When he debuted as prime minister, Junichiro Koizumi pledged economic and political reforms, saying there will be "no economic recovery without structural reforms." To implement the reforms, Koizumi said he was ready to overhaul the governing Liberal Democratic Party. I have supported Koizumi's determination, but now I doubt that his plans will put the economy back on recovery track, as he promised. Leading me to this conclusion are a serious defect in his agenda and the recent political chaos.
First, the reform agenda is flawed. In a recent session of the Lower House Budget Committee, Democratic Party of Japan Secretary General Naoto Kan challenged Koizumi to explain how his structural reforms will lead to economic recovery, but the prime minister said only that the economy would recover following an adjustment period of about two years. That's because Koizumi's reform agenda lists individual reform plans for Japan's economic revival in seven categories -- without linking them to the potential for economic growth.
Solving various economic problems such as banks' nonperforming loans is necessary, but that in itself will not lead to economic growth. It is common knowledge in the business community that the lack of investment opportunities in Japan, amid intense international competition related to economic globalization, is the basic cause of Japan's long-term slump. Therefore, structural reforms must be sharply focused on improving the environment for business activities, especially for investments, through deregulation and cost reductions.