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Japan faced continued economic malaise after Prime Minister Junichiro Koizumi's efforts to tackle the mountain of bad bank loans that have helped push the world's second-largest economy into recession three times since 1990 were rebuffed by old-guard factions within his own ruling party. Koizumi argued that painful reforms are needed to nurse the economy back to health, but his plans threatened industries that are key ruling-party backers. They also could push up unemployment, already at postwar highs.
Following its defeat in World War II, Japan adopted a U.S.-drafted constitution in 1947 that provided for a parliamentary government, renounced war, and ended the emperor's divine status. Postwar Japanese politics have been dominated by the Liberal Democratic Party (LDP), created in 1955 through a merger of two conservative parties. During the Cold War, the LDP presided over the economy's spectacular growth while fostering close security ties with the United States. Successive governments spent massively on public works projects to benefit the LDP's rural stronghold as well as its corporate backers, who funneled both legal and illegal contributions back to the party. Bureaucrats, meanwhile, imposed costly regulations to protect small businesses, which overwhelmingly supported the LDP.
The LDP's only spell in opposition since its inception came after it lost the 1993 lower house elections. The party's drubbing followed a string of corruption scandals in the late 1980s that brought down Prime Minister Noburu Takeshita and other top LDP politicians. After a fractious reformist government collapsed, the LDP returned to power in 1994 as the head of a three-party coalition.
Successive LDP-led governments in the latter half of the 1990s did little to arrest mounting economic problems stemming from the collapse of Japanese stock market and real estate prices earlier in the decade. The crash left Japanese banks saddled with tens of billions of dollars worth of problem loans and diminished the value of property and other collateral backing the loans.
As the banks' problem loans dragged down the economy by choking off lending and eroding consumer confidence, the government pumped around $1 trillion into the economy in the 1990s. The stimulus packages largely failed to jump-start the economy but helped jack up Japan's huge public debt, now approaching 140 percent of economic output, the highest among rich countries.
Despite the economy's continuing woes and the deep unpopularity of then Prime Minister Yoshiro Mori, the LDP won the most seats in the most recent lower house elections, in June 2000. It formed a coalition government with the New Komeito and New Conservative parties. With 233 seats in the 480-seat house, the LDP easily defeated the main opposition Democratic Party, which took 127 seats behind calls to curb public spending and scale back governmental regulation. Turnout was 62.4 percent.
Koizumi, 60, took office in April 2001 following the resignation of the gaffe-prone Mori. The LDP's conservative factions have opposed Koizumi's reforms because they would cut the public spending and red tape that benefit the party's core constituency of farmers, small businesses, and the construction industry. Construction alone accounts for 10 percent of all jobs in Japan.
Economists, meanwhile, have warned that Koizumi's reforms, if actually carried out, could make matters worse before there is any improvement. They said that cutting government spending and forcing banks to get rid of bad loans could accelerate Japan's vicious economic cycle.
This cycle has seen deflation make banks less willing to lend, healthy firms reluctant to borrow and invest, and consumers tight-fisted with their yen. Weak consumer spending erodes corporate profits, which makes it harder for firms to pay off bank loans. Firms respond to weak demand by slashing prices and cutting jobs, while banks curb lending further in response to deadbeat borrowers. Deflation also raises real interest rates, making healthy firms reluctant to take out fresh loans.
Meanwhile, the prospect of even lower prices in the future and the specter of lost jobs make ordinary Japanese even less willing to part with their yen in an economy in which their spending makes up around 60 percent of output. Consumers have also cut spending over fears that they will have to rely on their own retirement savings should the government's swelling public debt and Japan's greying population overwhelm the state pension system. Firms respond to weak demand with more job and price cuts, and the deflationary spiral continues.
LDP conservatives in October blocked plans by chief banking regulator Heizo Takenaka to make banks hold more capital and set aside more money for bad loans. They argued that the moves could cause bankruptcies among banks and tottering borrowers, leading to a credit crunch and heavy job losses at a time when unemployment had already returned to a record high of 5.5 percent. Koizumi has argued that precisely this type of painful reform is needed to stop banks from keeping ailing firms on life support while choking off lending to healthy ones. Analysts say that the current size of the banks' bad loans could be two to four times the official figure of 52 trillion yen (US$426 billion).
Conservatives also watered down Koizumi's efforts to privatize the $2 trillion postal savings system, which he says invests the money inefficiently. The economy grew at a 3.2 percent annual rate in the third quarter compared with the previous quarter. However, the Paris-based Organization for Economic Cooperation and Development predicted late in the year that economic growth would be virtually flat until after the end of 2004.
