TIMOR LOROSAE – INTERNAL AFFAIRS

Former E. Timor governor to start jail term Friday over 1999 atrocities
A former East Timor governor who was convicted of human rights abuses during the territory's bloody 1999 breakaway from Indonesia will begin serving a three-year sentence later this week, his lawyer said Wednesday.
Prosecutors were expected to take Abilio Soares to a special prison cell at Jakarta's Cipinang prison on Friday, said lawyer Otto Cornelis Kaligis.
Soares, an ethnic Timorese appointed by Jakarta, will be the first to go to prison out of six people who were ordered jailed by an Indonesian human rights court last year.
Three army officers, a former Dili police chief and a militia leader remain free pending appeals. The Supreme Court recently rejected Soares' appeal.
The rights court acquitted 11 security force members and one civilian over the Indonesian army-backed militia violence against independence supporters which cost at least 1,400 lives.
Soares has complained he is a scapegoat.
"Prosecutors told the human rights court on Monday about their plan to put him to jail. Abilio then said 'Why don't you shoot me to death instead?'" Kaligis said, quoting his client Soares.
Kaligis said Soares believed he had been made a scapegoat for the military and police since "not a single prosecuted police officer is serving a jail term" for the 1999 attacks. (*)
Source; AFP, July 04

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AFGANISTAN – POLITICAL AFFAIRS

Majority of Afghans back president Karzai and his government, poll shows
About two-thirds of Afghans think that Hamid Karzai, the president, is doing a good job and more than half approve of his government, a public opinion poll showed yesterday,Victoria Burnett reports from Islamabad. Mr Karzai enjoys most support among the predominantly ethnic Pashtun population in eastern Afghanistan, where 92 per cent of people approved of his performance. But the president's approval rating dropped to 20 per cent in the north-west and 35 per cent among southern Pashtuns. The results of the survey of 804 people, sponsored by the Asia Foundation and conducted in the spring, came days after the Afghan electoral commission announced presidential elections on October 9. Eight out of 10 Afghans surveyed said they wanted to vote in elections, but 87 per cent said women would need their husband's permission and 18 per cent of men said they would not allow their wives to vote. Security was what most worried 40 per cent of the people polled, followed by the economy, which 29 per cent of interviewees said topped their list of concerns.
Source; FT, July 04
Write; by Victoria Burnett
Picture; Mr Karzai: still battling ethnic infighting and funding woes

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CAMBODIA – INTERNAL AFFAIRS

King reappoints Cambodian PM
Cambodia's King Norodom Sihanouk has officially reappointed Hun Sen as the country's prime minister.

Correspondents say this is an important step forward in ending the long-running crisis which has left Cambodia without a proper government for nearly a year.
Hun Sen's Cambodian People's Party (CPP) won last year's general election, but without enough seats to rule alone.

After long months of negotiations, the CPP finally struck a deal with the royalist Funcinpec party last month.

The widely-revered king is in self-imposed exile in North Korea, after being sidelined throughout the 11-month political deadlock.
He had earlier refused to sign the bill to allow Hun Sen's reappointment, and analysts say his change of heart could be a sign that he is willing to support the political process again.
"(I) appoint Hun Sen as the Prime Minister of the royal government of Cambodia," the king wrote in a document signed on Wednesday.

"The Prime Minister has the duty to propose forming of government and seek the approval from the National Assembly."

The appointment gives Hun Sen his third elected term. He has already been prime minister for almost 20 years, making him one of the world's longest serving leaders.
The move should also clear the way for a new government to be formed.

Stalled schedule
The lengthy political wrangling has already prevented Cambodia from taking some important actions, including preparation to join the World Trade Organization and concluding plans for a genocide trial to try former Khmer Rouge leaders.

But despite Wednesday's announcement, the political skirmishes seem far from over.
On Tuesday Cambodia's acting head of state, Chea Sim - who is also head of the CPP - left the country for what was officially termed "health reasons".
But he is thought to have refused to sign the bill to endorse Hun Sen as prime minister, and opposition groups say that troops and police had surrounded Chea Sim's house to force him to leave.
Source; BBC News, July 04
Picture; Cambodia's parties agreed to a power-sharing agreement in June

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CHINA – INTERNAL AFFAIRS

Beijing knows best: Tung
Chief Executive Tung Chee-hwa sparred amiably with lawmakers yesterday, the last day of the four-year term of the incumbent Legislative Council, but the answer was the same: ``No''.
During a lively question-and-answer session, Tung made it clear that despite the July 1 protests he still believes China knows best when it comes to democracy.

