Japan's Destroyer

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If you were Junichiro Koizumi, about now you might be wishing you weren't so damned prophetic. During campaigning for parliamentary elections in July, the Japanese Prime Minister won over voters by giving them bad news, straight-up: the country's ailing economy would get a lot worse before it got better. Well, last week lived up to Koizumi's predictions, in spades. The benchmark stock market index sank to its lowest level in 17 years, new numbers showed that industrial output and retail sales are slowing more dramatically than expected and, in the unkindest cut of all, credit rating agency Moody's said it might downgrade Japanese government bonds to the same level as Slovenia's. Slovenia's!

It was a reality-check week for the Prime Minister, and for the people who believe he is the man who can pull the country out of its economic doldrums. The unremitting bad news rattled Koizumi into tracking back, ever so slightly, from his promises of speedy, painful reform. That pledge he made in July to limit government borrowing this year to $8.25 billion? Now he says that's just a target, not written in stone. Those big-spending supplementary budgets he derided in his stump speeches? Koizumi now thinks one will be necessary this year, after all. The three-year deadline for cleaning up banks' bad loans? Hmm, that might actually take longer. This doesn't add up to a major policy retreat, but Koizumi's waffling amid looming economic catastrophe raises some critical questions: Is he up to the task? And what does Koizumi really want for Japan? The fact is, no one really knows. Since becoming Prime Minister, Koizumi has carefully avoided the microscope even as he has basked in the spotlight.

Most people seem to like the Koizumi they see. What's not to like about this touchy-feely New Age leader who is the antithesis of the stiff old pols who preceded him? Economists at home and abroad laud the clear-eyed reformer who recognizes that the system stinksand says he will take a sledgehammer to it. Fellow world leaders wish they had his approval ratings, which stand at about 70%. "Whatever you're doing," George W. Bush told Koizumi during his July visit to Camp David, "I envy those numbers." The Japanese can't get enough of him. Youngsters, particularly female ones, rave about his hip, wavy hairstyle. A record label released a CD of his favorite Elvis hits, with Koizumi posing next to a life-size statue of "the King" on the cover. (They share the same birthday.) There's a mint-flavored chewing gum named after him. Millions of people tune in to watch him on televised parliamentary debates. His posters outsell those of pop stars and baseball heroes. Last week, a glossy photo book about him hit the stores, with a blurb from Koizumi that says, "Everything you want to know about me is in here."

Not quite. In reality, much of the Koizumi storyand a sizeable chunk of his personahas been carefully airbrushed out of his public profile. Few realize that the effervescent election campaigner is in fact a loner, isolated from all but a tight-knit circle of longtime advisers; or that the New Age reformer is an old-fashioned nationalist at heart, influenced by some of the country's most extreme right-wing politicians; or that the man with the seemingly natural empathy for people is, in his private life, aloof and cold, prone to putting career before family. And only his closest friends realize that this consummate politician deeply despises Japanese politics, for reasons that are as much personal as they are philosophical.

An understanding of the inner Koizumi is crucial: his chances of resuscitating the world's second-largest economy may depend on which aspects of his complicated character govern his decisions and actions.

Know first that Koizumi the maverick is very much a product of the Establishment. His father, Junya, was a member of parliament and Liberal Democratic Party (LDP) stalwart who helped draft Japan's security agreement with the U.S. When he died in 1969, Junichiro was studying in London. He hurried back home and, while sorting through Junya's papers, discovered that his future had been laid out for him. "Certain victory, Junichiro-kun," read a note written in his father's script. In Japan, political inheritance is common: about a third of the seats in parliament are passed from one generation to the next. So Koizumi's election should have been a slam dunk. Instead, he suffered an embarrassing defeat in Yokosuka, his family's parliamentary district. "His political base was fragile, because a lot of new people were moving into the urban areas," says Naoki Tanaka, an economist who now heads a Prime Ministerial advisory panel. "And at first, his speeches were not very good. He was very shy."

After that electoral defeat, Koizumi signed up as an assistant to an LDP heavyweight, Takeo Fukuda. The job involved answering the phone, greeting guests, running errands and even dusting Fukuda's shoes. It was Koizumi's political boot camp. His antiestablishment streak developed under Fukuda, himself a bright, squeaky-clean policy wonk who frequently took on the LDP's most powerful clique, headed by Kakuei Tanaka and filled with politicians with cozy ties to special interest groups like construction bosses, farmers and war veterans. This is the faction most dependent on pork-barrel politics, campaign war chests and the obtaining of government largesse and protectionism in exchange for votes. "Fukuda was insulated from all the pork-barreling, and that had an effect on Koizumi," says Naoki Tanaka. Under Fukuda's tutelage, the future Prime Minister came to understandand loathethe corrosive influence of money in politics. He watched with mounting disgust as LDP bosses doled out jobs, contracts and favors to their friends and supporters. It was no coincidence that the first institution he attacked as a young politician was the post office, which sits on a huge treasure chest of Japanese personal savings and is linked with the kinds of officials his mentor so despised. "When Koizumi says 'reform' he means to destroy that faction," says Katsuyuki Yakushiji, a journalist who has known the Prime Minister for many years. "The fact that reforming might also be good for Japan is secondary."

Under Fukuda, Koizumi also learned the importance of developing a personality. For as clean-cut as Fukuda was, he was unable to connect with the masses and thus lacked the power base from which to do battle with the Old Guard. Koizumi carefully cultivated the image of the Outsider. He avoided the restaurants where politicians lived it up and cut their backroom deals. "Faction bosses would go out with their underlings, drinking and singing," says Takao Toshikawa, a political analyst in Tokyo. "But they would all look around the restaurant, and someone would say, 'Where's Koizumi?' He never went along. They all thought him strange."

Being a maverick and an iconoclast in an ossified political culture helped Koizumi's career. But being a loner can be a huge handicap when you're trying to tear down that cultureand have powerful, entrenched forces fighting you every step of the way. The LDP conservatives, led by the formidable Ryutaro Hashiimoto, want no part of Koizumi's reform agenda and are determined to preserve the business-politics relationships the Prime Minister has sworn to destroy. They are waiting to pounce: at the first sign of vulnerability, they will surely come after Koizumi as they did with previous reform-minded Premiers. "They've been waiting years to dig up some scandal on Koizumi," says his longtime aide, Isao Iijima. "But there is no scandal. So they'll have to come after us on ideas, but you know what? They don't have any."

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