Economic Structure Reform only in Words, Japan Is in a Mess

The fable `Lion Cannot Sleep`, written by a British freelancer, is currently gaining popularity in Japan. A nameless lion becomes a king and fights against fat rats in the opposition party. It pursues reform supported by citizens, but the rats oppose it as depression falls upon the nation. Eventually, the Lion king executes a radical `X- Plan` and saves the nation from breakdown.

The Lion represents Prime Minister Koizumi Junichiro, who is known as the `lion head`. The book satirizes the Japanese economic crisis, but it is uncertain whether economic reform will succeed as it does in the fable.

The Koizumi administration was formed last April, insisting on `structural reform for all`, but the economy has worsened since then. After last year’s negative growth, this year’s foreseen growth rate is –0.9 percent. The unemployment rate has also risen from 4.8 percent in the beginning to the highest ever, 5.5 percent.

The Nikkei stock has fallen 30 percent since the administration’s beginning, and the amount of government bond issue keeps on increasing.

The core of `Koizumi’s structural reform` lies in reviving the financial sector rather than economic stimulation. It is a strategy to pursue economic growth after establishing basic strength. Abolition or privatization of 157 special authorized corporations, including public corporations of roads and urban foundation repair, is being pursued, but bureaucratic society and conservative politicians are rejecting the issue. As a result, favor for economic stimulation measures are being expressed even in the government party. Citizens’ support rate has soared up to 70 percent, but the problem is the lack of detailed practical measures over the emphasized sense of need for reform. There is no more policy measure to be put out in the current situation in which the interest rate is almost at zero point and the yen is devalued to 130 for a dollar.

The administration announced its projections for the economic growth rate as over 2.5 percent from the year 2004, but this seems hardly believable.

Young-Ee Lee yes202@donga.com