Heizo Takenaka; Not Quite Out Of the Woods.(Interview)

Byline: Fareed Zakaria, Christian Caryl and Hideko Takayama

Heizo Takenaka has long been Prime Minister Junichiro Koizumi's point man for economic reform in Japan. After Koizumi was overwhelmingly re-elected in September, he appointed Takenaka minister for Internal Affairs and Communications. In the new position, Takenaka will shift the reform battle from banks and the privatization of Japan Post (which is now assured) to other fronts, like the consolidation of eight state-run banks into a single institution. Last week NEWSWEEK's Fareed Zakaria, Christian Caryl and Hideko Takayama spoke with Takenaka in his Tokyo office. Excerpts:

NEWSWEEK: Some government critics say that all the talk of reform is just a lot of rhetoric and no substance.

TAKENAKA: Reform is very steady. That is quite clear. Two years ago no one could have imagined that Japan Post could be privatized. But now the law has been approved by the Diet, and in about two years it will be privatized. Ten years from now all the shares of the company will be sold on the market. This is a very dramatic privatization.

But if all this is true, why is it that FDI is trickling in? I know that Prime Minister Koizumi has vowed to double it in five years, but it doesn't seem that foreign investors are seeing what you're describing.

I do not have the recent figures. But I believe that foreign indirect investment is increasing. Please look at the transactions of the Tokyo stock market. The most important part now is held by foreign investors. So there is a lot of foreign money coming in.

What would happen to the Japanese economy if Bank of Japan governor Toshihiko Fukui were to raise interest rates?