Japanese Prime Minister Junichiro Koizumi
Seeks New Mandate After 
Defeat Postal System Privatization 

GEORGE NISHIYAMA & MASAYUKI KITANO / Reuters 8aug2005

TOKYO — In the biggest gamble of his career, Japanese Prime Minister Junichiro Koizumi called a Sept. 11 election for parliament's lower house on Monday in hopes of winning a new mandate for reform.

The decision to call a snap poll came after ruling party rebels in parliament's upper house joined the opposition to defeat bills to privatize Japan's vast postal system -- the core of Koizumi's agenda for change.

Koizumi is betting that a purge of those anti-reformers from the Liberal Democratic Party, which has ruled Japan for most of the past half century, will allow him to forge ahead.

"I see the rejection of the postal privatization bills as a rejection of the Koizumi cabinet and the Koizumi reforms," the prime minister told a news conference.

"I want to ask the Japanese people whether they say 'Yes' or 'No' to my reform agenda," he said.

But the bitter split means the LDP could lose to the opposition Democratic Party, a centrist party that argues it can succeed at reform where the LDP failed.

Koizumi ruled out cooperating with those who oppose the privatization bills and said he would step down if the LDP and its junior coalition partner, the New Komeito, failed to win a majority in the lower house. He said anti-reform lawmakers would not be approved as LDP candidates.

Koizumi sees postal privatization as crucial to his broader goal of weaning the LDP from the wasteful public spending that won votes but spawned scandals and inflated government debt.

Economics Minister Heizo Takenaka, who is in charge of postal reform, lamented the defeat of the bills to privatize Japan Post, which has $3 trillion in assets including the world's biggest deposit-taking institution and a huge life insurance business.

"Postal system privatization represented an important crossroads in terms of whether Japan opts for a small government or a big government," he said. "In that sense, I feel the rejection was a big loss for Japan's future and economy."

Some financial market analysts said the defeat meant that the reforms Koizumi had pledged to implement when he swept into power in 2001 would be stalled, but others were less pessimistic.

"Koizumi tried to achieve reform within the LDP framework ... But he couldn't do that, so that means reform is only possible if there is a change in government," said Yasunori Sone, a political science professor at Keio University.

The outcome of the vote ensures that the uncertainty that has hit Japan's markets in recent days will continue a while.

SCENARIOS FOR CHAOS

Koizumi's cabinet had 47.8 percent support, according to a public opinion poll conducted last weekend and published in the online edition of the Yomiuri daily on Monday.

That was up slightly from July.

The yen and Japanese share prices fell when the results of the vote became known. But the Japanese currency quickly recovered all of its losses, and the Nikkei share average closed higher after falling 1 percent ahead of the vote.

The bills were rejected by a vote of 125 to 108.

Media reported that more than 20 LDP upper house members had voted against the legislation.

Fifty-one LDP lower house members had either voted against the bills, abstained or absented themselves when the legislation narrowly passed the lower house last month.

The bills would have split Japan Post into four units under a state-owned holding company in 2007. Insurance and savings businesses were to have been sold off by 2017.

The future of the privatization plans will now have to wait the outcome of the election.

Koizumi, Japan's longest-serving prime minister in two decades, said privatization was vital to make investment flows more efficient and remove distortions from the financial system.

Japan Post holds a quarter of total personal assets in Japan. About 85 percent of households have postal savings accounts and over 60 percent have postal life insurance.

Many in the LDP feared privatization would weaken their political machines, which have long relied on powerful rural postmasters to get out the vote and on the postal system's assets to fund popular but wasteful public works.

Analysts say the Democratic Party, which wants to slim down Japan Post before deciding on privatization, has a shot at winning an election, but it would need help from other parties to get legislation through the upper house.

"The reform of Japan starts today. There is no tomorrow for the Koizumi LDP government, which spends all its time in internal power struggles," Democratic Party chief Katsuya Okada said.