``I identify with the central government that its arrangement [on universal suffrage] is for the good of the long-term interests of Hong Kong,'' he said in response to sharp questioning from The Frontier's Emily Lau.
She was demanding to know why Tung would not serve as an advocate for Hong Kong people who want to see full democracy here in time for the 2007-08 electoral cycle.
Hong Kong, Tung said, has to see things from Beijing's standpoint. ``How will Hong Kong's development affect the interests of our country and the safety and well-being of our mainland compatriots?

``We have to take into account our country's point of view. This is the basic principle,'' he said.
While the policy gulf between Tung and the political opposition remains as great as ever, yesterday's session lacked the vitriol of past exchanges.
Tung, in a deep blue suit and a crimson tie, appeared relaxed and even cracked the odd joke with lawmakers.
Addressing this group of legislators for the last time, he expressed thanks for their work.

``Everyone says that I am nostalgic. I am indeed nostalgic. I sincerely hope that I will be able to see most of you here again in October.''
Elections in September will return a new council, with 30 of the 60 seats filled by direct election and the remainder from more conservative functional constituencies.
Pro-democrat parties are hoping to gain a majority in the next Legco and to use the body to push a reform agenda on Beijing.
In April, the National People's Congress Standing Committee ruled that universal suffrage could not be granted in Hong Kong by 2007-08 and gave no timetable for further changes in the political structure.
In yesterday's session, democrats called on Tung to fight for democracy, but he said that under the Basic Law, he was accountable to the central government.

``After the NPC Standing Committee makes a decision, the chief executive has a statutory duty to implement the decision and be accountable to the central government,'' he said. Tung said he had no power to demand that Beijing overturn its decision.

``If you continue to take this attitude, aren't you worried that you are planting a time bomb for your administration?'' democrat Andrew Cheng asked. ``Mr Tung, how many people do you want to see marching in the streets before you line up with them and urge the central government to give us democracy?''

Tung said he had relayed Hong Kong people's aspirations to the central government, but that was all he could do.
Liberal Party leader James Tien lowered the heat of the debate when he asked Tung to help democrats obtain home-return permits to visit the mainland. Tien joked that he would especially like his opponents in the hotly contested New Territories East constituency - Andrew Cheng and Emily Lau - get permits that would allow them to stay away the entire campaign period. ``Allow them to visit the mainland until September 13 [the day after the Legco elections], that will be very good,'' he joked.

``You all have to be careful. The Liberal Party and the chief executive are conspiring together,'' Tung answered, causing loud laughter in the chamber.
Source; The Standard, July 04
Write; by Cannix Yau
Picture; The Monument to the People's Heroes in the foreground and The Mao Zedong Memorial Hall seen behind

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UZBEKISTAN – INTERNAL AFFAIRS

US freezes aid to Uzbekistan
The United States has frozen aid to Uzbekistan because of what it calls a lack of progress in democratic reforms.
US state department spokesman Richard Boucher said Uzbekistan had made some encouraging progress over the past year on human rights, but Washington was disappointed by a lack of progress towards democracy.
Mr Boucher added that the US still wanted to co-operate with the country.
Uzbekistan has received tens of millions of dollars in US aid since 2001, when, after the September 11 attacks, it allowed American forces to use an airbase near the Afghan border.
Last month US officials said Uzbekistan's overall human rights record remained very poor, referring to what it described as serious abuses and deaths under detention.
Source; BBC World Service, July 04

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AUSTRALIA – ECONOMY

Australian Dollar Gains as Consumer Confidence at 10-Year High
The Australian dollar traded close to its highest in nine weeks after a surge in consumer confidence raised the possibility of an increase in interest rates.
Consumer sentiment rising to a 10-year high and a report yesterday showing business confidence rebounded in June, have increased the likelihood the Reserve Bank of Australia will lift rates for the first time this year, boosting the appeal of local assets.

``The jump in consumer confidence has increased the possibility of a rate hike this year,'' said Lawrie Dryden, head of currency and asset allocation in Sydney at State Street Global Advisors, which manages $33 billion. ``It's added to reasons'' to buy ``the Australian dollar.''

Australia's dollar bought 72.53 U.S. cents at 5:00 p.m. in Sydney, from 72.45 cents late in Asia yesterday, when the currency rose as high as 72.85, the strongest since May 7.
The Reserve Bank of Australia has kept its target cash rate at 5.25 percent this year amid signs spending and borrowing had slowed, following two rate increases late in 2003.

Futures traders increased bets the Reserve Bank will raise interest rates later this year. The implied yield on the December 90-day bank bill futures rose to 5.59 percent from 5.56 percent yesterday. The December contract traded at an average yield of 55 basis points above the central bank's overnight cash rate in the past year.

The median forecast in a Bloomberg News survey of 23 economists is for a quarter-percentage point rate rise by March next year. Nine economists forecast an increase this year.

