Koizumi triumphs

Japan's "rock star" Prime Minister has gambled and won again. He returns to power with enough seats in the Diet (lower house) to override the upper house, which had blocked his privatisation of Japan Post. His prestige within his party - from within which much of the opposition had come - is inevitably enhanced. He personally recruited high profile "assassins" to eliminate LDP rebels and 20 of the 25 running in single member constituencies were elected.

While many of the rebels survived, either by jumping ship to one of two breakaway parties or by being elected in multi-member constituencies, Koizumi's stature is nonetheless enhanced. Previously, members who defected to other parties were counted within the LDP's 249 members and are now outside the enhanced total of 296.

The privatisation of Japan Post - the country's largest savings bank as well as the postal monopoly - is now likely to proceed. As in many other countries, nationalisation has proved a source of patronage and corruption, as well as being a cause of huge overstaffing and a brake on innovation and customer service. The privatisation of other retail financial institutions will follow, leading to more fluid financial markets and a reduction in Japan's huge state debt.

Koizumi has already curbed state spending but the level of debt has kept taxes higher than they need to be - though still low by western standards. The next few years could see major tax cuts, and a consequent boost of the anaemic 2% growth rate.

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