Article at a glance:
Since Prime Minister Junichiro Koizumi of Japan took office in 2001, he has argued that structural reform of the financial system was necessary to assure long-term national economic growth. His approach contrasts favorably with past administrations, but he has gone neither fast nor far enough. Structural changes have yet to really get under way, and now the problem is whether or not momentum for reform will continue.
The take-away
Three major issues lie ahead in the reform of the financial sector, and government intrusion in the system is at their heart. Sick banks must be allowed to fail, the government should implement a deposit guarantee cap on demand deposits, and public and private financial institutions should be placed on an equal footing.