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1. Macroeconomic Policy
Both fiscal and monetary policies have been expansionary. Japan can afford to run government deficits in trillions of yen as Japan still has total net savings of 3 percent of the nominal GDP. The short-term discount rate has been zero for some years. These policies are dominated by the bureaucracy (finance) and do not carry Koizumi's signature.
In fact, Japanese economy is gaining strength not because of the policies but the unexpected, sustained rise in consumption despite the declining wages during the past few years, as well as external factors.
2. Signature Policies
His signature economic policy has been privatization, with mixed results. Despite the hype about "privatization" of highways, the government will (naturally) continue to finance highway projects.
Postal service privatization is, as I wrote earlier, more a product of his personal enmity towards the former Ministry of Posts and politicians around them. Nevertheless, the majority feels comfortable about the talk of "reform forward" despite the fact that its specifics have never been defined, and this leads me to suspect the "reform" is being increasingly interpreted as "new beginning" of assertiveness particularly in its foreign policy.
3. Foreign Policy/Positioning
There is a strong tradition of the "America can't do no anything wrong" mentality in the leading elite and mass media. It is not surprising that they ended up being Bush apologists after 9/11.
Koizumi's decision to send troops to Iraq, however misguided, sent a new spark among the Japanese who, with the "new beginning" mentality, saw in this a new Japanese politico-military initiative. This awakening led then to an outraged reaction to China's anti-Japan demonstration and remains a dormant, but powerful force which unites the conservatives. Of course, Koizumi is aware of this and is exploiting it to maintain and exert his personal power.
4. Where Are Liberals?
Still it is premature to conclude Japan is set on reverting to militaristic adventurism, although there are signs. The majority, for example, are opposed to Koizumi's visit to the Yasukuni shrine and demand withdrawal from Iraq, according to a recent poll.
The problem is, these views do not have a core political movement around which they can unite. This leads to a disparate election victory like the one we saw today, and a vocal minority maneuver to adopt "patriotic" school history books. Needless to say, the conservative media have learned a great deal from CNN and FoxNews.
In a larger contest, the election is very local. Issues are local and the electorate mentality is local. With the full local flavor, Japan is venturing once again into the open sea.
I will become a patissier, God willing.
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