Consumers
The consumer confidence index rose 4.5 percent from June to 119.5, the highest since July 1994, according to a Westpac Banking Corp. and Melbourne Institute survey released in Sydney. A reading above 100 shows optimists outnumber pessimists. From a year earlier, sentiment gained 2.9 percent.

``This can be good for the Australian dollar,'' as it ``means more spending and a healthier economy,'' said Stephen Koukoulas, chief strategist at TD Securities Ltd. in Sydney.

A report yesterday showed business confidence rebounded last month from a one-year low, spurred by extra consumer spending after the government paid out a total of A$2.2 billion ($1.6 billion) to some families in June as a tax benefit.

Australian government bonds were lower across all maturities. The 6.25 percent bond maturing in April 2015 fell 0.189, or A$1.89 per A$1,000 face amount, to 103.963, pushing the yield 2 basis points higher to 5.75 percent. A basis point is 0.01 percentage point.

``With consumer sentiment at a record high the bond market is concerned this tips the balance toward a rate hike at some stage,'' said Warren Hogan, chief economist and head of bond strategy at Credit Suisse First Boston in Sydney.

Retail Sales
Australia's dollar, also known as the Aussie, will extend gains should U.S. retail sales meet expectations later today, said Robert Rennie, currency strategist in Sydney at Westpac Banking Corp. The currency will rise to 73 to 73.5 cents this week, he said.

Any signs of a slowing economy may encourage the Federal Reserve to raise its interest-rate target for overnight loans between banks at a ``measured'' pace. The gap between Australian and U.S. interest rates narrowed to 4 percent last month.
U.S. retail sales dropped 0.8 percent in June following a rise of 1.2 percent in May, according to the median estimate of 68 economist surveyed by Bloomberg News. Excluding vehicles, sales probably rose 0.2 percent after rising 0.7 percent the previous month.

``Our economist sees the ex-auto component of retail sales falling 0.2 percent,'' said Rennie.

``We therefore expect more U.S. dollar weakness and arguably this will be supportive for the Aussie as well.''
Source; Bloomberg, July 04
Write; by Chris Young in Sydney

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SOUTH KOREA – ECONOMY

South Korean growth forecasts are cut
A South Korean state research agency and Morgan Stanley on Wednesday both cut their economic growth estimates for South Korea for this year and next, saying that a forecast rebound in domestic demand is taking longer than expected to materialize.

The agency, the Korea Development Institute, lowered its 2004 growth forecast to 5.2 percent from an April estimate of 5.5 percent, it said in a quarterly report released in Seoul. Morgan Stanley cut its projection to 4.6 percent from 4.9 percent. The central bank and investment banks including Citigroup, ING Groep and UBS have also trimmed growth forecasts in recent weeks.
Growth more than halved to 3.1 percent last year as South Koreans were forced to cut spending after a credit binge left many unable to meet their debt payments. One in 13 of the nation's 48 million people were three months or more behind on interest payments at the end of May.

"Korea's domestic demand is weaker than we previously thought and is likely to stage a weaker recovery in 2005," Andy Xie, an economist at Morgan Stanley, said in a report. "The high level of household debt continues to weigh down consumption, while strong exports have not translated into domestic demand."

The government predicts that the economy will expand about 5 percent in 2004, less than the 6 percent target it set itself at the start of the year, and the Bank of Korea is forecasting 5.2 percent growth. The bank last week cut its second-half estimate to 5 percent from 5.6 percent.

The state agency said it expected consumer spending, which makes up more than half of South Korea's economy, to rise 0.7 percent this year, less than its April prediction for a 3.3 percent increase. Corporate investment in plant and machinery is expected to climb 6.1 percent, compared with 8.5 percent previously, it said.

The Korea Development Institute lowered its second-quarter economic growth estimate to 5.7 percent from 6.1 percent, its quarterly report showed.
Source; Bloomberg News, July 04
Write; by Yoolim Lee and Heejin Koo

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JAPAN – NATURAL CATASTROPHE

Floods wreak chaos in north Japan
At least five people have died and thousands have been ordered to evacuate after heavy rains caused flooding north of the Japanese capital Tokyo.
Victims were drowned or trapped under landslides, which covered their homes in Niigata prefecture, according to local officials.
More than 400mm (16 inches) of rain have fallen in the region since Monday night, and more is feared.

Local authorities have requested military help in the rescue operation.
Residents have been seen shovelling mud out of their homes, and many roads remain blocked. Some were said to be choked by falling telephone poles and trees.
Japan's Meteorological Agency said more heavy rain was likely. Parts of Niigata are forecast to receive another 160mm of rainfall by Thursday morning.
The rain has already broken records for the Niigata region.
Many elderly people have been affected by the floods, with some forced to await rescue on upper storeys of buildings or rooftops.

