September 10, 2002

[paper] From Koizumi-Magic To Koizumi-Nomics

Jesper Koll: Chief Economist of Merrill Lynch Japan Securities

Graduated from Johns Hopkins University. Held positions in the J.P.Morgan and Tiger Management L.L.C. before taking up present position. Publications include Nihon Keizai korekara Ougonkihe.

Good News - A Long Period of Political Stability

Prime Minister Junichiro Koizumi is off to a good start. The strong Upper House election results raise the odds that Japan will now get something it has not had in a long time - a period of political stability. The fact that Japan had nine prime ministers in the past ten years is as good an indication of Japan's deep-rooted problems as, for example, the decline in the stock market or the increase in unemployment. Frequent leadership change is always an indication of national weakness and desperation. It breeds distrust in government and the rule of law. Above all, it breeds uncertainty amongst business leaders, entrepreneurs and consumers.

Now, the Liberal Democratic Party's victory is founded on the immense popularity of its leader. No doubt this may fade in coming months, just as the public embrace of a new, hot movie star or cartoon character may quickly turn from hot to cold. However, Mr. Koizumi is now in a strong position, strong enough to become the first PM since Yasuhiro Nakasone's rule in the mid-1980s to stay in power for more than just a couple of years. This raises the hope that public trust in the policy making process may start to increase.

The key challenge for Mr. Koizumi is not the possible threat to his leadership from within the LDP. No doubt the conservative and anti-reform wing will always exist. But in Japanese politics - like everywhere - nothing succeeds like success. Mr. Koizumi delivers what no other LDP president has delivered in a long-time: prospects of a steady grip on power and a new-found pride in being a member of the party.

There is not a single man or woman in the LDP who does not agree with Mr. Koizumi's central rallying point. The ruling elite has recognized that Japan is in danger of becoming a second- or third-rate power if it continues its old ways. Any rational analysis makes this risk appear very large. The fiscal debt dynamics, the demographic decline, and the challenge posed to Japan by the emergence of China in the world economy suggest as much. The most important dynamic in Japanese politics today, however, is that Mr. Koizumi is the man who has successfully turned this fear of national decline into a political force. His message is simple at the core - the LDP can either be the leader to respond to the national challenge to fend-off decline, or be thrown into the dustbin of history. And if there is one thing the LDP understands better than any other political party on earth, it is the Machiavellian will to stay in power. Indeed, perhaps the biggest worry is that Koizumi-Magic stays unchallenged from the opposition parties for too long. How long will it take before the opposition parties are united and can counter the mass-appeal and erotic attraction of Koizumi-Magic with a man or a woman of their own? Can opposition party leadership capture the imagination, the dreams of the Japanese people?

From Kozumi-Magic Toward Koizumi-Nomics

The real challenge for Mr. Koizumi is on the economic policy front. The leader of the second-largest economy on earth must now turn his political mandate into a forward-looking and transparent economic strategy. If this is then followed by consistent execution, he will quickly gain the trust of business leaders, entrepreneurs and bankers. Failure to show economic policy leadership could quickly push Japan back toward the brink of an economic crisis. It is now or never to turn Koizumi-magic into Koizumi-nomics.

The key to Koizumi-nomics is the purchasing power of the Japanese people. Just as his political power is based on the support of the people, not the smoky backrooms of LDP factions, Mr. Koizumi's strongest economic ally is the Japanese public. The success or failure of his economic policies will be determined by primarily one factor - whether he will be able to raise the purchasing power of the people. In history, he will be judged not by whether he succeeds in limiting next years JGB bond financing to Y30 trillion but by whether his policies bring democracy to Japan's economy just as he brings people power to the Japanese political process. Like Ronald Reagan or Margaret Thatcher before him, Koizumi's economic policies rise and fall with the success of supply-side economics.

