When Junichiro Koizumi became prime minister of Japan in April 2001, he had an approval rating of nearly 90 percent.

Elected to office without the full support of his Liberal Democratic Party (LDP), Koizumi was acclaimed by junior legislators as well as by the people. As the successor to the dismally unpopular Yoshiro Mori, the new prime minister promised radical solutions for Japan’s economic woes. With his reformist stance, striking coiffure, and dashing personality, Koizumi seemed to be a blast of fresh air in the stagnant Japanese political scene. The Japanese and the rest of the world had great hopes for the maverick politician, hailing him as the man to lead Japan into the 21st century.

However, in the months following his assumption of office, the prime minister’s plans have met immense opposition. Koizumi’s winning campaign platform of “Change the LDP, Change Japan” ironically points out his real problem in reforming Japan. In order to achieve substantial reforms, Koizumi must first reform the long-ruling LDP, of which he is the leader. Unfortunately, old-time LDP members have been unwilling to change their old ways and have stubbornly opposed Koizumi’s calls for reform legislation.

The prime minister made his aim to change the LDP clear from the beginning, when he announced his cabinet on April 26. Koizumi paid no attention to the faction system within the LDP, through which the main party factions are ensured several cabinet posts in each administration. The system secures political clout for business interests, which make large campaign contributions to the factions. Upon announcing his cabinet list to stunned LDP faction leaders, many commented that this was indeed an “earth-shattering list.” The five women, three non-politicians, and many junior party members in his list of 17 was unprecedented. The LDP old guard, though smarting at their rejection, did not take action against Koizumi immediately. They waited until after the Upper House election on July 29, when the LDP captured a majority of seats due to Koizumi’s personal popularity.

The LDP members’ animosity toward their party president has been exacerbated by his privatization agenda for state enterprises. State-owned corporations proliferated in Japan after World War II; there are now 163 such “special corporations.” Run by the government with taxpayer money, they are involved in everything from oil exploration to home loans to highway building. The Japanese government will have to pay 5.3 trillion yen (US$40.8 billion) in subsidies and investment in 2001 to keep these enterprises afloat. As a key part of his drive to check the power of the bureaucracy and to shrink the size of the government, Koizumi wants to privatize the special corporations. Yet LDP politicians are loath to support privatization because the state-owned enterprises fuel pork-barrel politics. Throughout its 46 years in power since World War II, the LDP has garnered votes from farmers, builders, and small businessmen by awarding large state corporation projects to their constituencies. Many LDP members would not be able to survive a successful transfer of government companies to the private sector.

The Japanese bureaucracy has joined the LDP in resisting privatization. The government officials, known for their elitism and conservatism, have also relied on the special corporations for their private interests. Upon retiring from public office, the bureaucrats find sinecures in the many public corporations. The state enterprises pay handsomely; retired top civil servants can earn more than US$1 million in 10 years.

Despite such resistance, the prime minister made some progress in privatizing state businesses. Eventually, hard-line bureaucrats agreed to the privatization of seven corporations picked by Koizumi. They are the three postal service corporations, which are slated to be privatized in 2003, and the four public corporations that construct and manage roads and bridges. One of the three postal service corporations, the postal savings system, has 330 trillion yen (US$2.5 trillion) in assets and has served as the Japanese government’s “second budget.” This enterprise has been the object of many political schemes over the years, and its privatization is extremely important in Koizumi’s push toward creating “politics of trust” and restoring faith in government. The Japan Highway Public Corporation, one of the four infrastructure state businesses, receives 306 billion yen (US$330 billion) in annual subsidies. Currently, it manages 6,851 km (4,280 miles) of tolled highways. Another 4,669 km of roads are slated to be built through mountains and around cities, and are expected to cost at least 25 trillion yen. The building costs cannot be recouped even with Japan’s high toll fees and bureaucrats and LDP members support such wasteful construction largely for personal gain. The public corporations, though they may have helped Japan recover from the economic devastation of World War II, are ill-placed in today’s economy.

Koizumi’s fight for privatization remains arduous. In November 2001, Toshikatsu Matsuoka led a group of 53 LDP legislators in opposing the prime minister’s reform plans. The group argued that Koizumi’s push for privatization would result in government spending cuts and thus worsen deflation and raise unemployment. According to Matsuoka, “The true path we should take is achieving an economic recovery while rooting out deflation.” His antagonistic stance toward Koizumi was echoed by Ryutaro Hashimoto, a former prime minister and LDP faction leader. Even Koizumi’s minister of administrative reform, Nobutero Ishihara, demonstrated his doubts about privatization when he sent a memo to bureaucrats advising only minor changes. Koizumi responded to his critics by saying that their language is outdated and that in Japan’s present state the LDP cannot preserve its old ways and must change to fit modern circumstances.

Whether the LDP will acquiesce to change is the major question. Unlike the bureaucracy, which has at least made some concessions toward reform with regard to privatization, many in the LDP are betraying their party president in order to preserve the status quo. These party members seem to be more concerned with keeping their positions of power than with improving the Japanese economy. Many administrative, political, and economic changes are undeniably necessary if Japan is to overcome its ongoing fiscal problems. The LDP and Japanese politicians in general are obstructing reform through their tremendous influence and connections with the business world. This customary bond is a deep problem that can and must be rooted out if the political system is to be weaned away from business, as privatization hopes to do. Yet the traditions of factionalism and paternalistic government are still strong in Japan; Koizumi will continue to face great difficulty in opposing them. It is crucial for the prime minister to remember that only he has the personal charisma and drive needed to undertake such a Herculean task. Unless Koizumi manages to sway the hard-liners in the LDP toward a new style of politics, little substantial change will occur in Japan.