering the mail via a network of 25,000 post offices, the entity controls $3 trillion in individual savings and insurance deposits, making it the largest financial institution in the world.

The postal savings system has been a key source of off-budget revenue for many of Japan's post-war public works projects, making it the larder where politicians go to bring home the bacon for constituents.

Top policymakers, including Minister of Finance Sadakazu Tanigaki and Bank of Japan Governor Toshihiko Fukui, have mostly come out in favor of the scheme on the grounds that a private body would allocate financial resources more efficiently. Mr. Tanigaki argues the infusion of money into the private sector would boost the recovering economy.

Opponents of the bills - including powerful legislators in the ruling coalition - argue that privatization would lead to reduced services and the closing of post offices in remote areas.

The bills squeaked through the lower house in early July after some LDP members voted against the government and a number of others abstained. If just 18 LDP members rebel against the party line in the 242-seat upper house, the initiative will be defeated. Up to 16 LDP lawmakers recently said they plan to cross the floor on the matter.

"The key to whether the bills pass or not is the level of public support for the Koizumi cabinet going into the vote," says Kazuhiro Miyake, chief strategist at Daiwa Institute of Research in Tokyo. Support for the government has been steady in the mid-40 percent range all year but showed a slight fall after the narrow win in the lower house.

A snap election could bring an abrupt halt to Koizumi's structural and fiscal reforms - not to mention much-awaited changes to the constitution that may nudge Japan away from strict pacifism.

Opposition parties are already gearing up for a possible election. Leader of the main opposition Democratic Party of Japan (DPJ), Katsuya Okada, has been making a series of stump speeches discussing personnel changes and setting out his agenda for what he dubs "Japan's next cabinet." Analysts say the DPJ may be helped by a possible split in the LDP with rebel leaders Takeo Hiranuma and Shizuka Kamei forming a new party, taking the support of the postal network with them.

With a weakened political base, Mr. Koizumi may need to pay his respects at Yasukuni Shrine to shore up support among conservatives. The Mainichi Shimbun newspaper reported Sunday that some in LDP circles expect him to visit the shrine on the Aug. 15 anniversary of the end of World War II should the bills be defeated. Such a move would be sure to raise the ire of neighboring countries.