Raising the Purchasing Power of the People - A More Aggressive Deregulation Drive Is Needed

The great supply-side leaders - Thatcher and Reagan - were fully aware of the immediate deflationary impact of their policies. Supply-side policies - less government intervention and more focus on private sector initiatives - are always deflationary in the first instance. This is because the weaker, inefficient companies will be forced out of business as competition increases. To counter the initial deflationary pull, traditional supply-siders implement large-scale tax cuts. This directly raises the purchasing power of the people. Here, Japan has limited options due to the record-high budget deficit. Personally, I think a cut in corporate taxes from the current 40% to 30% should be implemented to raise Japan's competitive position. However, Koizumi does have one other, potentially much more effective policy tool available.

To raise the purchasing power of the people Koizumi-nomics must break up the economic and business cartels that still directly and indirectly dominate Japan's economy and business culture. One of the first items on the agenda should be a deregulation drive focused on the large de facto public monopolies. On an economic level, this move would effectively offer quasi-tax cuts through deregulation, while cutting down the monopoly profits of these players. Japanese consumers spent about 2.5% of total annual consumption expenditures on telecommunications bills, for fixed lines, mobile phones and Internet access charges. A government mandate to cut access charges by 30% would free up about 0.7% of the consumption expenditures for the purchase of other services or goods from the free economy.

Another excellent candidate for indirect tax cuts - indirect because they come from cuts in government regulated prices, not tax rates - are the de facto utility monopolies. Consumers in the urban area spent about 5% of annual expenditures on paying utility bills for water, gas and electricity. A government-mandated price cut of 10% would boost free-market consumer demand by perhaps as much as 0.5%. While we don't know the exact economics of utility price cuts°› how much of the cost savings would actually be saved, how much will be used for more utility consumption are more use of telephones - this should not be a concern for a national leader. Moreover, the economists argument that this will not raise aggregate consumption is also irrelevant. The point is an executive decision to re-distribute national welfare away from de-facto government monopolies to the free-market economy.

The central question facing Japan's economy in the autumn of 2001 is "how to raise demand for free-market goods and services consumption." Raising the purchasing power of the people through more aggressive deregulation and price cuts of the de facto public monopolies of the telecommunications and utilities industries is the most direct and most efficient way to do so. Watch the autumn policy proposals for concrete steps to free purchasing power of the people by more aggressive government price cuts and deregulation policies.

New Profit Opportunities for Japanese Banks

On the banking and financial policy side, the much-publicized debate about non-performing loans and assets of the banks is distracting from the real focus. On banks, Koizumi-nomics is actually following a similar policy to the "purchasing power of the people " one. Since Mr. Koizumi assumed power three months ago, he has pushed hard for the privatization of the Housing and Loan Corporation. This mammoth organization is the mainstay of Japan's financial socialism machine, the postal savings, and fiscal investment and loans program.

Funded by postal savings deposits, the public Housing and Loan Corporation offers below-market rate mortgages. Its market share is about one-third of all mortgages. Deregulation here would immediately trigger "crowding in " - lucrative business and profit chances for Japanese banks. Because the mortgage markets offer very solid profit margins for banks, top banking analysts estimate Mr. Koizumi's deregulation policy may add as much as 15% to the operating profitability of Japanese banks.

As such, Mr. Koizumi's policy offers concrete new business and profit opportunities for banks. This is clearly more important than the never-ending debate about problem assets. If the PM's Housing and Loan Corporation privatization plans get turned into law this autumn, Japan's bankers may finally be dealing with a forward-looking policy.

No Large-scale Supplementary Budget

Another way of judging Koizumi-nomic is by focusing on what must not be done. In the past, any recession was quickly countered with a large-scale supplementary budget. Mr. Koizumi will not follow that route, as a supplementary budget would actually cut the purchasing power of the people. Already, Japan's past fondness of Keynesian remedies has pushed up the deficit to 130% of GDP. The cost of this is born by the Japanese people. Mr. Koizumi's stated policy is to cap next year's new government bond financing to \30trn ($244bn), equivalent to about \2,000 per Japanese household per day. The money buys you a set lunch for two people in Tokyo's expensive financial district, and about three lunches in the cheaper local areas where real people live and work.