LDP anti-reformers have threatened to form a new party.

(Additional reporting by Takeshi Yoshiike)

source: http://www.metronews.ca/reuters_international.asp?id=88240 8aug2005

After Reform Defeat, Japanese Leader to
Dissolve Parliament, Call Elections

AP 8aug2005

TOKYO — Japan's upper house of Parliament voted down legislation to split up and sell the country's postal service Monday, prompting Prime Minister Junichiro Koizumi to follow through on a threat to call snap elections that could shake the ruling party's grip on power.

Defections from Koizumi's own Liberal Democratic Party helped defeat the reform package by a 125-108 vote, dealing a painful setback to the prime minister's longtime quest to privatize the postal savings and insurance businesses and open their massive deposits to private investors.

Koizumi called an emergency Cabinet meeting, and ministers - with one dissenting vote - decided to dissolve the lower house of Parliament, Foreign Minister Nobutaka Machimura said. The order was later read by lower house speaker Yohei Kono at a specially called session, after which the disbanded lawmakers filed out of the chamber.

"I assume the prime minister made a difficult decision," Machimura told reporters. "He had said he would dissolve the lower house if the bills were voted down, so I supported his decision."

Media reports said the LDP and its coalition partner, the Komeito Party, had agreed to hold the ballot on Sept. 11. Campaigning for the chamber's 480 seats was to begin Aug. 30.

The dissent over the package revealed deep divisions within the LDP, which has held onto power almost uninterruptedly since its founding in 1955. Reform was expected to be a major issue in the campaign, and some speculated that it could split the LDP into separate camps.

The legislative package would have created the world's largest private bank, but opposition was strong among opposition and LDP legislators who said the measure would cut postal services to rural areas and lead to layoffs.

Proponents were disheartened by the vote.

"These were the bills that put us at the crossroads, whether Japan can create a small government or it is headed toward creating a big government," said Economy Minister Heizo Takenaka, the main architect of the reform. "The rejection is a major blow to Japan's future and its economy."

The opposition Democratic Party, meanwhile, started gearing up for an election fight, submitting a no-confidence measure against Koizumi's government. That move was cut short by the lower house's dissolution, but the Democratic Party has made strong gains in elections last year's upper house elections and in the previous lower house ballot in 2003.

"We've been steadily making efforts for this day," Democratic Party leader Katsuya Okada told his party members. "Now we have finally came to this opportunity to change the government."

Shizuka Kamei, a leading LDP opponent of the reforms, suggested he regretted the divisions that the legislation had created within the ruling party. Top legislators had tried to convince Koizumi over the weekend not to go ahead with his election threat.

"The results shows the conscience of the upper house," Kamei said. "The prime minister should come to his senses. It will be bad for Japan if we do something like this over and over."

Proponents of the reform said it was needed to put the postal saving system's massive deposits into the hand of private investors and provide a strong jump-start to the economy, which is only now emerging from a decade-long slowdown.

Privatizing Japan Post, which has 330 trillion yen - the equivalent of about $2.9 trillion US - in savings and insurance deposits, would create the world's largest bank.

Those funds have financed the massive public works projects central to the LDP's pork-barrel system, while the network of unionized postal workers has long proved a bastion of support for the party.

Opponents, including some in his own party, argue that privatization would reduce postal services in rural areas and lead to layoffs among the 400,000 postal system workers. They also say the new, giant bank would drive private financial institutions out of business.

Some opponents also said they were tired of Koizumi's heavy-handed attitude.

"It is extremely abnormal to tell lawmakers to vote for the bills or Parliament will be dissolved," said Tatsuo Kawabata, secretary-general of the opposition Democratic party.

The vote could change the face of Japanese politics if, as some predict, the LDP splits in nationwide elections with members opposing the bills forming a new party.

The showdown was stirring memories of an eight-month period between 1993 and 1994 - the only time in the past 50 years that a non-LDP bloc controlled the government after groups of legislators broke with the LDP in the wake of a power struggle.