The five who died were said to be aged between 72 and 83:
- In Sanjo, one man died when his house flooded
- Two women were found dead in the same town, one in a flooded field and the other near local government offices
- A farmer died after a mudslide destroyed his house in Tochio
- A woman was found dead in Izumozaki after her house was destroyed by a landslide.
On Tuesday, military helicopters reportedly rescued 66 children from their nursery school in Nakanoshima.
"I was scared," a little girl told Reuters news agency. "When I looked out of the window, it looked like a river out there."
About 1,000 children were forced to spend the night inside their schools.
Source; BBC News, July 04

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JAPAN – LEGAL AFFAIRS

Japan warns Microsoft over patents
Japan's anti-monopoly watchdog handed Microsoft a warning on Tuesday, demanding that the American software giant remove what it said was a restrictive clause from contracts with electronics makers.

Microsoft said it would contest the decision.

Toshihiro Hara, an official with the Fair Trade Commission, said the warning was the first in the world against the clause, which he said in effect prevented Japanese computer makers from demanding damages or royalty fees even when rivals violated patents for important technology.

Such concerns have increased over the past several years as Japanese manufacturers add consumer-electronics features to Windows-installed computers, Hara said.

"There are concerns the clause may discourage motivation to develop audiovisual technology and may hinder fair competition in that technological field in our nation," he added.
.
Although the commission is not certain patents have been violated, it said several major Japanese makers suspected such violations and have objected to the provision since December 2000. Hara refused to give the makers' names.

Microsoft said it had omitted the conditions from new contracts. The Redmond, Washington based company also maintained that the disputed provisions were legal under Japanese, U.S. and European Union law.

"We have also been offering a different type of contract that does not include the provision and we are not forcing the provision to PC makers," said Takashi Hirano, an executive officer at Microsoft's Japan unit. "It is regrettable that the FTC did not recognize these points."

Microsoft is willing to go to court if it does not get a satisfactory result at the FTC hearing, Hirano said.

Analysts said Japanese authorities were trying to curb possibly monopolistic behavior in an effort to give more opportunities to alternatives such as the open-source Linux software system.

The European Commission found in March that Microsoft abused its "near monopoly" with Windows software.

In the United States, an appeals court last month approved a landmark antitrust settlement that Microsoft negotiated with the Justice Department.
Source; AP, Reuters. July 04
Picture; Microsoft officials said they would investigate

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INDIA – HEALTH / AIDS

Fighting India's Aids apathy
India is looking at ways to contain the spread of the Aids epidemic - but many of its citizens don't want to talk about the issue. The world's second most populous country has one of the highest infection rates - and more than five million HIV/Aids cases. To counteract the spread of the virus, the government recently launched its biggest anti-Aids initiative to date. But efforts are hampered by the fact that most Indians still find sex and Aids taboo subjects.

Stigma
In a corner of the St Katherine's Home in Bombay (Mumbai) a group of children are enjoying their playtime. But despite their singing and laughter these are not typical five-year-olds - all of them are HIV positive.
They were infected by their parents before they were born and were brought here sick and, in some cases, close to death. In a society where families are the main source of support, they are looked after by nurses and nuns.
Sister Shanti has 30 children in her care at this orphanage.
She says the hardest part for her is when people turn their back on children as young as these.
"It disturbs me when people discriminate against them.
"They have this disease through no fault of their own. They too have a right to live," she says.

Ignorance
For years many in India ignored the growing threat of Aids. Many simply could not imagine it was something that could affect them.
Down a crowded street in the heart of Bombay is the Unison clinic, one of the few in the city that deals with HIV patients.
Ram Kewar is on one of his regular visits - he is among 20 HIV-infected people who come here every day.
He was infected by the virus a few years ago and since then has passed it on to members of his family.
He says he had never even heard of the disease, far less about how it can be transmitted.
"I thought it was just my fate to have got it. It was only much later that I found out why it had happened to me."
The new Indian government has identified Aids as one of its priorities.
But the biggest problem is combating ignorance - and that includes people who are very influential.
Sanjay Nirupam is a politician belonging to the right-wing Shiv Sena party, an ally of the former Indian government and the main opposition party in Bombay.
He believes the issue is being overplayed.
"One always hears about Aids and how it's this big problem. But I have personally never come across anyone with Aids or seen anyone dying of the disease," he says.
"I think it's just hype."

Taboo topic
But it's a problem, which is not just confined to the poor or uneducated, or even the conservative.
It spreads across Indian society.
In a trendy Bombay cafe young men and women draw on cigarettes and sip long cocktails.
They are part of cosmopolitan Bombay's elite - upwardly mobile, liberal and well-informed.
This is one section of Indians who are more open to talking about Aids - but they would never think of doing so at home.
"It has to do with sex and that's something which is an absolute taboo," says twenty-something Rocky Bhatia.
"Most families simply will not bring it up."

