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With Prime Minister Junichiro Koizumi firing off a barrage of reform proposals aimed at turning the ailing economy around, his foes, including fellow Liberal Democratic Party lawmakers and bureaucrats keen to protect vested interests, are drawing battle lines.

But observers say Koizumi, backed by record-high public approval ratings, has so far been skillful in handling those resisting his reform agenda.

One example was when the Council on Economic and Fiscal Policy, the top economic advisory body to the prime minister, drafted policy guidelines May 31.

Discussions at the 10-member council were led mainly by Heizo Takenaka, minister in charge of economic and fiscal policy, and four members from the private sector: Hiroshi Okuda, chairman of Toyota Motor Corp.; Jiro Ushio, chairman of Ushio Inc.; Osaka University professor Masaaki Honma; and University of Tokyo professor Hiroshi Yoshikawa.

Koizumi — unlike his predecessor, Yoshiro Mori, who largely let his party draw up government policies — did not allow demands from bureaucrats and lawmakers to alter the council’s blueprint.

Instead, details of bureaucrats’ meddling were revealed to the media as “comments from ministries” by Takenaka when he released the council’s guidelines, which called for reducing tax grants to local governments, reforming the state-run pension programs and creating 5 million jobs in five years.

The administration’s rare move to disclose the bureaucratic “comments” to the public apparently helped clarify each ministry’s intentions. The public management ministry is against the tax grant cuts; the health ministry hates the pension reform plan aimed at reducing government involvement; and the Finance Ministry wants to erase the new-job target.

“Once the top leadership sets a policy direction, the bureaucracy will do its best to carry it out,” Takenaka told reporters last week, suggesting that the panel is confident of eventually overcoming bureaucratic resistance.

“It’s a new political style. He (Koizumi) is making good use of the council, which was created to give the prime minister more leadership in policymaking,” said Kenji Eda, who from 1996 to 1998 was then-Prime Minister Ryutaro Hashimoto’s chief secretary.

The idea to create the council, as part of the reorganization of state ministries and agencies in January, was devised by the Hashimoto administration in 1997.

Eda pointed out that the way Koizumi broaches his reform plans is quite tactful.

“He does not jump to (his goal of) cutting government spending,” Eda said. “Instead, he begins the discussion by asking for changes in the nation’s fiscal structure that will not inflict new burdens on most of the general public.”

Koizumi’s fellow lawmakers are meanwhile upset by his leadership style, which many claim largely ignores the “nemawashi” (consensus-building) process of prior consultations with political and bureaucratic heavyweights.

Even members of his own Cabinet demanded on June 1 — just a day after the council’s guidelines were released — that they be given an opportunity to have their opinions reflected in the panel’s final report.

The report, due out at the end of this month, will spell out how the fiscal 2002 national budget — the first one under Koizumi — will be formed later this year.

The fact that many LDP lawmakers are left out of Koizumi’s decision-making processes was reflected by the frustration voiced recently at the party’s Executive Council.

Under Mori’s reign, Executive Council sessions normally proceeded quietly because policy decisions and a consensus had been reached beforehand among party members.

Since Koizumi took office in late April, however, the council sessions have seen heated discussions over the pros and cons — mostly the latter — of his reform plans.

“I don’t think (Koizumi) understands the definition of the parliamentary system,” Muneo Suzuki, a senior member of the LDP’s largest faction, led by Ryutaro Hashimoto, told an Executive Council meeting last week.

At the meeting, Suzuki lashed out against Koizumi’s decision-making style, urging him to consult the coalition parties about his policy proposals before going public with them.

Many senior LDP members vehemently oppose his plan to divert revenues from vehicle and gasoline taxes, which are currently allocated exclusively to road construction projects. The fund has been a pork barrel long coveted by LDP lawmakers.

Koizumi said reforming the “inflexible” system, which guarantees funds even for inefficient public works projects, will help alleviate the nation’s fiscal debts.

Eda, who teaches a weekly class on information technology and government policy at Waseda University, is critical of those LDP members for trying to meddle with Koizumi’s reform plans.

The Council on Economic and Fiscal Policy was created to give the prime minister greater power to take policy initiatives, and their resistance could undermine this, he said.

Koizumi has only put his proposals on the agenda, Eda said, and his real test will come later.

“In order to put his ideas into practice, Prime Minister Koizumi will eventually have to have relevant bills approved by the Diet, and will need the party’s help for that. That’s when Koizumi will face the real challenge.”

In fact, it will take time before his proposals go to the Diet in the form of bills, because the current legislative session ends in less than three weeks.

Critics are watching to see if Koizumi can overcome resistance from within the LDP and bureaucrats seeking to water down his reforms.

There have been precedents. A proposal to privatize part of the state-run postal businesses, which formed part of Hashimoto’s original administrative reform proposals in 1997, met with fierce opposition from his fellow LDP lawmakers.

Later that year, the finalized version of the reform plan merely called for transferring the postal businesses to an independent, but public, entity in 2003.

Koizumi, a longtime advocate of privatizing the inefficient postal system, has launched an advisory panel to again discuss the issue. It is to reach a conclusion within a year.

Koizumi’s political style may merit comparison with that of former Prime Minister Yasuhiro Nakasone of the mid-1980s, who supports his reform agenda.

Like Koizumi, Nakasone relied frequently on policy panels and actively spoke to the public on television, calling on the private sector to help invigorate the economy.

But political analyst Minoru Tada said Koizumi is not following Nakasone’s path.

“Koizumi is pursuing reforms, while Nakasone sought to strengthen the existing system,” Tada said.

Only three years ago, Hashimoto’s attempt to rebuild the nation’s finances backfired as Japan suffered its worst recession since the war. Will Koizumi fall into the same trap, with the economy still bogged down?

“Hashimoto pursued two contradictory goals — economic recovery and erasing government debts. That was why business leaders cold-shouldered Hashimoto, sending stock prices falling and pushing him out of power (in 1998),” Tada said.

“Koizumi has so far never deviated from the path of fiscal reconstruction. But his determination will be tested when LDP members start discussing the specifics after the Upper House election in July.”

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