LONDON -- The results of the Japanese general election on Sept. 11 will be important not only for the future of Japanese parliamentary democracy but also for the Japanese economy and Japan's foreign relations.
Prime Minister Junichiro Koizumi called the election earlier this month after the Upper House rejected his proposals to privatize postal services. To the uninitiated outside Japan, this seemed like an odd reason to call an election. But Japanese postal services, due especially to the privileged position of the postal savings accounts and life insurance policies, have competed unfairly with Japanese banks and insurance companies by providing government-guaranteed deposits and insurance services.
More importantly, the postal deposit system has resulted in the buildup of a huge government-controlled fund that has been used to finance public works projects of dubious long-term economic value. The main beneficiaries have often been construction companies that bid for the projects under the potentially corrupt dango (collusion) system. Reform of a system that has long distorted the Japanese economy is overdue.