Investor sentiment
It seemed to be good news when economics minister Heizo Takenaka was appointed as head of the Financial Services Agency on September 30th. He promised to present broad measures to restructure bad loans and force the banks to behave in a more rational manner on October 22nd.
But Mr Takenaka is surrounded by enemies, according to the l
atest edition of The Economist he faces resistance from all sides: his political party the ruling LDP, his coalition partners, opposition parties, people inside the Financial Services Agency, the Ministry of Finance, and even some parts of the prime minister's office.
Thus, only three weeks after taking on the task of overseeing the banks, Mr Takenaka looks set to fail. His proposals were derailed by LDP opponents on October 22nd, and investors now fear they will be watered down in political compromises. Once again the Japanese government seems incapable of solving the bad loan problems.
And as long as the lack of economic reforms continues, statistics showing a slow economic recovery in Japan will not be enough to encourage the stockmarket. In over a year as prime minister Junichiro Koizumi has not met the promises for reform he made when he was elected. Adding to the gloom is the risk of an American attack on Iraq which would probably disrupt Japan's oil supply.
Outlook
A substantial piece of good news is needed to revive the Japanese stockmarket. But the political deadlock and the weakness of the financial system seem insurmountable so the probability that Mr Koizumi will at last deliver his promised reforms looks small.