Sign of hope
But there's hope at the other end of the social divide. Falkland Road right in the heart of the city is Bombay's red light district. For years activists have worked closely with the sex workers operating out of tiny rooms and filthy alleyways off this busy street. It's a move that is now paying dividends. Monica is a sex-worker who has seen many of her colleagues die.
In the past decade, Aids has claimed the lives of thousands of sex workers. Now they are learning to be more careful. Volunteers regularly visit every brothel handing out boxes of condoms and carrying out regular medical tests.
"If a customer refuses to use a condom we return his money and turn him away," says Monica.
"It doesn't matter how much money he offers us. Our lives are more important."
It is a small sign of success for a problem that needs to be tackled on a much larger scale.
Otherwise, it is estimated that in the next 10 years India could have more Aids cases than all of Africa.
Source; BBC News, July 04
Write; by Sanjoy Majumder, correspondent, in Bombay
Picture; India is home to one in seven HIV-positive people

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PAKISTAN – INTERNAL AFFAIRS

After Me… Me
So, how long before a presidential form of government? Not very, as another PM is sworn in, for the interim.
It can now be said unequivocally: Pakistan has a revolving-door democracy; PMs come and go, the President calls the shots. Just glance at last week's events in Islamabad. Prime Minister Mir Zafarullah Khan Jamali resigned (read: was sacked), Chaudhary Shujaat Hussain was appointed his successor. This is for an interim period during which the military establishment will find a safe seat from where to get 'miracle man' and finance minister Shaukat Aziz elected to the National Assembly. Then Hussain will resign to let Aziz replace him. But rumour is that even this revolving door will be closed permanently, and a presidential form of government ushered in.

Musharraf's choice of Aziz symbolises his deep distrust of the political class. As a technocrat who served the Saudi royal family and princes of the uae, and also worked with the World Bank in Washington, Aziz is expected to be indifferent to the country's democratic aspirations. But already the members of the ruling Pakistan Muslim League-Q have started to ask: can Aziz find a safe seat from where he can get elected to the National Assembly?

The speculation has been sparked because PML-Q president Hussain did not mention Aziz in his speech of thanks after he was elected leader of the National Assembly (that is, in effect, the PM). He subsequently made amends at a party meeting after the presidency called reminding him of the script he, Jamali and Musharraf had agreed upon. Hussain has also been requesting the media not to refer to him as 'interim PM'. Reason: the Constitution does not recognise such a post.

The whisper campaign against Aziz has a sharp edge: his detractors say he belongs to the Ahmadi sect, declared non-Muslim here, and consequently can't be PM. Urdu dailies even headlined this rumour, goading Aziz into publicly denying it. His proximity to Washington has riled the Muttahida Majlis-e-Amal (MMA), an alliance of right-wing Islamist parties. With Musharraf already toeing Washington's line, Pakistan, MMA leaders say, will now have a PM whose thinking is anything but 'home-grown'.

MMA leader Qazi Hussain fired the first salvo saying, "The nomination of Aziz is a contempt of not only Parliament but the whole nation." MMA leaders say they are wary of Aziz because he will do Washington's bidding and roll back Pakistan's nuclear programme. Worse, Aziz's antecedents have prompted the Lahore High Court Bar Association to resolve that it will oppose him as PM due to his propensity to promote the US economic agenda.

Musharraf can sell Aziz to Washington and London as the man of 'western values' who is largely credited with having pulled Pakistan out of an economic quagmire. In reality, though, he is a 'non-political face' of Jamali, appointed to defend the President in the National Assembly. Indeed, Jamali was ousted because he would rarely intervene in the National Assembly debates, which routinely ripped apart every policy of the army headquarters.

As rumours about Jamali's imminent ouster gathered force in the last three weeks, Musharraf retaliated against the PM's 'betrayal' through complete silence. Jamali was reduced to pathetically appealing to the media to desist from such speculation. The loss of face was decidedly his, but it also devalued Pakistani democracy.

Democracy here will continue to be undermined as long as no systemic measures are taken to balance the trinity of forces in Pakistan. As Senator Aitizaz Ahsan explains, "Our constitutional history is the story of conflict between three elements - the civil and military bureaucracy, the judiciary and the fundamentalists. Only those politicians prepared to display abject subservience to this trinity can survive. Those who choose to challenge or even to question the trinity, there's death, imprisonment or exile.Unless the political and civil society address this distortion in our political-constitutional structure, there is little hope."

