The current extraordinary Diet session, dubbed an “economy Diet,” has its work cut out: debating measures for economic recovery and banking reform. As it turned out, the Lower House’s opening debates on Monday and Tuesday did not measure up to that billing. Prime Minister Junichiro Koizumi’s answers to questions lacked substance and clarity, as did his policy speech delivered last Friday.
It has been a long time since people began talking of a “hollowing Diet,” the implication being that the legislature is not functioning as it should. The lackluster question-and-answer sessions have reinforced that perception. A sense of frustration is growing among the public, which feels that the Diet is not very serious about tackling rice-and-soy-sauce issues even as the economy faces growing downside risks.
Much of the blame for this must fall on the prime minister, who seemed inclined toward ambiguity, which is certainly not his forte. Uncharacteristically, he parried questions, avoiding straight answers. The huge popularity he enjoyed early in his administration was due largely to the extraordinary candor he exhibited in parliamentary exchanges. This time around he spoke as if he were a different man. His passion for reform seemed to have withered.
The debates were marked by almost unanimous calls for “policy change,” not only from opposition parties but also from his Liberal Democratic Party. “Pushing the reforms too far will throw the economy into confusion,” said one leading legislator. “What the people want now is not reform that hurts but reform that heals,” said another. One said, “The prime minister should change his mind as a wise man does.”
The remarks reflected a sense of crisis over the economic stagnation and banking unrest that have continued for more than a decade since the stock and property bubble burst. But the prime minister went little further than delivering moral lessons and repeating his favorite slogans. “We should be more optimistic, not more pessimistic,” he declared. At the same time, he urged the nation to “endure pain a few more years,” while offering no prescriptions for recovery.
When asked why he insists on a policy of “no structural reform, no economic recovery,” Koizumi replied, “The economy has not recovered in spite of lavish spending. That’s why I am pushing for structural reform.” He has a point. Still, one wonders, if his structural reform is making steady progress as he claims it is, then why is the economy still in the doldrums?
At the time Koizumi came into office, deflation was regarded as a legacy from the bubble’s collapse — a manifestation of the economic policy mistakes of previous Liberal Democratic administrations. Structural reform was considered the key to correcting those mistakes. Now, however, many blame the Koizumi administration for prolonging the deflation because of its benign neglect and policy errors.
But the basic thrust of structural reform is correct. Perhaps the Koizumi administration’s biggest mistake was its failure to act quickly and decisively. Indeed, timing is essential. The reform scenario needs fine-tuning or partial rewriting. The test for Mr. Koizumi is to make flexible responses within the framework of his broad commitments.
In doing so, he needs to stay clear of partisan struggles in his party. The LDP — particularly, the old guard opposed to his reforms — is reportedly trying to regain policy leadership from the prime minister over a supplementary spending budget, which he has ruled out as an immediate option. A battle is also brewing over the 30 trillion yen debt limit, which Mr. Koizumi wants to keep.
The prime minister, however, has hinted that a new spending package might be introduced in the next regular Diet session that opens in January. The possibility is that the debt cap might be removed, if temporarily. He should have spoken clearly on these issues. Does he think an extra budget is necessary? If he does, he should say so and take action accordingly. Ambivalence is an invitation to political play.
To be sure, there are no “quick fixes” for deflation. With options limited, finding an effective mix of remedies is difficult. However, that does not lessen the need for the prime minister to show leadership, and he cannot show leadership without public support and understanding. This truism seemed far from his mind, as he gave only a cursory account of his policies and intentions.
Unfortunately for him, and for the nation, Mr. Koizumi’s superficial replies, combined with his perfunctory policy speech, has created the impression that neither the administration nor the Diet is fully prepared for the gathering economic storms.
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