Koizumi's Second Act — page 2

When Koizumi swashbuckled his way to power 21/2 years ago in an unexpected landslide, he energized a society desperately seeking an excuse for optimism. In a nation of dwindling economic vitality and increasingly ineffectual leadership, the 61-year-old divorcé's flowing silvery mane, handsome looks and tough talk (tempered with a New Age vibe that felt your pain) heralded something new. Though he was a third-generation LDP politician, Koizumi proudly played the outsider, famously declaring he would pursue a reform agenda "without sanctuary," even if it meant demolishing his own party in the process. With gargantuan promises of a political revitalization and audacious plans for economic reforms, Koizumi seemed bent on doing far more than simply talking about a revolution. He enjoyed an astonishing 87% approval rating, and his visage adorned everything from chewing gum to cakes.

Almost immediately, however, Koizumi found it impossible to deliver on many of his boldest promises. Old Guard LDP members, none too happy about his intention to overhaul powerful constituencies, such as agriculture, banking, construction and the postal service, blocked many initiatives. And once in office, Koizumi proved more willing to compromise than his firebrand campaigning had let on. His pledge to limit government borrowing to $8.5 billion per year? That one got thrown out within his first few months in office. His pledge to cut public spending? The amount of public spending may be falling but, as economist Richard Katz notes, the rate of spending cuts under Koizumi is no more aggressive than under his Old Guard predecessors. And the privatization of the postal service and state highway corporation? Those grand plans are still on Koizumi's "to do" list, headlining this year's election promises as well.

Even in the face of such setbacks, Koizumi has maintained his primary power base: popular support. Indeed, one of his biggest strengths is how well he manages his image as an outsider and reformer, despite significant evidence to the contrary. He does this, say observers, in part by intentionally submitting unrealistically ambitious policy ideas that he knows will punch the traditional LDP forces' hot buttons. The message is clear: Koizumi wants to effect massive change, but it's those old boys that are stopping him. The public? They love it, and Koizumi uses their enthusiasm to strengthen his standing within the party. Though Koizumi's approval rating is off its postelection high, he still garners a respectable 58%, far more than any other politician in Japan today. Ezra Vogel, an Asia expert and professor at Harvard University, remarks: "The Prime Minister's greatest achievement is that the public is with him."

	If Koizumi is not re-elected, the LDP will not survive his defeat.     —GERALD CURTIS Columbia University

But that's only part of the story. It's doubtful that Koizumi could maintain such approval if he were just a master at crafting his public image. Despite what his critics say, Koizumi has, in fact, changed Japan more than any of his recent predecessors have. Although he may have failed to live up to the lofty expectations he himself set, Koizumi has delivered on several fronts. Take banking reform. Heizo Takenaka, Koizumi's controversial Minister of State for both Financial Services and for Economic and Fiscal Policy, has forced the nation's banks to accelerate their disposal of nonperforming loans and to shore up their capital bases. In May, he helped orchestrate a $17.2 billion bailout of Resona Bank, the nation's fifth largest. "I believe the finance regeneration is proceeding on schedule," Takenaka told TIME in August. "Japan is now in the third year of Koizumi's reforms, and I think results are beginning to bud." Similarly, Koizumi helped oversee Japan's first formal structural-reform program, which allows local governments to sponsor special economic zones where tariff reductions and other innovations can be tested. These projects, most of which began only this summer, range from extending the business hours of a port in Kyushu to allowing a few farmers near Japan's Inland Sea to rent fallow fields to corporations and not just to other farmers. "It's ridiculous how the media brush Koizumi as a nonreformer," says Kazuo Aichi, a former LDP lower-house member. "The man has been in office for just 21/2 years, and he's remained consistent about his reforms. How could anyone get structural reform done in that amount of time, especially in this country?"

In foreign affairs, meanwhile, Koizumi's statecraft has been even more enterprising. In one of the most decisive acts of solo diplomacy by a Japanese Prime Minister in years, Koizumi met North Korean leader Kim Jong Il while on a trip to Pyongyang last September. Although Koizumi has been steadfast in his criticism of reports of North Korea's renewed nuclear ambitions, he has won far more praise domestically for sticking to his demand that all Japanese citizens abducted by North Korea in the 1970s be allowed to return home. Also, Koizumi has dramatically stepped up Japan's national-security measures and military initiatives, going so far as to suggest he'd like to amend the country's pacifist constitution. He's overseen the drafting of legislation that gives Japan more options in dispatching troops to combat terrorism or to engage in peacekeeping missions worldwide. Likewise, the country recently launched two spy satellites and is exploring the feasibility of a missile defense system. Finally, Koizumi demonstrated that he's not a captive of public-opinion polls when he offered unyielding support for America's war on Iraq, despite vehement domestic opposition. This loyalty to the U.S. may have produced significant hidden benefits, perhaps encouraging Washington to keep quiet about Japan's recent currency-market interventions aimed at weakening the yen and thereby boosting foreign exports.

Such reforms are just the beginning. Indeed, Koizumi's lasting impact on Japan may rest above all in the way he has shaken up his own party. Nearly three years ago, "Change the LDP, Change Japan," was one of Koizumi's key campaign slogans. Pithy but unrealistic, right? Perhaps not. Take a closer look at the way Koizumi has seized control of this presidential election, and you begin to see that he may indeed be transforming the LDP—and, yes, therefore Japan. In the past few months, Koizumi has essentially driven a stake through the heart of the factional politics that were the lifeblood of the LDP. Historically, powerful LDP insiders have controlled smaller groups of Diet members that functioned almost as parties within the party. These insiders would routinely come together and make major decisions, often picking the next Prime Minister and his entire Cabinet. In a recent master stroke of strategy, however, Koizumi has outmaneuvered the faction system while virtually guaranteeing his re-election.

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