As the Diet moves into the second half of its 150-day regular session, Prime Minister Junichiro Koizumi's administration appears headed for more difficult times, politically and economically. The first half ended without a major hitch. The fiscal 2003 government budget -- the most important legislative item of the session -- cleared the legislature as scheduled before the new fiscal year started on April 1.
It comes as a great relief that no financial panic, or "March crisis," occurred at the end of the month when most Japanese companies, including banks, closed their books for fiscal 2002. The bad news is that the Nikkei stock average tumbled below 8,000 -- its lowest fiscal yearend finish in 21 years. The index dropped 27.6 percent in the 12 months to March 31.
The 2003 financial year is off to a bumpy start. The economy, stuck in a quagmire of deflation, will deteriorate further if the war in Iraq drags on. If that happens, stock prices will probably continue to fall, barring drastic action to support them. Unemployment, already at a record level, could go up higher still. As a result, the government will likely come under pressure to boost spending, its crushing debt burden notwithstanding.