There can be no question that eventually the repayment of next year's government debt will cut the purchasing power of the people. Moreover, unlike the price of the set lunch, the price of public debt is unlikely to come down in the future because interest rates are already super low. Mr. Koizumi's economic policy is focused on this, fully aware that added public deficits will do nothing but cut the purchasing power of the people. Of course, technically a small supplementary budget of about \2-3trn will become necessary this autumn. That much is needed to fund the cyclical tax revenue short-fall likely this year. But another large-scale spending program would be a very negative signal.

Mr. Koizumi's mentor, former PM Nakasone, once coined the phrase "In Japanese politics, three inches ahead there is nothing but darkness." There is no doubt that many challenges remain ahead for Mr. Koizumi, both politically and policy-wise. But overall, chances are good that his economic policies are starting off in the right direction. If Koizumi-nomics focuses on raising the purchasing power of the Japanese people through deregulation and privatization, then Japan's economy is poised for good things.

投稿者 gnpo : 07:11 PM

[paper] Use the funding policy to boost demand

Andrew Smithers: Smithers & Co . Ltd. (Chairman)

Date of Birth: 21st September, 1937. Education: Winchester College 1951-1955. Clare College, Cambridge 1956-1959 (M.A. Econ.) Business Career: 1989-present Smithers & Co. Ltd. (Chairman) 1962-1989 S.G.Warburg & Co. Ltd. (Director from 1968) 1959-1962 Commonwealth Development Finance Co.

Japan's key economic problem is obviously a shortage of demand. This is clearly inadequate and, if boosted, the economy could expand for some time before supply constraints become any hindrance to growth. Furthermore the demand problem is structural rather than cyclical.

Fiscal stimulus is a sensible response to a cyclical demand problem, but not to a structural one. Large long term budget deficits cannot be used as a policy tool. Since Japan's demand problem cannot therefore be solved by increased budget deficits, it follows that another way must be found to boost demand.

Governments can stimulate demand through fiscal policy, monetary policy or funding policy. Since fiscal policy is inappropriate to solving a structural demand problem, only through monetary or funding policies can stimulus be effected. While either, if followed with sufficient rigour, could achieve a sustained recovery for Japan, the central argument of this article is that funding policy is more appropriate under current circumstances. Not only is this much more likely to achieve quick results, but it lowers the risk that an excessive rise in inflation will follow recovery.

The Use of Funding Policy

It is usual to distinguish between fiscal and monetary policy, but to ignore funding as a potential policy tool. It may therefore be helpful to set out in more detail the nature of the proposal, before considering how a change in funding policy could solve the fundamental economic issues that face Japan.

Japan has a huge budget deficit. At the moment, this is partly funded by borrowing from commercial banks, via local governments and the Trust Fund Bureau, but by far the larger part is funded by the issue of bonds. Funding policy can be changed by varying the mix between borrowing from commercial banks and borrowing from the bond market.

This could be effected most radically by ceasing to issue bonds and borrowing all the needed funds from banks. If this were done, it should result in a marked expansion of money supply. At present, money supply is not increased to the extent that the budget deficit is financed by the sale of bonds, unless those sales are made to banks. If all financing were made by direct borrowing from the banks, then the growth of money supply would accelerate.

The Bank of Japan is hoping to increase money supply by increasing the monetary base through the purchase of government bonds. Compared with direct government borrowing from the banks, this has two disadvantages. First, it is relatively ineffective and secondly, it opens up potential problems for the management of money supply, once the economy has started to expand.

When the Bank of Japan buys bonds, it adds to the assets in its balance sheet. The matching increase in liabilities is represented by higher deposits of commercial banks. If the banks use these idle balances to make loans or buy bonds, then their actions will increase money supply. In current circumstances, however, the banks may not respond at all. They may simply allow their idle balances to grow, without taking any action.

This risk is not an academic one, it has been happening. In recent years, the monetary base has expanded much faster than money supply. It was also the experience of the US in the 1930s. In the first three years of that decade, the US monetary base grew by 30% while money supply fell by 25%.