Most have already given up hope. They fear once Aziz is anointed as PM, he'll call for a snap poll. Musharraf will help him engineer a two-third majority. The Constitution will be amended to usher in the presidential form of government. That's been the denouement to all democracy dramas army generals have scripted in Pakistan.
Source; Outlook India, July 04
Write; by Mariana Baabar

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FOCUS


JAPAN – GEOPOLITICAL

Unfinished Business
Even with his popularity waning, Junichiro Koizumi might get one last chance to leave a good mark on Japan.
Yasuko Imatomi feels like she has heard this song before, and she's not singing along anymore. The 41-year-old Tokyo homemaker has been a longtime supporter of Japan's dominant Liberal Democratic Party (LDP), and until fairly recently she counted herself as a fan of its silver-maned, silver-tongued leader, Prime Minister Junichiro Koizumi. But here in the city's Shibuya neighborhood, as Koizumi and other party members begin campaigning for the July 11 Upper House election, Imatomi is a lot more cynical than she was three years ago when Koizumi first took office. As "Jun-chan" and company promise, yet again, to enact broad structural reforms that will overhaul Japan's calcified political and social systems, Imatomi says Koizumi has been making the same pledges for years and has far too little to show for it. "I'm having doubts about just how far he is willing to push his promises," she says. "I'm planning on voting for a different party this time."

In the past few weeks, people like Imatomi have turned into a big, unforeseen headache for the Prime Minister. As little as a month ago, Koizumi was flying high and seemingly unassailable. In rapid succession this spring, he made a bold dash to North Korea to fetch family members of repatriated Japanese citizens abducted by the Hermit Kingdom in the 1970s; deftly sidestepped a pension scandal that had crippled the Democratic Party of Japan (DPJ), the nation's primary opposition party, by taking down its two most senior members; and headed off to the G-8 summit on Sea Island in the U.S. state of Georgia, where he was lavishly fêted at a private breakfast with American President George W. Bush. His burst of statesmanlike coups led many pundits in the Japanese media to declare that this week's election was over before the campaigning had even begun. The polling, they opined, would be just another formality as Koizumi, alone atop the Japanese political landscape, would lead his LDP to a runaway victory and begin his final two years in office with a clear mandate to pursue his most important initiatives and secure his place in history.

But something happened on the way to the landslide. Once boasting an approval rating of 87%, Koizumi's power base has always been his overwhelming public mandate. But popular support has suddenly dissipated at a crucial juncture in his career. Due to two critical missteps, Koizumi's approval rating has fallen from 54% to 40% (one of his lowest scores ever) in the past five weeks. According to recent opinion polls, voters have taken a dim view of his surprising declaration at the G-8 summit that he had decided without consulting (or even informing) the Diet to keep Japanese troops in Iraq indefinitely. They are likewise annoyed by the way the LDP rammed through a pension-reform bill last month that raised citizens' premiums and lowered their payouts while doing little to solve the system's fundamental flaws. Many see the pension bill as an underhanded and secretive move reminiscent of Japan's behind-closed-doors political tradition, one not in keeping with Koizumi's new era of openness and transparency. And others have called the Iraq decision slavish toadying to American dictates that puts Japanese lives at unwarranted risk. "These things have made people lose confidence in Koizumi fast," says Takao Toshikawa, a veteran political commentator and the editor in chief of the newsletter Tokyo Insideline.

The election that was supposed to be a Koizumi walkover has thus become a hotly contested battle, one that has breathed signs of life into the DPJ, which most commentators had declared all but dead. Rather than a rubber stamp for a Koizumi mandate, July 11 has now become a key measure of public confidence (or lack thereof) in the Prime Minister's performance and an important indicator of how the final years of his term may play out. With 121 seats up for grabs, the LDP's declared goal is to capture at least 51. While outright control of the government is not at stake even if it falls well short of that objective (the LDP-led coalition still retains a handsome majority in the far larger and more powerful Lower House), a disappointing performance could embolden some of Koizumi's bitterest enemies from within the LDP to call for a change of leadership. There is a precedent for this, if not a tradition: after four out of five of the most recent Upper House elections, the Prime Minister has been forced out within 54 weeks. As campaigning heats up, most politicians and observers say the chances of a catastrophic LDP drubbing followed by Koizumi's ouster are remote. But there is no doubt now that the LDP's performance will set the tone for the duration of Koizumi's tenure.

Unfinished business: it's the cloud that continues to hang over Koizumi's government. While he is already one of the longest-serving Prime Ministers since 1945, there can be little doubt that a man who has repeatedly vowed to "change Japan" - even if it requires destroying his own party - aspires to be remembered as a pivotal figure in Japanese history. And while Koizumi has made significant strides in areas such as banking reform and foreign affairs, if his administration were to end tomorrow, he would be remembered mostly for his charisma - and for a litany of promises unfulfilled. Will Koizumi go down in history as a leader who, like Ronald Reagan or Margaret Thatcher, invigorated and modernized the government and, for better or worse, reoriented the attitudes and expectations of its citizens about the role the state plays in their lives? Koizumi has a daunting task ahead of him in the next two years if he is to secure that kind of stature. Most experts point to three primary areas - Japan's political structure, long overdue economic structural reforms, and the country's dysfunctional relationship with China - where he must devote his efforts if he is to be noted not just as one of the longest-serving Prime Ministers but as one of the best.