Analysts say a nationwide election could give the Democratic Party, the largest opposition bloc, a shot at improving its standing because LDP members who voted against the bill in the lower house wouldn't receive party endorsements.

Parliament's more powerful lower house approved the privatization bill last month by a razor-thin margin. The package would have privatized Japan Post by 2017 and divided into private companies handling mail delivery, banking and insurance.

source: http://www.canada.com/montreal/montrealgazette/news/story.html?id=4900580b-3971-4dfa-86b9-3618cfa78156 8aug2005

Japan House Rejects Postal Reform Bills

JOSEPH COLEMAN / AP 8aug2005

TOKYO — Japan's upper house of Parliament rejected a proposal to privatize the country's postal system Monday, and Prime Minister Junichiro Koizumi immediately called an emergency Cabinet meeting to dissolve the lower house.

The 125-108 defeat was a heavy blow to Koizumi, who has championed postal reform for more than a decade. The vote revealed deep divisions in his ruling Liberal Democratic Party - national broadcaster NHK reported 22 LDP members voted against the measure.

The legislative package would have created the world's largest private bank, but opposition was strong among opposition and LDP lawmakers who said the measure would cut postal services to rural areas and lead to layoffs.

NHK and Kyodo News agency reported that Koizumi told LDP executives after the vote that he would dissolve the lower house of Parliament.

A snap election was expected to be tough challenge for the Liberal Democratic Party, which has been slowly declining in popularity despite its nearly unbroken string of 50 years in power. The opposition Democratic Party has made strong gains in recent elections.

Chief Cabinet Secretary Hiroyuki Hosoda had warned earlier Monday that dissolution of the powerful lower house of Parliament was inevitable if the package was voted down.

``Koizumi's efforts have been toward reforming Japan. If this point can't be understood among lawmakers, there's no choice left but to seek judgment from the people,'' Hosoda told reporters.

Ruling Liberal Democratic Party lawmakers scrambled over the weekend to change Koizumi's mind.

Proponents say the reform is needed to put the postal saving system's massive deposits into the hand of private investors and provide a strong jump-start to the economy, which is only now emerging from a decade-long slowdown.

``This reform is a policy decided on by the party as an election pledge,'' Hosoda said. ``I know some party members are opposed, but the bills are necessary for reform, and there are absolutely no calls for reform coming from the opposition.''

Privatizing Japan Post, which has $2.9 trillion in savings and insurance deposits, would have created the world's largest bank.

Those funds have financed the massive public works projects central to the LDP's pork-barrel system, while the network of unionized postal workers has long proved a bastion of support for the party.

Opponents, including some in his own party, argue that privatization would reduce postal services in rural areas and lead to layoffs among the 400,000 postal system workers. They also say the new, giant bank would drive private financial institutions out of business.

Some opponents also said they were tired of Koizumi's heavy-handed attitude.

``It is extremely abnormal to tell lawmakers to vote for the bills or Parliament will be dissolved,'' said Tatsuo Kawabata, secretary-general of the opposition Democratic party. ``We have been campaigning for change of government so it will be good for us if we can test public mandate.''

The vote could change the face of Japanese politics if, as some predict, the LDP splits in nationwide elections with members opposing the bills forming a new party.

Shizuka Kamei, a key figure in the LDP camp that rebelled against the bill, did not rule out the possibility Sunday that such a crisis could force the party into the opposition for only the second time since World War II.

Analysts say a nationwide election could give the Democratic Party, the largest opposition bloc, a shot at improving its standing because LDP members who voted against the bill in the lower house wouldn't receive party endorsements.

Parliament's more powerful lower house approved the privatization bill last month by a razor-thin margin.

The package of six bills proposed that Japan Post be privatized by 2017 and divided into private companies handling mail delivery, banking and insurance.

source: http://www.guardian.co.uk/worldlatest/story/0,1280,-5196955,00.html 8aug2005