The additional advantage of the use of funding rather than monetary policy to expand money supply, is that it will render the control of the economy less difficult, once the recovery starts. If the monetary base is expanded enough, then it is probable that the banks will use their idle balances to buy bonds and increase money supply. This will then lead to the desired expansion of the economy. Once this is firmly in place, however, it will be necessary to reduce again the size of the monetary base. Otherwise, the ability of the banks to increase money supply will be almost unlimited and will create a risk that recovery could lead to uncontrolled inflation. The Bank of Japan would then, however, face a quandary. The banks would have greatly increased their holdings of government bonds and if the Bank of Japan raised interest rates to control the rise in money supply, it would risk bankrupting the commercial banks through the fall in the value of their bonds holdings.

On the other hand, if the government had borrowed directly from the commercial banks, paying interest at short term and regularly adjusted rates, the government could quickly prevent the rise in money supply from proceeding too rapidly and could do so without distressing the banks. All the government would need to do, once recovery was in progress, would be to revert to issuing bonds to cover the budget deficit. If an even slower rise in money supply was required, then the existing debt to the banks could be repaid by issuing bonds, to "over-fund" the deficit.

The Structural Savings Surplus

The need for novel measures reflects the unusual nature of Japan's problems. Structural, as distinct from cyclical demand problems are rare. In Japan's case they are the result of the country's unusual demography.

The main purpose, for which people save, is to have a decent standard of living when they have retired. The normal pattern, therefore, is for savings to take place during working years and for those savings to be run down in retirement. This pattern will not only be reflected in the actions of individuals, but will take place indirectly through pension funds and life insurance arrangements. Japan today has a most unusual demographic structure. It has an unusually high proportion of its population in the high savings ages and, as yet, relatively few who have retired. As a result, Japan is and is likely to remain for a decade or more, a country with a naturally high savings rate.

Another profound influence on demand arises from the relatively small number of young people in an economy. This means that, unless the pattern is changed by migration, the workforce of Japan will be falling at around 0.6% p.a. for at least the next 20 years.

Until about 1990, Japan's economy was still catching-up with those of other developed countries. Japanese labour productivity was able to grow rapidly and, in the process, the economy was able to absorb a great deal of new capital equipment.

Now that Japan is a mature economy improvements in labour productivity are unlikely to be significantly better than those in other mature economies. Indeed over the past decade, labour productivity has fallen behind that of the US. Without exceptional growth in productivity, Japan's ability to absorb investment will decline with the fall in its workforce. For example, the US economy has a workforce that is growing at over 1 % p.a., while Japan's is shrinking at 0.6% p.a. If the improvement in labour productivity in the two countries is the same, then the Japanese economy will grow at nearly 2% p.a. slower than the US and its ability to absorb investment will be similarly restricted. At present Japan invests more of its GDP than the US. If this investment is to be adequately profitable, then in the future the level of investment must shrink to well below the US level.

Japan's demography thus produces a population with a naturally high savings rate and an economy with a limited ability to absorb these savings.

Unless impeded by imperfectly working capital and foreign exchange markets or the threat of political interference, the natural result is for Japan to run a very large external current account surplus for the next decade or so. In time, the situation will reverse, as the age structure of the population changes.

In two decades from now, Japan's pensioners should be partly living off the country's accumulated external savings. This will be very important, as otherwise the burden to pay the pensions of a vastly increased number of elderly people, will impose an unacceptable burden on the shrinking number of Japanese who will then be of working age.

Discomfort and Denial

The structural nature of Japan's demand problem raises political difficulties. There are two fundamental ways in which it could be tackled. The first is through a large current account surplus, the second is through immigration.

Each of solutions, however, creates political discomfort. There is the fear that a greatly increased current account surplus for Japan will be unwelcome in Washington, while massive immigration raises concerns in Tokyo.

This produces a tendency to avoid the issues. Discomfort, as so often, produces denial rather than discussion. This is a major barrier to solving Japan's economic problems. Recognising the existence of a problem is usually an essential first step to a solution. A common form of denial is to discuss structural improvements in the economy which, while generally desirable, are irrelevant to the problem of inadequate demand. By ignoring the key problem, the supporters of reformaremaking the achieving of their aims less likely. If the only apparent results of the drive for reform are mounting unemployment and falling output, the public support for it is likely to melt away.

