Japan PM hints at snap election if reform blocked

Koizumi is at a crossroads, hoping to push painful reforms just as Japan falters

TOKYO, Japan -- Japan's prime minister has hinted he will call a snap election if opponents in his ruling camp block crucial reforms of the nation's ailing economy.

Junichiro Koizumi, who became leader of the Liberal Democratic Party (LDP) on the back of his economic promises in April, said on Sunday he wants at least three years in office to achieve his reform agenda, but might call a snap general election if he is opposed.

Koizumi's comments are a clear signal he is raising the political stakes in a battle to rescue the world's second largest economy, which has been unable to break out of a decade-long economic slowdown.

In the past few weeks, Japan has been buffeted by a string of bad news that hint the country is heading into a full-blown recession, including skidding business confidence, a sinking yen, burdened banks and the highest unemployment since World War II.

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But the prime minister has promised he will not allow Japan's economic malaise to infect other key powers around the world.

The world's largest economy in particular has a vested interest in seeing Japan return to prosperity because of the large bilateral trade between the two nations, and Japan being the largest investor in U.S. government treasuries.

People's opinion

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

In a live interview with Fuji Television, Koizumi said he expected the LDP to continue supporting him, but if they did not "I will make a decision as prime minister and seek the people's opinion."

No election for the powerful Lower House need be held until 2004.

The popular Koizumi added he hoped he would keep the people's support over his tenure, even as he tries to push through long-needed reforms no matter how painful they are in the short-term.

So far, Japan's mass of voters have been drawn to the maverick and charismatic leader who has made an unswerving promise to open the country's political system and reform its moribund economy amid a global downturn.

So far it has worked, with a new poll showing the Japan public throwing their weight behind his LDP.

Some 42 percent of all respondents to a survey last month by the Asahi Shimbun newspaper said they would back the LDP in July. That was up by five percent from May. The survey also showed about 30 percent of unaffiliated voters -- the largest force in a general election for parliament's powerful Lower House June last year -- had switched to the LDP.

Fragile economy

But Koizumi needs the LDP to perform well in an Upper House poll in July, campaigning for which begins on Thursday, to survive a party presidential race in September.

He is perhaps all too aware that an overwhelming victory by the party might not be in the interests of reform, with some members from within his party likely to gut his proposals. Koizumi has sought to counter critics who fear his painful but vital reforms might risk sending an already fragile economy into a deflationary spiral.

Asked about that scenario, he shot back: "If we don't carry out structural reforms, things will be even worse.

But he is facing an uphill battle. Tokyo's bellwether Nikkei share average is down 15 percent from its year-to-date high marked on May 7.

Last week alone it dropped 5.1 percent to 12,306.08, slipping below the key 12,500 level for the first time since March 21.

Reuters contributed to this report.