Wheels grind slowly for Japan reforms


Koizumi has been pushing reforms for Japan's state companies, but the fine print has yet to be written

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan -- The gears ground forward, but slowly, on Japan's much-vaunted reforms on Tuesday.

Prime Minister Junichiro Koizumi's government approved plans to scrap 17 of Japan's state-owned corporations and privatize another 45 of them.

The plan will get a rubber stamp from an extraordinary cabinet session on Wednesday, and the Koizumi administration wants to present it to parliament in the January session.

In a compromise reached this week, the government put off making a decision on what to do with eight state corporations until early next year.

The Council on Economic and Fiscal Policy will address what to do with those eight mainly finance-oriented companies, including the Development Bank of Japan, the Japan Bank for International Cooperation and the National Life Finance Corp.

Some officials are worried that many small- and mid-size companies rely on those institutions and could be left stranded if they are scrapped.

A tough push ahead

Koizumi has advocated big changes for at least 70 of Japan's 77 main state companies.

But there are many more. Those dealt with in Tuesday's plan account for only 38 percent of a total tally of 163 state-backed companies. Critics say many perform functions the private sector could easily handle.

Koizumi said last week he would push ahead with reforms, despite Japan hitting recession and a quarterly central bank survey that showed business confidence is low.

But the prime minister is likely to meet stiff resistance from within his own party and from the ministries that control the state companies. The companies are often viewed as a source of well-paid retirement jobs for lifetime bureaucrats, a reward for a lifetime of public service.

The construction projects many of them fund also benefit the rural areas that form an important base for Koizumi's ruling Liberal Democratic Party.

So far, Koizumi has counted on his high level of public support to ram through moves that are unpopular with the conservative parts of the LDP.

Building on November plan

In late November, the panels that Koizumi has charged with tackling state-company reform cleared a plan to reform seven of the companies, privatizing the vast Japan Public Highway Corp., after merging it with three other road companies, and scrapping the Housing Loan Corp. the Urban Development Corp. and the National Oil Corp.

The plan approved Tuesday still calls for further debate on how to handle those four highway companies, particularly how exactly the privatization would happen.

It also calls for a review of 2,400 kilometers of road construction that they have already approved.

Tuesday's plan also says the government will make a final decision by the end of 2002 on whether to privatize three airport companies - the New Tokyo International Airport Authority, Kansai International Airport Co. and Central Japan International Airport Co.

The plan passed Tuesday also left five state companies in their current form, including the central Bank of Japan and Japan's national television network, NHK.