A Bold Plan: Pain First and Then Gain for Japan
by David Ignatius
International Herald Tribune/The Washington Post
Monday, July 9, 2001

PARIS - The global leader who is playing the world's most interesting poker game right now is Japan's new prime minister, Junichiro Koizumi.

Press reports about Mr. Koizumi have featured the gee-whiz details that journalists love - his long, wavy hair, his taste for heavy-metal music, the public craze to buy his posters, the millions of people who subscribe to his e-mail newsletter, known as "The Lion Heart" because of his leonine locks. The Koizumi boom sounds almost like "Beatlemania." But behind the scenes Mr. Koizumi is locked in a bitter battle against the power brokers and money men of the Liberal Democratic Party who have ruled Japanese politics since 1955. His only real weapon against this gang of entrenched wheeler-dealers is the fact that the Japanese public is crazy about him, and he is playing that card for all it's worth.

"This is a revolution," one of Mr. Koizumi's strategists told me last week, just after the prime minister's visit to Washington. If Mr. Koizumi wins, Japanese politics will indeed have a rebirth. But after 10 years of failed Japanese attempts to cure the nation's political and economic slump, it is hard to be optimistic.

What outsiders often don't realize is that modern Japan has really been a one-party state, much like Mexico under the PRI or even the Soviet Union under the Communist Party. Since the LDP held power more or less continuously, the real political jostling took place among the party's factions. The most powerful faction is headed by Ryutaro Hashimoto, a former prime minister who is the latest in a line of political godfathers that included Noboru Takeshita and Kakuei Tanaka.

Under the LDP, Japan hasn't really had a normal political system. That is the argument made by a Dutch-born analyst named Karel van Wolferen, who has argued that Japan is in fact run by its business elite, and the politicians are just along for the ride. "Japanese democracy has not been realized," Mr. van Wolferen wrote in a recent book. "It exists only in potential."

Japan seemed stuck permanently in this rut when along came Mr. Koizumi. Although a member of the LDP himself, he had for years been something of a maverick, allying himself with a team of reformers from different factions known as the "YKK Group," after the initials of its three leaders (Koizumi was the middle K). The LDP barons loathed Mr. Koizumi. He had campaigned unsuccessfully for prime minister twice before, and he expected to lose again this spring. But a funny thing happened on the way to the usual diktat by the Hashimoto faction. The Japanese public rebelled. A grassroots movement among LDP members forced the leadership to accept the reformist troublemaker.

"The magma is moving," Mr. Koizumi said back in April, when he won the leadership. "People are driving the LDP members, and the LDP members are driving the party. That is a total reversal of the past." But the political war is just beginning. Mr. Koizumi's strategists explain that the power of the LDP's factions rests on two pillars: personnel and money. In that respect it is like any political machine, from Chicago to Beijing. Mr. Koizumi has already broken through on the personnel front by refusing to select his cabinet from the lists submitted by the LDP's factions. Those lists have always been the way top jobs in the government were filled.

Cleaning up the LDP's finances will be much tougher. Mr. Koizumi's strategists say their first target is a special fund for road construction, which currently holds a whopping 6 trillion yen, or roughly $47 billion. The highway fund was created years ago by Mr. Tanaka

It is controlled by the Hashimoto faction, whose members distribute the money to friendly contractors who in turn pump contributions into the party's coffers, according to a Koizumi adviser. This dubious system is one reason Japan is so overbuilt with highways, even in remote rural areas. It is part of how the LDP system works.

Koizumi strategists say that in their budget for the next fiscal year they will try to crack open this slush fund by directing that the highway money can be spent for other purposes. "This is challenging and defiant," says a Koizumi adviser, in what sounds like an understatement.

The political bosses will fight back, perhaps by attacking Mr. Koizumi's economic austerity program. The new prime minister has said he will force banks to write off bad loans, which are estimated at somewhere between $300 billion and $1.2 trillion. These uncollectable loans are an example of the favoritism and self-deception that have crippled Japan's economy, and Mr. Koizumi seems serious about making Japanese business face reality.

His austerity program will hurt. Aides estimate that unemployment will probably climb from the current 4.9 percent to 6 percent or more. "No pain, no gain," says a Koizumi adviser.

So this promises to be a painful but potentially exhilarating year in Japanese politics, in which a charismatic politician tries at last to cure the disease that has been crippling the country.