You also have a problem when you’re talking about dealing with deflation, that most of the tools available to deal with deflation are exhausted. Monetary policy has a limited effect when interest rates are already close to zero, and it is difficult to use fiscal policy (a) when you’ve promised that you’re not going to do it, and (b) given the size of the national debt and the risks of further inflating that national debt.
Now, what sort of guy is Koizumi, because you would have read a lot about him. You would have read about his reformist aspirations, his very unusual style for a Japanese politician and, you know, he is unusual for a Japanese politician, particularly a Japanese LDP politician. This is my impression of him.
I don’t think he is somebody who has just come to power because he has got flair and because he has a good unusual political style. He has that. He is very good with the media. He is unusually good with the media by the standards of almost, I think, any politician, but particularly in Japan where politicians tend to be rather po faced, unresponsive, very much prepared, very staged. He is very good, and the public respond to that.
But because of a lot of the public hoopla about Koizumi, I think people fail to see that, in fact, he is quite a careful conservative politician in what he actually does. What he says he will do maybe inflates expectations, but in terms of the risks he actually takes at the end of the day he is quite careful. He is also quite conservative in other respects. Right from the word go he has been very pro-American. He belongs to the conservative side of the spectrum in the sense also that he sees advantage in Japan taking a more outward looking role in terms of external policy and defence policy.
He is also on the conservative side in terms of his view of Japanese nationalism. I am not suggesting for a moment he is on the far rights of the Japanese political spectrum, not at all, but his visit to Yasakune Shrine for example, is evidence, I think, of a deeply felt belief that this is the right thing to do for a Japanese Prime Minister. Now, he is not the sort of politician who spends ages on the telephone talking to Parliamentary colleagues, bringing the LDP along with him. He is not that sort of person. Nor is he a person that gets deeply into the substance of policy. What he is, however, is very good at assessing political risk, judging timing and when there is advantage, making quite bold political moves, which he did, for example, when he visited Pyongyang in the autumn of last year, the northern autumn of last year.
How does this translate to his political style and his progress on reforms? You will hear a lot of views that really reform has got nowhere, that Koizumi says he is going to do something and nothing gets done. I don’t actually think that’s quite right. On, for example, this issue of non-performing loans, quite a lot is actually coming into play and has come into play in the last two or three months. The proof of the pudding, I think, will be in the eating. We will have to see what is going to happen over the next six to nine months, but thus far, things are happening - tougher inspections of banks are actually taking place. The methodology to assess bad loans - what is a bad loan, and what isn’t a bad loan - is much tougher with more rigorous accounting systems being used. A few weeks ago an Industrial Revitalisation Corporation was created which is intended to assist companies that are viable although in bad shape in return for some fairly strict restructuring undertakings. There is, of course, some cynicism about this in Tokyo, but in the last couple of months I have also picked up a certain sense that perhaps a few things are beginning to happen after all. And if you look at also what has happened in other areas of restructuring, attempts, for example, to restructure the post office, or to restructure the system of funding highways which has got a huge amount of money in it in Japan because it funds a construction industry, whereas Koizumi has not been able to get 100 per cent of what he has aimed for, I think a good argument can be made that he has thus far perhaps attained 20, 25 per cent of what he has aimed for. Two years later he may be able to get another 20, 25 per cent. So it is not really a negative balance sheet. There are quite a lot of achievements.
I think also if you look across what is happening in Japan you do see changes happening in business. The examples are the management of Nissan and Mitsubishi Motors which, under foreign management, have actually made some quite considerable changes, but it is not only that. The successful Japanese companies are still, you know, being highly successful, like Toyota. But other companies are taking very hard decisions on letting people go and on restructuring operations more generally. Still, nothing like enough, but it is happening gradually over a period.