A yen for change

Prime Minister Koizumi8217;s impressive victory in the Japanese elections is something of a watershed in the history of economic reforms. The election was a virtual referendum on postal reform. The privatisation of Japan8217;s sacrosanct postal system is expected to unleash billions of dollars of savings and insurance premiums into the market and help Japan overcome economic stagnation. A revival in the Japanese economy will have far-reaching effects across Asia.

But the victory is remarkable for a number of reasons. First, it demonstrates that politicians often underestimate the capacity for people to change and respond to reasoned arguments. Even so much as tinkering with the postal system was considered politically suicidal in Japan. Yet Junichiro Koizumi managed to convince the electorate for the need to reform and they responded. Second, in the trajectory of economic reforms, there is a time when leaders need to take some bold political decisions. Reform by stealth, in slow incremental steps has its limits. It takes an extraordinary act of leadership to bring out some fundamental changes that are necessary for the health of the economy. Koizumi has shown both that he is such a leader, and that the public will reward such leaders. Third, leadership also requires fighting entrenched interests with your own party. At one level, this victory continues the Liberal Democratic Party8217;s lock over political power in Japan. But that surface continuity is deceptive. Koizumi used the expulsion of rebels and entrenched interests in the LDP to give it a more forward looking image. No economic or political reform is possible without changes within political parties. It is to Koizumi8217;s credit that he recognised this. And, finally, his campaign was a tribute to the importance of strategy. His use of candidates known as 8220;assassins8221; was out of the box thinking that made a difference.

This victory should galvanise reformers around the world. If leaders trust the intelligence of their voters, are prepared to take bold gambles, and reform their own political parties, economic reform will have a more secure future.