Executive Power
From the very beginning of his term in office, Koizumi has been Japan's most independent and "presidential" Prime Minister. Conducting himself as if he were an opposition leader, he routinely rails against his own party, which has held a virtually unbroken monopoly on power for almost 50 years. Thanks to his overwhelming popularity, Koizumi has been able to work outside the LDP's famous, and famously arthritic, faction system, neutralizing it in significant ways. Early on, for example, he broke with tradition and rankled the Old Guard by picking Cabinet members he thought were most qualified for their jobs, rather than filling the posts by quota with members from each faction. Over the past three years, he has similarly built an administration that introduces far more legislation into the Diet than most Prime Ministers before him have. He routinely and unapologetically makes unilateral decisions, whether it's to open a dialogue with North Korea without consulting Japan's Ministry of Foreign Affairs or deciding to keep troops in Iraq without checking with anyone at all. In a country where a secretive ruling élite brokered deals behind closed doors, Koizumi has made the government more open and the executive branch more accountable. The citizenry may be upset that Japanese troops are still in Iraq, but no one doubts where the buck stops.
Unfortunately, it is unclear whether the government will revert to politics as usual as soon as Koizumi leaves office. Sheila Smith, a Japan specialist at Hawaii's East-West Center, gives Koizumi credit for introducing "a whole new vocabulary for the LDP, one that includes responsiveness and transparency. The next person will not be able to retreat from that." At the same time, Smith readily admits that the next PM might not be up to the job. "There aren't many Koizumis out there," she says.

Curiously, this is a situation that Koizumi seems uninterested in remedying. Not only is there no leader with Koizumi's panache waiting in the wings, but virtually every political expert in Japan agrees that Koizumi has made no attempt to groom a generation of young politicians capable of carrying on his good works. "Koizumi may have cut through LDP factional politics," says former LDP lawmaker Raizo Matsuno, "but he's not interested in creating a successor." Take 49-year-old LDP secretary-general Shinzo Abe, Koizumi's heir apparent. Abe is a young, good-looking, impeccably credentialed reformer handpicked by Koizumi to be the party's No. 2 man. He appears on many of the LDP's election posters and has been delegated to take the lead on certain issues, such as the North Korea abductees. But those who know both men say he is far from Koizumi's tight-knit inner circle and could hardly be called a protégé. Many commentators, such as newsletter editor Toshikawa, say that Koizumi brought Abe into the fold not so much to nurture him as to keep him on a short leash. While Abe will doubtless be a powerful force in Japanese politics in the future, it is unclear whether his style will approach anything that could be called Koizumiesque. And though Koizumi has put the LDP faction machine in idle, its engine continues to hum.

Economy
One of the apparently unqualified successes of Koizumi's time in office has been Japan's surprisingly robust economic rebound. After fading in and out of recession for more than a decade, the country has posted two consecutive quarters of annualized GDP growth in excess of 6% (making it the world's fastest-growing mature economy), and results for the quarter ended June 30 are expected to be equally impressive. Japan's Nikkei 225 stock-market index, meanwhile, has surged 56% since its 20-year lows reached last April, corporate profits and confidence are stronger than they have been in a decade, and household spending, consumer confidence and employee bonuses are all on the rise.

Koizumi has garnered the most praise for filling high economic and policymaking posts with effective leaders. Financial Services Minister Heizo Takenaka, for example, has forced ailing Japanese banks—once seen as the single greatest threat to the nation's financial stability—to radically overhaul their balance sheets. Thanks to Takenaka's get-tough measures, nonperforming loans at major Japanese banks have fallen from 8% in 2001 to 5.2% at the end of March 2004; debt-rating agency Standard & Poor's has just lifted its assessment of several Japanese banks for the first time in 21 years. Meanwhile, Toshihiko Fukui, who was appointed Bank of Japan governor in March 2003, has been much more successful than his predecessor in stifling Japan's pernicious, decade-long bout of deflation through unconventionally loose monetary policies.

Even with such savvy appointments, many critics maintain that Koizumi has still mostly been lucky - that the economy has been buoyed primarily by forces beyond his control. While Koizumi has not attempted to kick-start growth via wasteful public-spending projects the way many of his predecessors did, much of Japan's economic revival is the result of self-initiated restructuring by many of the country's world-class multinational businesses. (Meanwhile, Japan's highly inefficient domestic industries, such as mom-and-pop retailing and food production, bumble along as unprofitably as ever.) And the voracious appetite of Chinese industries for basic materials, not to mention that country's growing consumer demand, has proved to be a surprising and welcome salvation to a broad swath of Japanese manufacturers and exporters that only recently had been sounding the alarms about China's ability to "export deflation" or "hollow out Japanese industry" by taking over factory jobs once handled by domestic workers.