Some supporters of reform wrongly believe that it will lead to increased demand. They correctly recognise that the low return on capital is a key problem for Japan and then, wrongly, conclude that this can be cured by cost cutting. This leads to the hope that the return on capital can be raised without cutting investment.

This argument involves a fallacy of composition. While cost cutting by one company will normally result in higher profits, cost cutting by all will result in lower output and falling profits. The essential point is that one company's costs are the income of its employees and suppliers. The impact of cost cutting on the economy is not therefore the same as the apparent effect on a single company multiplied many times over.

In economic terms the problem can be resolved by separating the return on capital into two parts. Profitability is the ratio of profits to capital employed. This in turn is determined by the amount of capital it takes to produce a unit of output, and by the proportion of output that goes to profits. This ratio, which is known as the capital income share, has the important quality that it is stable in mature economies. This means that higher returns on capital, for the corporate sector in aggregate, cannot be obtained by cost cutting but only by an improvement in the efficiency of capital.

Looking ahead, therefore, large falls are needed, not only in the budget deficit but also in investment. The resulting shortfall in demand cannot be offset solely by a rise in consumption arising from a fall in the household savings rate. A major rise in the external current account surplus is thus essential for Japan's recovery.

The Problem of Excessive Debt

There is another major problem, in that the level of debt is excessive In the private as well as the public sector. This is often discussed as if it were a problem purely for the banks, but the problem lies much deeper. By emphasising the banking aspect, the full extent of the problem tends to be ignored and thus unresolved. The fundamental issue is not just that the banks are bankrupt, but that so many of the banks' customers are.

From 1950 to 1990, Japan was a "catch-up" economy. It's standard of living was rising much faster than that of Western Europe or the United States.This was, of course, only possible because of a relatively rapid advance in labour productivity. Productivity does not, however, grow evenly throughout an economy and the economists Bela Belassa and Paul Samuelson have shown that this has an important impact on exchange rates. As productivity grows most rapidly in the production of traded goods, the cost of producing such goods in rapidly growing countries falls faster than other countries. To offset this, a country with rapid growth must have a rising real exchange rate.

Japan has been an admirable example of this theory working in practice. Over the past 40 years, the yen has risen against the dollar by nearly 3% p.a. in real, as well as in nominal terms.

There is an important corollary to this. A country with a rising real exchange rate will have a much lower return on capital. For example, if the return on capital in America was 8% and that in Japan was only 5%, then there will still be no incentive for investors to shift money from one country to another. An American investor would have had the choice of receiving 8% in his home market or 5%, plus a 3% rise in the exchange rate, if he had invested in Japan. Equally for a Japanese investor the higher return in the US will have been offset by the loss on the exchange rate.

Now, however, Japan is all too obviously a mature economy. The result is that neither can the real exchange rate continue to rise, nor can the return on capital remain below that in other mature economies.

This has important consequences for both new investment and the existing stock of capital. A fall in the rate of investment is needed to allow the return on new capital to rise. This, however, produces no benefit for the existing stock of capital. In order to raise the return on existing capital, it is necessary to write-down its value.

If Japanese corporations had been largely financed by equity, then a large write-down in the value of their assets would merely be unpleasant for the stock market. Japanese corporations are, however, highly leveraged and the required write-down of assets would mean that around \ 120 trillion of loans would become valueless.

The problem of debt is thus fundamentally a problem for companies, rather than just for banks. The outstanding amount of bank loans in the economy is shrinking, but this is not because the banks are unwilling to lend, it is because their customers are in no position to borrow. If this were not the case, then foreign banks, who do not have balance sheet problems, would take over the lending role.

At the moment, Japanese companies are choosing to repay debt rather than invest, both because much of their existing plant capacity is unutilised, and because their debt burden is excessive. So long as this continues, loans will fall and money supply will only grow through increases in the bank's bond portfolios. As the proportion of bonds to other assets rises, the banks are increasingly exposed to the risk that a rise in interest rates will bankrupt them. Thus, as their ownership of bonds rises, so the risks to the banks rise also. Prudence will therefore dictate that they should start to reduce their new purchases. If this happens before the banks' customers have been refinanced, then money supply will be unable to rise and the economy will decline.

