HIGH-NOON TAKENAKA

Some interesting behind-the-scenes political analysis fro Time of Asia:

Japan's Prime Minister Junichiro Koizumi is used to making other politicians unhappy. But even he seemed shaken when his longtime supporter Mikio Aoki took the floor of the Diet last Tuesday and added his voice to the growing dissension over the Prime Minister's latest round of banking reform proposals. In a withering attack, he accused Koizumi's new finance chief Heizo Takenaka of being a loose cannon, an unelected and unaccountable radical operating outside the system. And he finished with a direct salvo against the man he used to defend, telling Koizumi, "What is lacking most is leadership in coping with economic issues." When the barrage was over, the Prime Minister smiled wanly and thanked Aoki for his "encouragement."

On Tuesday morning, Liberal Democratic Party (LDP) heavyweights Mitsuo Horiuchi, Taro Aso and Taku Yamasaki vowed to intervene. While Koizumi briefed the emperor at the Imperial Palace that evening, the three leaders and other LDP bosses confronted Takenaka behind closed doors in the Diet building. Takenaka left the meeting looking visibly pale. "This was poor leadership from Koizumi," says Mamoru Yamazaki, chief economist at Barclays Capital Management. "Takenaka was accused by the leading politicians of the Diet, and the Prime Minister wasn't protecting him." That evening, Takenaka said the publication of his plan was postponed till the end of October, though he later insisted that he wouldn't temper his proposals.

Koizumi's opponents are worried about a host of factors, including what they deem a "Takenaka Recession." Under the finance chief's plan, the easy pipeline of money from complacent banks to profitless companies would be cut off, giving these companies no choice but to shut down and throw their workers out on the street. "Companies are going to go under and Japan offers no support for the unemployed," frets Minoru Morita, a prominent political analyst. Already, LDP politicians and Tokyo bankers are circulating a list of 51 companies presumed likely to meet with peril under the plan—including retailer Mitsukoshi, video gamemaker Sega and trading outfit Nissho Iwai, plus a slew of construction, heavy machinery and real estate companies. Goldman Sachs estimates that if all 51 companies on the list were to close, Japan's unemployment rate would jump from 5.4% to 6.1%. And that tally doesn't include thousands of small and medium-sized businesses also likely to go belly-up. Indeed, bleaker estimates suggest that unemployment could spike to 10%. In Japan, that grim prospect is less palatable than trillions of yen in bad debt—not just to politicians but to the majority of Japanese citizens who vote for them.
Source: Time Asia Magazine
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