Former financial diplomat Eisuke Sakakibara said Thursday the government of Prime Minister Junichiro Koizumi has "failed miserably" to resolve the bad-loan problem, making it impossible to push ahead with any real reforms.

Sakakibara, vice finance minister for international affairs between 1997 and 1999, said Koizumi virtually postponed doing anything about the problem the minute he shifted to a soft-landing scenario of avoiding legal settlements and corporate bankruptcies.

During a luncheon meeting at the Foreign Correspondents' Club of Japan, Sakakibara said Koizumi initially sought a hard-landing solution, ordering the Financial Services Agency to conduct special inspections of banks.

"But eventually, as fear of a February and March crisis emerged . . . Koizumi chickened out . . . and has chosen a soft-landing scenario," Sakakibara said, speaking in English.

Sakakibara, now a professor at Tokyo's Keio University, said he believes the policy shift came on Jan. 4, when Koizumi said he would "avoid a financial crisis at any cost."

He also said Koizumi will be unable to bring about "any meaningful structural reforms" as he has no intention of destroying the nation's dual political system of the government and the party, which Sakakibara believes is key in pursuing reforms in Japan.

"All government drafts of the budget and bills have to be approved by a Liberal Democratic Party committee or research group -- prior to the submission to the Cabinet," he noted. "This is not a legal requirement, this is a well-established convention developed during the course of the last 40 or 50 years."

The influence LDP politician Muneo Suzuki wields over the Foreign Ministry is also due to the dual structure, he said.

Suzuki "effectively ruled" the ministry through his power as chairman of the LDP's research group on official development assistance, Sakakibara said.

This situation is not peculiar to Suzuki, he said, pointing out that the LDP's Makoto Koga is the same in relation to road construction.

"It was quite ironic that (U.S.) President (George W.) Bush came to Tokyo at this moment to express his support for Koizumi's structural reform and to express his strong confidence in Koizumi," he said, as Koizumi's reform is now "faltering."

"In my view, Koizumi's structural reform is not structural in any sense of the word," Sakakibara continued. "Koizumi's reform is essentially a combination of old fiscal consolidation programs a la (former Prime Minister Noboru) Takeshita, combined with the empty populism of (former Foreign Minister) Makiko Tanaka."

He also said financial reforms implemented by former Prime Minister Ryutaro Hashimoto, including the establishment of the FSA through the shrinkage of functions at the Finance Ministry, were more advanced and genuine than any reforms pursued by Koizumi.

Sakakibara reiterated his recent predictions that the U.S. dollar could rise to 150 yen to 160 yen toward the end of this year because Japan faces a serious economic crisis.