Solving the debt problem is thus not just a case of refinancing the banks, it needs the radical refinancing of their customers.

Solving the Debt Problem

It is often said that Japanese are a wealthy people because they have such huge amounts of money on deposit. This of course simply reflects the huge debts of those that have borrowed the money. The fact that one half of Japan owes vast sums to the other half, that it can never hope to repay, does not make the country wealthy.

The real position is that Japan has more debt than the economy can sustain. This debt has to be reduced, without defaulting on the deposits, as this would cause a major collapse in the economy. This could be prevented by a massive injection of tax payers money, but it would only shift the debt from the private sector to the public sector, where it is already excessive. It has the additional disadvantage that even after major debt forgiveness, the private sector will wish to improve its balance sheet by continuing to run down debt.

The third course open to Japan is to have a one off rise in the price level. This would raise the value of assets to debt in the economy and thus effectively provide an injection of equity into the corporate sector and into the housing market. Such an injection of equity is vital to improving balance sheets to the point where debt repayment ceases to take priority over spending for both companies and households.

One Solution to Two Problems

The solution both to Japan's demand shortage, resulting from its structural savings surplus, and to its excess debt, thus lies in monetary expansion. Provided this is adequate, it should achieve both a rise in the general price level, and sufficient yen weakness to allow exports to expand. A large fall in the exchange rate is needed, however, since it must be sufficient to achieve two ends.

First there must be a decline in the real exchange rate, so that exports are competitive and the current account surplus can expand. Second there must be an additional fall in the nominal rate, to allow and offset the rise in the price level which is needed to reduce the excess level of debt in the economy and effect an injection of equity into the real value of corporate balance sheets.

To increase the quantity of money sufficiently to achieve these policy objectives will not be easy. The conventional approach of lowering interest rates has already been exhausted. The Bank of Japan has now, albeit reluctantly, moved to a policy of increasing the monetary base. The experience of the US in the 1930s, suggests however, that changes in the monetary base may need to be massive in order to be sufficient to restore growth. Combined with the central banks' reluctance, this renders the success of the policy doubtful.

The alternative of increasing money supply through a change in funding policy has a much greater chance of success. Furthermore, once successful the policy will be much easier to reverse. The policy of monetary easing induced through the expansion of the monetary base carries with it the problem that it will result in another banking sector crisis, once it needs to be reversed.

投稿者 gnpo : 07:07 PM

[paper] Washington's First Impressions of Koizumi and Tanaka.

Bruce Stronach: Provost and Chief Operating Officer of Becker College

Provost and Chief Operating Officer of Becker College

Although it may be a bit early to draw any significant conclusions, Foreign Minister Tanaka's recent visit to Washington, and Prime Minister Koizumi's up-coming visit, inevitably prompt an examination of American's image of the new Japanese government and its relations with the United States.

the ability of Japanese and American leaders to communicate has been limited.

The ascension of Junichiro Koizumi and the impact of popular opinion on his choice as prime minister, as well as the appointment of Makiko Tanaka as foreign minister may remind Washington of the age-old curse, "Be careful of what you wish for, it may come true." Washington has long hoped for a strong Japanese leader with broad popular support for several reasons. The political style of elected officials in the United States is quite different from those in Japan because their professional development has been so different. American politicians rise through the ranks into prominence because they have a combination of charisma and strong stands on particular issues. Thus, they flaunt their power. They exude it, as anyone who has been in Washington will soon discover. Japanese politicians have in the past gained prominence through just the opposite behavior. By being flexible and having low-key personalities Japanese politicians have been able to rise quietly through the ranks by manipulating others and guiding through deals without attracting negative attention. The result has been that with rare exceptions, such as the equally forceful and outgoing "Ron" and "Yasu", the ability of Japanese and American leaders to communicate has been limited.

