Prime Minister Junichiro Koizumi’s administration, which marked its first anniversary April 26, stands at a crossroads. Its future hinges on whether his “no pain, no gain” reform initiative will produce tangible results. Thus far his administration has made no substantial achievements to speak of. Its public approval ratings have dropped from more than 80 percent a year ago to under 50 percent now, almost equal to the disapproval ratings.

In last October’s Lower House by-elections, pro-Koizumi candidates rode his coattails to victory. But April’s Upper House by-election in Niigata Prefecture, a conservative stronghold, ruined Koizumi’s image as a political patron saint.

The defeat in Niigata was a wake-up call for the Liberal Democratic Party and the Koizumi administration: It reflected deep public dissatisfaction with the lack of concrete reform and growing public mistrust of politics following a spate of political-corruption scandals.

Success of the Koizumi reforms depends on strong public support. With his popularity in a tailspin, the Koizumi administration is finding itself in an increasingly difficult situation. The obvious question is whether the reform efforts will bear fruit.

The only way he can produce tangible results is by overcoming resistance from the LDP old guard and hidebound bureaucrats. He should be prepared to dissolve the Lower House and call a general election, if necessary. Achieving results also requires that he focus on selected areas of reform.

A case in point is mail service, to which Koizumi gives top priority. On the day of its first anniversary in power, his administration sent deregulation bills to the Diet, bypassing the LDP’s traditional “prior examination” procedure. Many LDP lawmakers with ties to postal interests are opposed to liberalizing mail service.

The administration’s “unilateral” move flew in the face of a system in which the ruling party screens government bills before they are submitted to the Diet. This system has been criticized by many as clouding policymaking and crippling Diet debates on government proposals (the screening effectively precludes scrutiny by LDP lawmakers).

The more than 24,000 post offices throughout the country serve as a powerful election machine for the LDP’s “postal tribe.” Postal-worker unions play a similar role for opposition candidates. No wonder many members of both the ruling and opposition parties are against liberalization.

At a press conference marking his administration’s first anniversary, Koizumi said: “If the LDP wrecks my mail deregulation plan, it will have wrecked the Koizumi Cabinet. So it’s going to be a battle in which either the LDP will wreck the Koizumi Cabinet or the Koizumi Cabinet will wreck the LDP. This is the mainstay of the structural reforms.”

The prime minister assigns top priority to privatizing the postal system, which consists not only of mail services but also individual savings and life insurance plans. Mail reform is the opening shot at postal privatization. Mail deregulation also holds a key to progress in other areas of public-sector reform where the ruling parties have mounted resistance since late last year. That is why Koizumi described mail decontrol as the “mainstay” reform.

The Koizumi administration’s survival is largely a function of three factors: public support, Koizumi’s leadership ability and the power relationship between the administration and the LDP.

Until recently, overwhelming public support was the main prop for the Koizumi Cabinet, boosting his influence as a leader. That’s because Koizumi has no power base in the LDP, which is dominated by special-interest legislators allied with senior bureaucrats.

The LDP-Cabinet relationship was, and still is, driven by the prime minister’s popularity. The Cabinet is strong when he is immensely popular. As his popularity nosedives, the party and bureaucrats gain strength vis-a-vis the Cabinet.

The government shakeup of January 2001 strengthened Cabinet functions, giving the prime minister greater powers, such as initiating proposals at a Cabinet meeting. Moves to establish a Cabinet-centered policymaking process are also aimed at strengthening the prime minister’s leadership. Resistance is bound to increase, however, as Koizumi’s reforms make headway. To begin with, discord between the prime minister (the prime minister’s office) and bureaucrats (ministries) will intensify.

A case in point: Last December’s Cabinet decision to disband Japan National Oil Corp. prompted the Economy, Trade and Industry Ministry to draft bills intended to defend its turf. The prime minister’s office and the LDP have criticized the package as a veiled attempt to keep the corporation alive in a different form.

Disagreement between the prime minister and special-interest legislators (including those in opposition) will also intensify. For instance, the two sides are fighting over plans to privatize four road-related corporations, including Japan Highway Public Corp.

Last December, the prime minister decided to have a third-party panel in 2002 consider specific privatization plans. Panel members have yet to be selected, though, as the decision has met stiff resistance from the LDP’s “road tribe,” which is calling for the completion of the highway construction program, and from the Land, Infrastructure and Transport Ministry.

The prime minister faces a critical test of strength over mail deregulation, the mainstay reform. If he makes easy compromises with the postal tribe, his administration will lose its raison d’etre. But if the mail bills fail to pass the current Diet session because of an LDP boycott, then Koizumi and his team will suffer a severe political setback.

“We are set to privatize the highway corporations and scrap the housing loan and oil corporations,” Koizumi told the press conference. “Now we are moving toward the mainstay reform of postal services. Over the past year we have been pushing the kind of structural reforms that the LDP of the past would not have approved.”

The statement, however, also revealed the flip side of his reform campaign: determined resistance from antireform forces in his own party.

The prime minister faces other important priorities, such as tax and regulatory reform. Strong resistance is anticipated from both the ruling coalition and the bureaucracy. The question here, as in other areas of reform, is how much leadership can he demonstrate.

Koizumi’s political weakness is that he has no solid following in the LDP. This means that his political capital derives primarily from public support. To succeed he has only one choice — achieving specific results on selected targets.

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