Signaling disillusionment with mainstream politics, voters elected or nearly elected independents or Communist party members as mayors or governors in several local races early in the year. Koizumi's own political stock rose, however, after he won an admission by North Korea, during a trip to Pyongyang in September, that it had kidnapped 13 Japanese citizens more than two decades ago.
Japanese can change their government through elections and enjoy most basic rights. The lower house of parliament has 300 seats that represent single-member districts and 180 seats chosen by proportional representation balloting. The upper house has 152 single-member seats and 100 chosen by proportional representation. Despite recent reforms aimed at curbing the power of the bureaucracy, policy generally is still shaped by senior civil servants rather than elected politicians. The bureaucracy has recently been hit by numerous scandals and operates with little transparency.
Japan's judiciary is independent. Human rights groups say, however, that the criminal process is flawed because defendants often have little access to counsel before their trials. The criminal procedure code allows police and prosecutors to restrict a suspect's access to counsel during investigation and bars attorneys from being present during interrogations, even after indictment. Moreover, rights groups, bar associations, and some prisoners allege that police at times use force to extract confessions from suspects.
Foreign and domestic human rights groups have criticized Japanese prisons for subjecting inmates to severe regimentation that at times includes barring them from talking to each other or even making eye contact. Punishments include forcing inmates to sit motionless for hours at a time, preventing them from washing or exercising, and restraining them with leather handcuffs, the human rights group Amnesty International said in a November statement, which called on the government to set up an independent body to oversee prisons.
Amnesty has also criticized the secrecy surrounding death row and executions in Japan. Officials often notify condemned inmates less than two hours before they are to be executed and do not inform family members until after the execution takes place.
Japan's press is independent, though not always outspoken. The European Union has formally complained about the exclusive access to news sources that major media outlets often enjoy as members of Japan's 800 or more private press clubs. As club members, these media receive information from government ministries, political parties, and private firms that is often unavailable to reporters from foreign or small publications, who are shut out of many clubs. Journalists who belong to the clubs generally do not report aggressively on the conditions of ailing banks or companies and other sensitive financial issues.
Japanese women are frequently tracked by their companies into clerical careers and discriminated against in wages and other areas, according to the U.S. State Department's global human rights report for 2001, released in March 2002. In addition, sexual harassment on the job is widespread, according to recent reports by government agencies and the Japanese Trade Union Confederation. The law bans both sexual discrimination and harassment in the workplace, but authorizes only light sanctions for corporate violators. Moreover, one in three Japanese women experiences some form of physical abuse at home, a 1998 survey by the prime minister's office found. Women also frequently complain of being groped or otherwise molested on crowded trains. Meanwhile, a relatively small number of women and girls are trafficked into Japan each year for sexual exploitation and forced labor, the U.S. State Department report said. Concern is also growing in society over teenage girls who work as prostitutes or date older men for money and over student-on-student violence and bullying in schools.
Japanese of all faiths worship freely. Buddhism and Shintoism have the most followers. In the wake of the 1995 terrorist attacks in the Tokyo subway by the Aum Shinrikyo cult, parliament amended the Religious Corporation Law to give the government greater oversight over the operations and financial affairs of most religious groups. The law applies only to religious groups that register voluntarily as "religious corporations," but most do register in order to receive tax benefits and other advantages.
Japan's three million Burakumin, who are descendants of feudal-era outcasts, and its tiny, indigenous Ainu minority face unofficial discrimination in housing and employment and social ostracism, the U.S. State Department report said. The government funds programs aimed at promoting Ainu culture and boosting the economic status of Burakumin.
Meanwhile, Japan's 636,000 ethnic Koreans, most of whom were born in Japan, face "deeply entrenched societal discrimination," according to the U.S. State Department report. Koreans and other ethnic minorities born in Japan are considered legal foreign residents but are not automatically Japanese citizens at birth. Instead, those seeking citizenship must apply for naturalization and submit to extensive background checks. Separately, thousands of foreign nationals, many of them asylum seekers or holders of valid visas, are detained each year under harsh conditions in privately run facilities before being deported, Amnesty International said in its May report.
Japanese trade unions are independent and active. The International Labor Organization has criticized laws that prevent soldiers, police, and firefighters from joining unions or staging strikes. Civil servants also cannot strike, and face restrictions on bargaining collectively. Around 22 percent of Japanese workers belong to trade unions. Nongovernmental groups accuse employers of exploiting or discriminating against foreign workers, who often cannot speak Japanese and are unaware of their rights.
China, South Korea, and other regional countries frequently protest passages in Japanese history textbooks that try to justify the country's occupation of other Asian nations before and during World War II and downplay the imperial army's wartime atrocities in occupied lands. These abuses included forcibly using tens of thousands of women as sex slaves. The education ministry, moreover, often censors textbook passages that it considers too critical of Japan's wartime record.