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Essay on Structural Reform In Japan And Unemployment In Japan
I. Introduction:
Koizumi Junichiro became Japan's prime minister in April 2001 by appearing as a charismatic and resolute leader who would spearhead structural reforms to save the country from lingering economic and political stagnation. After a decade of recession since the bursting of Japan's bubble economy, many frustrated voters embraced Koizumi as the nation's "last chance" to turn it around.
Among the reasons why a breakthrough in structural reforms is difficult are the weak institutional position of the prime minister in Japan, the strength of special interests within and outside the ruling Liberal Democratic Party (LDP) that are opposed to reforms, the reluctance of the bureaucracy to embrace structural reform, the further deterioration of the Japanese economy since Koizumi came to office, the loss of momentum for reform due to Tokyo's preoccupation with appropriately assisting its U.S. ally after the 11 September terrorist attacks on the American homeland, and the erosion of public support for Koizumi following the sacking of his erstwhile ally and popular foreign minister, Tanaka Makiko.( Alan B. Krueger and Jorn-Steffan Pishke)
Japan's current economic malaise is not just cyclical but also structural. Even for the best-intentioned reformer, it is likely to take many years to unravel and restructure the old socioeconomic system, which is deeply entrenched and supported by vested interests. Systemic change is difficult even in the best of times, especially in a democracy deeply penetrated by powerful interest groups; Prime Minister Koizumi is proposing radical changes in the worst of times.
These include tightening fiscal spending at a time when Japan is sinking further into deflation, or even a prolonged recession, when such a step is likely to worsen the economy. A deeper recession and rising unemployment may well undermine public support for Koizumi--the most important factor for his rise to power and political survival....
