"Then, there's the 'Koizumi revolution.' Right now, he's enjoying a honeymoon period. Investors stressed that Japan must have political and eocnomic reform, even if it causes the pain Koizumi's plan advertises. The old ways haven't helped the economy in 10 years, so hope is that Koizumi's plan will. However, will Koizumi remain popular once the reforms are put in place, ie, cutting government spending, writing off bad loans, and unemployment moving up to, say 6%? Probably not, many said. But until jobs are lost and pain is reality, Koizumi's popularity is expected to stay high. What then? No answers.
Some view Koizumi as a Japanese Thatcher or Reagan, pointing out that during the early Thatcher and Reagan years, there was plenty of pain, ie, severe recessions. But the parallel doesn't really exist in our view. Neither Thatcher nor Reagan advertised pain, and both cut taxes and interest rates declined sharply. For now, Koizumi's plan doesn't have any stimulus. Our fear is Koizumi's reform are Hooverish, not Reaganesque, putting Japan at risk of a severe recession that has no safety net."