Abe's Economic Challenge

Junichiro Koizumi has left Japan's economy in better shape than he found it upon becoming Prime Minister in 2001. The most consequential achievement was stabilizing the banking system by slashing nonperforming loans (NPLs). This was indispensable to the recovery of the past few years. Koizumi also cut wasteful public works. Still, with so much unfinished business, it is vital that his successor (and Japan as a whole) resists complacency.

It is imperative that Shinzo Abe, who will be elected as Prime Minister by the Diet this week, continues financial progress. While NPLs at the megabanks were down to...

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