Compounding this inability to communicate has been a perception that Japanese prime ministers are superfluous. Interpersonal relations can make a real difference in both the tone and substance of the relations between two states. Leaders are often perceived as the embodiment of the countries they represent and personal warmth between two leaders does send a direct message to the people on their staffs who actually work on the details of the economic and political relationships. Given this crucial aspect of bilateral relations, consider these facts: since 1990 the United States has had three presidents with Clinton serving eight of those years. Great Britain has had two prime ministers and France has had two presidents, both roughly splitting the eleven years. Germany has had two chancellors, the longest serving eight of those years. Japan has had nine prime ministers with the longest tenure being about two years but the average tenure being a little over one year. This is not a recent trend. Since the end of the Sato regime in the early 1970s America has seen a virtual revolving door of Japanese prime ministers, again with Nakasone being the most obvious exception. Even if American presidents and their cabinets secretaries had the inclination to bond with their Japanese counterparts, there would be little time in which to do so.

This combination of factors means that American officials are predisposed to perceive Japanese prime ministers and cabinet ministers as being generally both ephemeral and ineffectual. It is believed that the bureaucrats are the real power holders, and it is more important to build relationships with the bureaucracy than with the politicians. This is another element of the relationship that makes communication difficult given the general distrust that many Americans, politicians or otherwise, have toward bureaucrats. The American analysis of Japan's contemporary economic problems is not dissimilar to the American analysis of Japan's problems during the occupation-too much centralization and a bureaucracy that is too strong. Fifty years after the occupation the mantra continues to be privatize, decentralize, globalize, and increase competition.

However, while American politicians may feel more comfortable dealing with Japanese politicians made in their own image, they may find that the tremendously positive continuity in Japanese-American relations is due to the influence of the Japanese bureaucracy over the volatile vagaries of politics. It has been over 40 years since Prime Minister Ikeda defused the inherently explosive nature of the relationship following the turmoil of the Kishi years, and the bureaucrats have done a good job of emphasizing the relatively benign economic aspects of the relationship while downplaying the potentially volatile political and military aspects.

From the attempts by Reagan to involve Japan in the "Star Wars" Strategic Defense Initiative to the strengthening of the security relationship in the 1990s, it has been the goal of successive American administrations to support the development of a "normal" Japan, to use the now somewhat passe Ozawa expression. The Koizumi government holds more promise than any other government since the security treaty was revised forty years ago to carrying out a wide range of reforms, including military reforms. Koizumi has challenged the constitution, the concept of not calling the Japanese military a "self-defense force", and is strongly supportive of Japan's strengthened role in the security alliance. The most incredible thing is that he has done all this while maintaining a high level of popular support, although it is still too soon to tell how stable that support is. Koizumi is a man that Americans think they can understand because they think that he is just like them-direct, outgoing, anti-bureaucratic. What they do not seem to consider, however, is whether they will be able to channel his energies into policies that will consistently match those of the United States. All will be well as long as he takes strong positions that coincide with American policies, but when there is disagreement it may lead to even greater antagonisms.

The early impressions of Koizumi and Tanaka

All Americans can be quite naive in their views of Japan and such is the case with Makiko Tanaka as foreign minister. The early perception of the new Japanese foreign minister was symbolized by the quite unprecedented reception she got in Washington by everyone up to and including President Bush. Tanaka has a high profile and a positive image in the United States on two counts. She is the first woman to hold the position of foreign minister, and that means that there is a good chance for her to become the first Japanese prime minister. She has the highest political profile of any woman in Japan since Takako Doi led the Socialists more than a decade ago. In addition, like Koizumi, she also is a non-traditionalist who is useful in confronting the bureaucrats that have tied Japan down for so many years and suppressed reform.

But Tanaka's positive attributes can turn to negative attributes in a relatively short period of time. It is well-known that Tanaka's personality can be very abrasive, and that in and of itself could be an important factor. The vigor with which she so forthrightly chastises Japanese bureaucrats may not have as much charm if it is turned against the Bush administration, the American embassy, corporations, and/or government representatives. Personality aside, there are some crucial issue areas that need to be examined. There is a distinct possibility that Japan may use the forceful energy generated by Koizumi and Tanaka to fuel alternative policies in some very crucial areas including, but not limited to, relations with China, the Kyoto Treaty and missile defense initiative.

