Koizumi to seek Bush's support for reform plans

Koizumi says he will push through with his reform plans regardless of the short-term pain they might cause

By staff and wire reports

TOKYO, Japan -- Japan's Prime Minister Junichiro Koizumi leaves for the United States on Friday on a mission to gain support for a raft of proposals to revive Japan's flailing economy.

Amid concerns for a sinking yen, a crisis in the nation's financial system and depressed consumer confidence, Koizumi and U.S. President George W. Bush are expected to discuss how to bring sustainable growth to the second largest economy in the world.

Analysts expect Bush to give his support to Koizumi's plan to reform Japan's banking system, which is weighed under a mountain of non-performing loans.

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"One key issue will be whether Bush supports Koizumi's reform plans outright, which will by necessity involve some short-term economic pain, or whether he pushes for a simple return to growth," says Sydney-based Macquarie Bank chief economist Richard Gibbs.

The Kyodo news agency said a joint statement to be issued after the Camp David summit would call for a swift solution to the bad-loan woes, saying this was "essential to the revival of the Japanese economy."

Reforms or bust

On the eve of his first visit to the United States as Japan's leader, Koizumi told The Asian Wall Street Journal he would push through the long-needed reforms no matter how painful they were in the short-term.

There are also interests that oppose his plans from within his ruling Liberal Democratic Party (LDP).

"The LDP will have to follow my lead whether they like it or not," the newspaper quoted him as saying.

"My job is to carry out reforms that were taboo, that weren't possible before. If the public gives me support of more than 50 percent, I can do it," he was quoted as saying.

The prime minister also promised he would not allow Japan's economic malaise to infect other key powers around the world.

"Even if there were a panic, we wouldn't let Japan cause a (worldwide) financial meltdown," the AWSJ quoted him as saying. "There is no worry about that. We have extraordinary measures for extraordinary times like that."

The U.S. has a vested interest in seeing Japan returned to prosperity smoothly because of the large bilateral trade between the two nations, and because Japan is the largest investor in U.S. government treasuries.

Trade issues

Elsewhere, trade with China and the thorny issue of Taiwan will also be on the agenda for discussion, Gibbs says, as China moves to enter the World Trade Organisation.

Japan's markets have been sunk by falling consumer confidence and profit downgrades

The move has progressed without interference from a diplomatic rift emerging Beijing and Washington, which has been widened by the sale of military hardware by the U.S. to Taiwan, which China sees as a renegade state.

Koizumi has maintained an immense popularity at a grassroots level of Japanese politics thanks to an unswerving promise to open its political system and reform its moribund economy.

He swept to power in April on a groundswell of street-level support and a desire among Japan's public for change in his long-ruling LDP, which for decades was dominated by a handful of powerbrokers and close-door deal making.

Although Koizumi has said he would not use public funds to bail the nation's banks out of their bad loan problem, there is concern he will not be able to raise some 12 trillion yen ($96.10 billion) set as a target over the next two years.

"Time will tell," he told the AWSJ. "You can't tell in just two months. Not two to three months, two to three years."

Meanwhile, Koizumi's trip to the U.S. comes as Japanese Finance Minister Masajuro Shiokawa expresses concern over the recent fall in the yen, saying he does not want any rapid currency movements.

Fears of falling yen

A weaker yen helps Japan's exporters by boosting the value of overseas sales, which would help inject life into Japan's export-driven economy.

But currency authorities say they would prefer not to use a weaker yen to stimulate the economy.

"A rapid weakening in the yen is troublesome. I want currencies to move in a stable manner," Shiokawa told a news conference.

Following his comments, the yen strengthened to be worth 124 against the U.S. dollar, climbing from close to 125 yen overnight.

The Associated Press & Reuters contributed to this report.