TOKYO, Sept. 22 (UPI) -- Less than two days after he was re-elected to lead the ruling Liberal Democratic Party, Prime Minister Junichiro Koizumi made clear Monday that he is now set on continuing his efforts to revitalize Japan's lackluster economy. He announced a fresh line-up of cabinet members early afternoon, appointing Sadakazu Tanigaki as Finance Minister to replace the 80-year-old Masajuro Shiokawa, and, more surprisingly, reappointing Heizo Takenaka as Economic Minister.
"We are just seeing the sprouts of structural reform, and my duty is to grow that into a big tree from the economic standpoint," Takenaka said at a press conference shortly after the announcement of his reappointment.
The prime minister's decision to keep Takenaka, who was a tenured economics professor at Keio University until he was appointed to the cabinet post, came as a surprise to some political analysts, given that the minister's efforts to reform the ailing banking system and clear up the ballooning non-performing loans have been unpopular with many of the more conservative members of the LDP on the one hand, whilst not being aggressive enough according to more aggressive policymakers.
But Koizumi's landslide victory over the weekend, when he won 399 of the 657 votes in competing with three other candidates, demonstrated just how much the ruling party is hoping the long-haired politician will deliver the party a win in the upcoming general elections. Moreover, it has given the prime minister more authority to push forward with some of the less popular reform measures that he has been trying to push forward for over two years, many of which have been blocked thus far not only by the opposition parties, but also from those within his own party less willing to accept changes that could prove painful in the near-term.
Indeed, in accepting his re-election as party leader over the weekend, Koizumi said at a press briefing that "this election for party leader was an election for the LDP to truly become the party of the people and the party of reform," adding that he would "move ahead with the structural reforms that have been tackled thus far to revitalize the economy."
Revitalizing the lackluster economy is clearly the single biggest agenda for the Japanese government, especially as there are some signs that the economic sluggishness that has lasted since the early 1990s, when the bubble burst, may finally be lifting. But for the recovery to be sustained, both domestic and overseas investors are well-aware that sweeping reform, particularly in the banking sector, must be implemented, even if it leads to losses in the short-term.
As lawmakers now clearly eye the elections, which could be as early as this November, Koizumi is hoping to cash in on his own popularity, currently above 50 percent in most opinion polls, for an outright LDP victory. The party currently is in a coalition government with the Conservative and New Komeito parties, even though it is the single largest party in government.
As he cashes in on his popularity amongst party members, Koizumi appointed moderate Taro Aso as Telecommunications Minister, which has increased speculation that the prime minister will renew efforts to privatize the postal system, a policy that has been unpopular among many lawmakers.
Koizumi also signaled that he would retain his pro-United States foreign policy as well by keeping Yoriko Kawaguchi as Foreign Minister, even though she has come under criticism for not having enough political leverage, given that she too is not an elected lawmaker but rather a political appointee who had been a career bureaucrat. Kawaguchi's reappointment makes clear that the prime minister will continue to pursue a policy that is accomodative towards the Bush administration's position on Iraq.
In fact, Koizumi has endeavored to push through measures to get Japan more directly involved with the reconstruction of Iraq, despite overwhelming public opposition to such a move. Granted, it is highly unlikely that he will try to send troops to the Middle East before the elections, but some analysts speculate that the prime minister will renew efforts to make military intervention a reality should his party win by a landslide. Japanese law currently forbids the country to send troops outside its own borders except for peacekeeping purposes.
Overall, Koizumi unveiled a comparatively more youthful 17-member cabinet that is likely to be more open to prospects of fundamental changes in public policy. Nevertheless, the biggest challenges the prime minister is likely to face is less from the opposition parties, but more from within the LDP itself. Even though the Democratic Party and the Liberal Party merged this summer to form a single unit, its leader Naoto Kan is trailing behind Koizumi in opinion polls as a viable candidate to replace Koizumi, whose popularity has admittedly diminished since he first came to power, but who nevertheless remains one of the most popular and long-lasting premiers over the past decade. By winning the LDP leadership once again, Koizumi will be able to strengthen his hold within the party and be in a better position to push through his less popular policies.
At the same time, within the party, Koizumi increased the allure of the LDP by replacing Taku Yamazaki, one of the most influential LDP members and long seen as one of the key old guard politicians with the more photogenic and youthful Shinzo Abe as secretary-general.
Still, market response to the new cabinet line-up, the first reshuffle since Koizumi came to power in April 2001, was tepid to say the least. The benchmark Nikkei-225 plunged 4.24 percent to close at 1,0475.10, marking the biggest single-day drop this year. However, the fall in the stock market was less to do with the latest political developments, but rather a result of the rapid appreciation of the Japanese currency which rose to 111 yen to the U.S. dollar earlier in the trading day. A strong yen makes Japanese exports more expensive, and thus less competitive, in overseas markets. As a result, there is growing concern that export-oriented companies will be hard hit by the recent volatility in the currency markets that could nip the country's nascent economic growth in the bud.
