Howard's End: Japan’s Maverick New PM
The United Nations Conference on Trade and Development (UNCTAD) has issued a report Tuesday warning that the U.S. and Japan are unlikely to come out of a recession anytime soon, but Japan is about to get a radical free marketeer as its new Prime Minister which might make a difference. John Howard writes.
UNCTAD is calling on Europe to take the lead to jump-start the global economy made sluggish by the sharp downturn in the U.S. and Japan.
It says hopes of an economic rebound in the U.S. are "beginning to fade and the landing could well be harder than optimists expected."
"The U.S. slowdown was a matter of serious global concern and Europe should pursue a more aggressive monetary policy through cuts in interest rates. Japan is unlikely to fill the breach with public debt at over 100 percent of gross domestic product.," the report says.
"This would have negative repercussions for Asian and Latin American countries strongly dependent on those markets for a large share of their exports."
But also on Tuesday, Junichiro Koizumi, was elected President of Japan's ruling Liberal Democratic Party. Because the LDP-led coalition dominates the Lower House, Koizumi, a former health minister, is expected to be named Prime Minister later today New Zealand time.
In his 20's he served as secretary to 1970's Prime Minister Takeo Fukuda and was heavily influenced by him. Fukuda was probably the most free-market of Japan's postwar leaders and abandoned the kind of building for the sake of building of infrastructural policies that LDP governments of the past decade have revelled in.
Koizumi is a convinced free marketeer wanting to deregulate the Japanese economy, loosen-up the Tokyo stock market and he wants to privatise the enormous resources that Japan's postal savings bank union continues to sit on.
He wants to see what Austrian economist Joseph Schumpter called the creative destruction process of capitalism at work.
Meaning? Privatisation and freeing up funds from long moribund sectors of the Japanese economy and see them flow into new and more profitable industries and sectors along with freeing up investment capital from the LDP iron triangle special interests, the government-sponsored public projects and slush funds.
Koizumi will also look for ways to restructure the domestic Japanese economy and banking sector to revive demand and investment confidence which has been deflated for years and suffers serious structural problems - particularly the domestic construction industry.
What he will not want to do is get Japan's extremely well organised crime brotherhoods, the Yakuza, too angry in the process.
By Japanese standards he is a maverick as are his economic ideas vowing to get rid of the banks' non-performing loans within 2-3 years. If he proceeds by forcing bankruptcy, and not by state subsidy, it might be the medicine Japan needs.
Junichrio Koizumi is a very confident man and looks likely to lead Japan back to growth in the next 12 months by applying stern orthodoxy, a mixture of loose monetary policy, very tight reins on public spending and a free market approach to enterprise and bank failures.
Some would say it sounds a whole lot like Rogernomics.