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Jesper Koll on Koizumi's Third Anniversary (WSJ)

ジャスパー・コール氏によれば、岩田副総裁は、『an aggressive and outspoken intellectual, who had long been critical of the BoJ's restrictive policies』ということだ。本op-edはWSJに掲載された小泉政権3年間のレビューなので、それなりに重みのあるop-edということになるだろう。

COMMENTARY Koizumi's Third Anniversary

By JESPER KOLL
April 23, 2004

Monday marks the third anniversary of Japanese Prime Minister Junichiro Koizumi taking office. Three years marked by an impressive track record on macroeconomic policy management, which deserves much credit for pulling Japan out of deflation. But three years that have so far seen Mr. Koizumi fall short on his promises of structural reform -- promises that now need to be pushed to the forefront of his policy agenda for the coming year.

Politicians the world over have two tools of power: allocating money via the budgetary process, and allocating people to positions of power through their powers of patronage. On both counts, Mr. Koizumi scored top marks during his first three years. He radically changed the way taxpayers' money is allocated in Japan -- cutting investment in public works by about 20%, or 1% of the country's gross domestic product. That was a salutary lesson to Japan's well-connected construction industry, which thought it had become politically invincible as it fed on the trough of never-ending supplementary spending packages throughout the previous decade.

But the fight against entrenched vested interests would never have been won without some strategic appointments. Remember the outcry from the Liberal Democratic Party old guard when Mr. Koizumi appointed his first cabinet three years ago? Instead of choosing ministers based on the traditional system of considering their seniority and factional interests in the LDP, the prime minister handpicked those personally loyal to him. What's more, he announced they would be personally responsible for progress in implementing reforms in their ministries. That amounted to a revolution by Japanese standards, transforming ministers from ceremonial appointments into real positions of responsibility.

Mr. Koizumi's appointment of Heizo Takenaka as minister of economic and fiscal policy put a competent outsider in charge of budgetary allocations, blocking out the LDP old guard. And when vested interests in the banking industry used their influence over the Financial Supervisory Agency to continue to resist reform, instead of backing down, in September 2002 Mr. Koizumi added responsibility for running the agency to Mr. Takenaka's portfolio.

That cleared the way for a reversal in banking and monetary policy, as the Bank of Japan embarked on an unprecedented wave of monetary easing, accompanied by swift capital injections into the weaker banks. In other words, while the construction industry's budget was being cut, the funds available to the banks were increased. That quickly began to yield results. Within months of Mr. Takenaka's additional appointment, bankruptcies -- which had been on the rise for more than three years -- began to drop, a clear sign of credit easing.

Mr. Takenaka and other key economic advisers -- including the U.S. government -- had long argued that Japan must loosen its monetary policy in order to pull out of deflation. The BoJ had traditionally resisted for two reasons. Firstly, that a tight credit policy was needed to counteract the harm done by a loose fiscal policy that squandered public funds. Secondly, it argued that FSA inspections of banks were too lax to promote any real change in banking practices. While Mr. Koizumi's budget cuts removed the first concern, the second remained a sore point.

However, the BoJ did not get much time to evaluate its options. Instead Mr. Koizumi forced its hands with his March 2003 choice of Toshihiko Fukui as the bank's new governor. A 40 year veteran of the central bank more amenable to compromise, his appointment was coupled with the choice of two new deputy governors, Toshiro Muto and Kazumasa Iwata. Mr. Muto had been vice minister of finance for domestic affairs for three years, the post reserved for the most powerful financial-policy powerbroker. Mr. Iwata is an aggressive and outspoken intellectual, who had long been critical of the BoJ's restrictive policies.

With those appointments, the prime minister put in place a team to cast aside Japan's decade-long obsession with steady fiscal expansion and budget exuberance, coupled with tight money and banking policy. By April 2003, Japan was running with a hyper expansionary monetary and banking policy, while fiscal policy had become modestly restrictive. And that change in macro policy direction is working -- slowly but surely the Japanese economy is being pulled out of deflation, toward growth and inflation.

That macroeconomic success was primarily achieved by an unprecedented mobilization of monetary resources, with the BoJ buying equities, lending to small- and medium-sized companies, funding public-capital injections into the banks, as well as buying 40% of new treasury bonds.

But the irony is that's not what Mr. Koizumi promised to prioritize. When he came into office he committed to focusing on structural reform. His original slogan was, "no growth without fundamental reforms." And now that he achieved such success on the macroeconomic front, it is time to return to that original goal.

Mr. Koizumi should use the tailwinds created by the return of economic growth to promote real reform. Japan's labor market remains riddled with red tape and inefficiencies, it's service sector -- particularly the health-care industry -- is a quagmire of irrational and untransparent rules that protect incumbents and suppress innovation. And the effect of the public sector on the economy remains so enormous that so-called privatization of the postal-savings and fiscal-investment machine runs the risk of crowding out private enterprise, instead of promoting it. Japan's tax system also remains in desperate need of fundamental reform.

The end of deflation offers the chance to make a new beginning in forging more aggressive and proactive structural reforms that will build lasting prosperity in Japan.

Mr. Koll is chief Japan analyst at Merrill Lynch Japan.

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