Japan's economic policy is adrift, as the government keeps putting off action to clean up debt-burdened banks and prop up the flagging economy. Mr. Heizo Takenaka, the chief banking regulator, wants to speed up the write-off of banks' nonperforming loans, but the release of his much-heralded action plan has been postponed until the end of this month under pressure from the Liberal Democratic Party and the banking community. A decision on an economic package designed to absorb the shock of debt disposal has also been delayed.
All of this is regrettable. The urgent task for the government is to complete an integrated game plan to rescue the banking system and revive the economy. The continuing policy drift will only make things worse, possibly leading to political turmoil as well. A combination of economic unrest and political instability is a recipe for social agitation.
That is why Prime Minister Junichiro Koizumi must exercise leadership up front and ensure that policy is speedily implemented. He is sticking, rightly, to his "no reform, no recovery" slogan but is leaving everything to Mr. Takenaka, an academic with few political friends. The embattled financial services minister now needs active support from the prime minister.