Regardless of the immediate causes of Japan's recovery, questions remain about its sustainability. Koizumi came to power as an economic reformer. Yet his three pet reform initiatives - privatizing the postal system, reforming the quasi-governmental highway-development companies, and overhauling the pension system - have barely left the drawing board since he made some of them central campaign planks as far back as 2001. In interviews with the Japanese press last month, Koizumi said that privatizing the postal system - an oddball governmental institution that not only delivers mail but also acts as the country's largest savings bank and as an insurance company - was his highest priority. An increasingly skeptical populace has been hearing that same promise for more than three years, and few believe he has enough political capital left to force unwilling LDP members to make the radical legislative changes necessary. Editor Toshikawa says, "He simply doesn't have the clout to carry out these privatization schemes. And if the LDP doesn't get 51 seats [in the Upper House election], he might abandon postal reform altogether."

Even those who are sanguine about Japan's recent economic performance warn that as long as structural reforms and a pension overhaul remain uncompleted, the country's fundamentals will continue to decay. The soaring stock market, they say, has papered over lingering inefficiencies at many companies, giving a much-needed (though potentially short-lived) boost to their asset levels. Similarly, Japan faces the worst demographic time bomb in the industrialized world - a problem that Koizumi and the LDP's pension reforms have done little to address. Many say Koizumi has lost any taste he may have had for the battles necessary to effect change. "The whole pension system needs to be taken apart and rebuilt," says Kazuhiko Nishizawa, an analyst at the Japan Research Institute in Tokyo, "but the administration isn't thinking that far ahead."

China
While Koizumi came to power as a domestic reformer, his greatest successes have so far been in foreign affairs. He boldly dispatched troops to Iraq (the first shipment of Japanese troops to a foreign land without the United Nations' blessing since World War II), and has maneuvered to be a major participant in the multinational engagement with North Korea to abandon its nuclear weapons program. For all his aplomb on the geopolitical scene, however, Koizumi has allowed Japan's crucial relationship with China to languish. "While pursuing closer ties with the U.S. and attempting to normalize relations with North Korea, Koizumi has abandoned China," says Jun Iio, a professor at the National Graduate Institute for Policy Studies in Tokyo. Since taking office, Koizumi has lived up to his promise to visit Yasukuni Shrine, which honors Japan's military war dead, at least once a year - meaning the Prime Minister, regularly like clockwork, offends China, whose citizens were brutalized by Japanese soldiers during World War II. Beijing has declared that Koizumi is unwelcome as long as the visits continue. So while trade between China and Japan has been booming, diplomatic relations are stalled.

Fixing that may mean making compromises about Yasukuni Shrine and more fully addressing other aspects of Japan's past war conduct, such as the Nanjing Massacre. Any admission of wrongdoing would be very unpopular with many of Koizumi's most conservative supporters, but political experts maintain that such compromises are the only way to get more fruitful dialogues with China rolling. "China is strengthening its presence throughout East Asia, but Japan and China have so many unresolved, complicated issues," says Terumasa Nakanishi, professor of international politics at Kyoto University.

From the day he burst onto the political scene, Koizumi was the outsider in his own party, relying on charm and public support to push his often-maverick agenda. But as his popularity rating now hovers near an all-time low, his antagonistic relationship with many of his colleagues may have boxed him in on everything from structural reforms to international relations. While Koizumi's tenure has already been an unqualified, if modest, success on a number of fronts, he has an exceedingly tough climb ahead of him if he is to achieve all of his goals before leaving office. According to Glen Fukushima, ex-president of the American Chamber of Commerce in Japan, what was once a river of goodwill that allowed Koizumi to float, almost miraculously, above the politics-as-usual fray, has begun to evaporate. That has created a vicious circle that threatens to snuff out his attempts to salvage a lasting political legacy. "His failure to implement what he has said he would do," Fukushima says, "has led to a decline in his popularity - which makes it difficult for him to do what he needs to." Back in 2001, as Japan's Prime Minister came to power on a wave of confidence and public optimism, he declared himself "Junichiro Koizumi, the lionhearted." As he heads into a tight election and perhaps his toughest season of policy battles, Koizumi has an opportunity to prove whether he deserves that nickname not just because of his leonine mane, but because of the power of his convictions and the tenacity of his fight.
Source; Time Asia, July 04
Write; by Jim Frederick / Tokyo. With reporting by Coco Masters, Toko Sekiguchi and Michiko Toyama/Tokyo
Picture; Can Koizumi finally translate his promises into lasting reforms?