Both Makiko Tanaka and her father have been known to have positive inclinations toward China, and given the current climate of economic growth and political assertiveness in the PRC it may not be a bad thing for Japan to have a government that can work well with its large and powerful neighbor. The fear, of course, is that a Koizumi-Tanaka government would play the China card against the United States in order to strengthen its own position. This would be a very dangerous game and it has a low probability, but the possibility remains and is something of which Washington is sure to be watchful. There is a greater possibility that the increasing assertiveness in defense matters would serve as an irritant in Sino-Japanese relations but that would, in its own way, be an equally severe problem for Washington. Managing the subtleties of American-Sino relations with respect to Taiwan is difficult enough; the addition of a serious Sino-Japanese conflict would make it well-neigh impossible.

Differences over the Kyoto Treaty and the Bush administrations plans for the missile defense initiative are not as complex, or even as important, as relations with China but they do serve as warnings for the confusion and conflict that could result from a Japan that consistently says "No" to American policy. Indeed, Koizumi's and Tanaka's outspoken opposition to the two early Bush policies of opposing the Kyoto Treaty and developing a missile defense initiative are in and of themselves confusing because Koizumi himself has been less than adamant in his support for the Kyoto Treaty, and one of the most important factors behind the missile defense policy is the North Korean threat to Japan. However, the possibility that anti-Tanaka bureaucrats were exaggerating the severity of her remarks cannot be overlooked. Indeed, if opposition to Japan's active participation in the missile defense initiative is based on the grounds that Article 9 of the Japanese constitution would not allow it, one assumes that if Koizumi can change the constitution that barrier would be removed.

Tanaka made an obvious effort to be positive during her Washington visit, and her remarks were more tempered than those she has reportedly made in Japan. It will be interesting to see Koizumi's posture when he visits the United States and whether he gets a reception as effusive as that received by Tanaka. The most important thing to remember is that both the Koizumi government and the Bush administration are still in their early days, and both face strong challenges in defining themselves to their respective domestic constituencies. Bush is still trying to assert the legitimacy of his administration after a very close and controversial election while simultaneously trying to reconcile his electoral platform of "compassionate conservatism" with his quite traditionally conservative policies. Koizumi, for his part, will at some point have to go beyond rhetoric and actually attempt deep structural reforms if he is to live up to the mandate that brought him to power. Thus, the perception that each has of the other, and their behavior toward each other, will be shaped as much by the image that each wants to project at home as it will be by the objective realities of the Japanese-American relationship as it currently exists.

whether Koizumi can present himself

Finally, when addressing the American perception of Japan it is important to add the caveat that most Americans only have a shallow and hazy image of Japan, and virtually no perception of any Japanese government, new or old. This article dealt with the perceptions of the American elite toward Japan, but the fact that the general population's images of Japan remain so shallow after 50 years of post-occupation relations in and of itself remains important. It is interesting to note that during those years when Japan was perceived to be at the apex of its economic power relative to the United States, there was more coverage of Japan (both positive and negative) and general interest in Japan than there is today. There is an unfortunate feeling in contemporary America that Japan has had its day and that in political and economic matters China deserves all the attention. This may not be true but the perception does exist. As a visiting foreign minister, Tanaka received relative scanty press coverage in the major media outlets no matter what the fanfare she received in Washington's corridors of power. Compare that with the overwhelming press coverage Ichiro, Nomo and the other Japanese professional baseball players in the United States have received in the past few months.

It will be interesting to see whether Koizumi commands greater coverage in the American press and whether he can use that coverage, or perhaps even stimulate it, by creating an image for himself. In a world of information technology and global, instant communication, it is incumbent upon Koizumi to present himself to the American public with as much panache and aplomb as he has presented himself to the Japanese public. If he does he will not only be well-received, he will also rekindle in both the American public and its political elite a realization of the importance of America's relationship to Japan. If he fails then he will be just another Japanese prime minister just passing through.

投稿者 gnpo : 02:16 PM