JIN-250 -- Seniors' Choice

J@pan Inc Magazine Presents:

T H E J @ P A N I N C N E W S L E T T E R

Commentary on the Week's Business, Technology and Cultural News

Issue No. 250
Thursday, November 6, 2003

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>> Viewpoint: Seniors' Choice

================** IRIS BAKER REPLIES FROM LONDON **==================
32-year-old Nick Baker now sits in a Japanese prison. He is charged
with smuggling drugs into Japan -- a charge he vehemently denies.
Now his mother is speaking out, collecting signatures and demanding
a fair trial.

[**THIS JUST IN: Baker's mother, Iris, responds to J@pan Inc.
Read her letter here:

Get the entire feature story in the red-hot November issue of J@pan
Inc magazine. Read it here now:

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>> Viewpoint: Seniors' Choice

Sunday's general election will be decided by voters over 50 years old
who tend to prefer quick-fix strategies to more painful long-term reform
programs. Pension reform and consumption tax head the list of priorities
for the elderly electorate -- the generation most likely to cast their
votes in what is expected to be a low turnout.

A frantic weekend of roadside stumping and live TV showdowns thrust the
economic debate to the forefront. Pollsters and pundits agree that a
victory for Junichiro Koizumi's Liberal Democratic Party seems probable,
though the Democratic Party of Japan, bolstered by its recent merger with
the Liberal Party, is expected to make a large dent in the LDP's 109-seat
majority. But with just six days to go, both main parties are lacking
solid details on how their plans to solve the non-performing loan crisis,
curb unemployment and reverse deflation in the world’s second biggest
economy can be made to work.

Even Koizumi, who has made his political mark by promising sweeping
fiscal reform and an end to Japan's long slump, admitted from the back
of a campaign bus on Saturday that nothing too positive is on the immediate
horizon. "The economy will not experience a full-fledged recovery for at
least three years, although some bright signs have emerged belatedly,"
he said.

The Prime Minister's comments come as investors around the world have driven
Tokyo stocks sharply higher in recent weeks in expectation that Japan's
economy will recover soon -- but amid increasingly noisy criticism of
Koizumi's inability to put his reforms into practice.

Some economists share Koizumi's caution. Jeffrey Young, an economist at
Nikko Citigroup, notes: "At this stage it is difficult to expect a radical
shift in policy that would prompt a marked upgrading of long-term economic
growth prospects. Neither major party has placed a strong emphasis on
deregulation and the need for new business formation."

But the financial debate on the campaign trail -- specifically the debate
over the future of Japan’s postal service -- has provided a series of
unpleasant reminders of how much money is wasted by the country's state
corporations and of successive governments' failure to address the problem.

Japan Post, the recipient of many years' worth of bubble-era savings, is
the world's biggest bank and one of the world's biggest life insurers.
About 90 percent of the savings and insurance premiums are channelled
into state entities such as road-building corporations that are insolvent
or very nearly so. Election rhetoric has revealed that that channelling --
known as Japan’s "second budget" -- into politically motivated construction
projects and loss-making urban development schemes has cost nearly 36
trillion yen.

Both parties have produced Western-style manifestos, though neither
document offers much in the way of clear initiatives. There are also
plenty of areas where the two parties apparently agree. Insiders
at the Ministry of Finance, for example, have been told that government
intervention to weaken the yen against the dollar is likely to continue
regardless of Sunday's results.

The LDP, backing its promise of 2 percent nominal GDP growth in fiscal
2006, lays out its plans to halve the still-crippling bad debt problem
by the end of next year and administer a general reform of the pension
system. The DPJ outlines plans to “reconsider the use of taxpayer money
and switch to policies that will revitalize the economy and generate
new jobs."

Leaders from both parties have used numerous TV appearances to fill in the
gaps left by their vague manifestos. The sensitive issue of the consumption
tax provided the most recent opportunity. The suggestion of an increase
in the tax from 5 percent to 7 percent evokes horror among those who
believe that continued domestic consumption is the mainstay of Japan's
recovery. Others believe the tax is the only way to raise the funds
needed to solve the massive budget deficit problem.

On Sunday morning Koizumi declared on national TV that there would be no
rise in the tax under his leadership. At nearly the same time,
DPJ leader Naoto Kan indicated that it would be increased soon after
he was elected. At least voters have a choice.

-- The Editors


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SUBSCRIBERS: 9,911 as of November 6, 2003

Written and edited by Roland Kelts and
Leo Lewis (editors@japaninc.com)


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