Prime Minister Koizumi: Divide and Conquer

The Industrial Revitalization Corporation of Japan (IRCJ) was inaugurated in May of this year with much hope that it would be a major catalyst for revitalizes Japanese companies. After a long delay, the IRCJ On September 1, the CRI selected four companies as their first corporate restructuring candidates. These companies included Daia Construction Co., Kyushu Sangyo Koutsu Group, Usui Department Store Group and Mitsui Mine Group–not exactly impressive in terms of having a big impact on outstanding NPLs and revitalizing "key" industries.


TT's concern all along was the potential for the IRCJ to be used as a political football. For example, why save Mitsui Mining? What is "strategic" about this company? Well, for one, it is a key supplier to Aso Cement, which is run by Taro Aso's brother, evidently. Taro Aso is chairman of the LDP Policy Research and Coordination Council, and recently "suddenly" switched his support for PM Koizumi.


Mikio Aoki, a key member of the LDP's Hashimoto faction, has in the past strongly criticized Mr. Takenaka's handling of the banks. But a memo recently circulated gives indications of how Mr. Koizumi will put together his new cabinet, as he is already assured of winning the upcoming LDP presidential elections. This memo has the Economic and Financial Policy Minister's post going to Naoki Tanaka, i.e., Heizo Takenaka, currently Minister for economic and fiscal policy as well as financial services, could well have his job downsized, with Mr. Takenaka maintaining his post as Financial Services Minister.


To TT this smells of politial deal-making--i.e., PM Koizumi has apparently adroitly divided and conquered the waning Hashimoto faction of the LDP. Kakuei Tanaka first polished factional politics in the LDP into a fine art, with a few "kuromaku" (behind the black veil, a reference to the puppet masters in Bunraku), basically manipulating the strings of government and effectively acting as kingmakers. Mr. Koizumi successfully challenged this system when he first became PM, and seems to have made noticeable progress in his promise to "break down the LDP", at lest in terms of the factional system that has kept Kakuei Tanaka's old faction in power for so long. By striking deals with Taro Aso and Mikio Aoki for their support, he has divided and conquered the Hashimoto faction of the LDP--and this may be the real reason why a frustrated Nonaka decided to retire.