Japan is a risk for the world economy. Although Prime Minister Junichiro Koizumi's reform plans are vague and offer no guarantee of results, Japan, and the world as well, depend on the success of the reforms for their prosperity.

At the recent summit of the Group of Eight industrialized nations, Koizumi and U.S. President George W. Bush agreed to create bilateral panels on fiscal and monetary policy, direct investment, trade and deregulation. The Bush administration proposed setting up the panels, and I believe Washington will use them to check up on Japan's economic policies that hopefully will put the nation back on a recovery track.

One concern I have about Koizumi's reform programs stems from their largely ignoring the risks of excessive currency fluctuations. Granted, some market experts, scholars and bureaucrats contend that currency stability is no longer as important as it used to be, since the manufacturing industries are less important in today's economy. I believe, however, that currency stability is a prerequisite for self-sustained economic recovery. An overshooting of the yen's value could ruin Koizumi's reforms.