Koizumi commits to reforms

Koizumi is faced with the arduous task of reviving Japan's ailing economy while trying to save his sinking popularity

TOKYO, Japan (CNN) -- Prime Minister Junichiro Koizumi has reiterated his resolve to press on with his vital but painful structural reforms, even after admitting that the path to Japan's economic revival remains narrow.

"I will revitalize Japanese economy. My immediate priority is effective measures against the deflation and disposal of non-performing loans. Reform is underway. I repeat my commitment towards the structural reform is firmer than ever," Koizumi said.

Koizumi was speaking to foreign journalists at his official residence on Friday where he outlined the key points he will discuss with U.S. President George W. Bush when the American leader arrives in Tokyo on Sunday.

Bush will embark on a three-day visit as part of a tour that will also take him to South Korea and China.

Koizumi's capability to revitalize Japan's economy has recently been placed in doubt due to persistent concerns over bad Japanese bank loans and rising deflation.

Japan has come under fire for orchestrating a fall in the value of the yen so it can export its way out of trouble rather than pushing through with economic reforms.

The sudden drop in his popularity following his sacking of controversial but popular Foreign Minister Makiko Tanaka has also put a dent on Koizumi's image.

"Now the path that we can tread in terms of fiscal and monetary policy is very narrow. But we will keep a careful watch on the current economic situation and we will take decisive steps, if necessary, to prevent financial unrest and halt the deflationary spiral," Koizumi said.

Painful program

VIDEO Seijiro Takeshita from Mizuho International says the unpopularity of Junichiro Koizumi has taken its toll on the Tokyo Nikkei. Play video (QuickTime, Real or Windows Media)    CNN.com Asia More news from our Asia edition

Koizumi shrugged off the impression that his approval rating would affect his determination, but appealed for people to put up with his painful programs.

"My structural reforms are achieving steady progress...The decline in the approval ratings will not affect my structural reforms," he said.

A poll conducted this week by the Nihon Keizai Shimbun daily showed about 60 percent of voters now believe that Koizumi cannot fulfill his mandate. Only 33 percent think he can.

But Koizumi voiced hopes that his reforms would bear fruit within a year or two, pulling the economy out of its prolonged depression.

"I believe temporary low growth is something we have to put up with in the interests of structural reforms," he said.

Balancing ties

Aside from pledging to forge ahead with his reforms, Koizumi is also expected to reiterate his support for the U.S. in its fight against terror.

But while stressing that Japan is a key U.S. ally, Koizumi appeared to be trying to balance his ties with the U.S. and North Korea.

"President Bush is taking a tough stance towards North Korea. But I don't think he has shut the door for dialogue with North Korea," he said.

U.S. President George W. Bush has recently lashed out at North Korea, along with Iran and Iraq, accusing them of constructing an "axis of evil."

"His expression of an 'axis of evil' only shows his strong resolve to fight against terrorism," Koizumi added.