TAKING STOCK: Koizumi and Japan Post Japan in the aftermath of World War II become an economic powerhouse. Not only did it rise from the ashes of Hiroshima and Nagasaki, its two cities devastated by atomic bombs, but by the 1970s completely dominated the world’s economic scene. It suffered virtually no unemployment and its manufacturers were the world’s envy. However, by the 1980s its mighty economic locomotive had stalled. Japan stopped growing, its stock market swooned and kept itself on a downward trajectory until recently. Its banks gave no returns to its shareholders and were saddled with non performing assets. The culprit was the government, which believed in maintaining a status quo. Free markets are dynamic and companies which cannot perform go under, however, in Japan, the government told banks to keep lending to insolvent firms in a bid to keep them afloat, somehow. Quite rightly, economists pointed out that there has, upto now, never been a greater misallocation of resources than had occurred in Japan during the last several decades. Simply speaking the more your business lost the more funding you obtained, courtesy the government of Japan. One of the egregious symbols of postwar Japan’s usurping of the nations resources and then misdirecting it is Japan Post. Japan Post is more than just a government monopoly post office. This so called post office includes a savings bank that maintains 30 per cent of all personal deposits, and has a life insurance activity which has cornered 40 per cent of the market. Its resources, collected from the people of Japan who get a paltry return, amount to $3 trillion. This money exceeds the entire annual federal government’s budget of the US, and has provided the main source of funding for Japan’s gargantuan public-work schemes. Public’s hard earned money was spent on building roads which no one used, bridges to nowhere which circled and come back to the spot where they originated, and the like. Thus Japan’s government partially negated the massive effort of its people and companies which produced world-class goods dominating the world markets for the last half century. Koizumi, Japan’s PM, wanted to privatise the post office. He wanted the depositors to get a better return and also wanted allocation of funds to be based on market forces. His political colleagues wanted none of this. They wanted to control Japan Post so that they could decide how to spend its money. Koizumi’s moves to sell-off the Post caused a big furore in the Diet (Parliament) and he could not get his initiative past the members of his own Liberal Democratic Party. Koizumi, in a bold move, called for, what has arguably been called Japan’s most thrilling general election and in September of this year achieved a stunning victory. Koizumi plans to privatise Japan Post fast. The people overwhelmingly support their PM; the election was a referendum on the future of the Post. He has no time to loose as he must step down in a year’s time thanks to Japan’s term limit laws which Koizumi is showing no intentions of seeking to amend. Besides privatization, the government of Japan needs to do other things: cuts in taxes and public spending are urgently required; other institutions controlled and directed by the state like the Housing Loan Corporation and eight other state lenders need to be dismantled; deregulation of industries and banks needs to be carried forward; government needs to get out of providing pensions and health care; and finally markets for agricultural products need to be further liberalized. How much of this Koizumi can actually do is anybody’s guess. He may achieve little, but by his courage he has shown the way. He has shown what one man shunning consensus and believing in his own convictions can do. His convictions carried the day, rarely have the people of Japan given such a overwhelming victory – a two-third majority in parliament – to an incumbent PM. Will Nepal ever produce a leader who understands economics, learns from the experience of others, and above all is bold like Koizumi and doesn’t hesitate to take his call to the public for reforms? We shall pray that this happens during our lifetimes. (The writer can be contacted: everest@mos.com.np)