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Japan's new Premier to continue reforms
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 Japan's Elvis-loving prime minister, Junichiro Koizumi, has left the building. He goes knowing his reforms have helped bring about Japan's long-awaited economic recovery. His anointed successor, Mr Shinzo Abe, was selected prime minister in September.
Japan has been governed almost exclusively by its Liberal Democratic Party (LDP) since 1955. The LDP is a conglomerate of competing factions representing the various special interests of big business, small business, farmers and professional groups. Its leaders tended to be indecisive, lacking both charisma and popularity. Economic policy was often characterised more by paralysis than reform.
All that changed in April 2001 when the party's maverick leader, Mr Koizumi, became prime minister. He helped to rescue a moribund economy with a series of much needed reforms, e.g. tackling the bad debts which prevented banks from issuing new loans vital to stimulate economic growth.
Reform was certainly needed because, in the early 1990s, the Japanese real estate bubble burst creating an avalanche of bad debts and falling property prices. Japan's main stockmarket index - the Nikkei 225 - fell from a peak of almost 39,000 in 1989 to a low of 7,699 in April 2003.
To combat this, and encourage people and companies to borrow, Japan's central bank cut interest rates to zero, i.e. it lent money for free. But consumers saw their economy collapsing and became very frugal. They wouldn't borrow and they wouldn't spend. So, in March 2001, the central bank started to print new money and pump it into the system to tackle the problem of a deflating economy.
By 2005, strong signs of recovery were emerging. Wages rose at their fastest rate for seven years. Koizumi was re-elected after calling a snap election based on the need for serious reforms. Companies profits started to rise. For the first time in a long while, there were more vacancies than the number of people seeking work.
Consumers stopped saving and finally started spending. By July, corporate investment was rising at its fastest pace in 16 years. It really did appear as if Japan was finally turning the corner.
Official confirmations of this came, firstly, in spring 2006 when the central bank said it would stop printing excess money. Secondly, in July the bank ended its policy of zero interest rates after nearly six years, saying Japan was likely to expand for a sustained period. Be in no doubt - this normalisation of monetary policy in the world's second biggest economy is an historic moment, marking the end of deflation and stagnation.
That is the big picture. What of the immediate future? Koizumi's successor, Mr Abe, shows both political weaknesses and strengths. He has never held a ministerial portfolio of any substance and lacks a party power base. His main strength is his great popularity. He appeals to voters and will attract votes for the LDP. Abe has pledged to continue with Mr Koizumi's conomic reforms and has even announced he will take a 30% pay cut, which he describes as being a 'good model' for cutting government spending.
Mr Abe appears to be an enthusiastic liberaliser likely to deregulate telecommunications and sell government assets to reduce debt. As each month goes by, the Japanese economy appears to be strengthening with companies reporting surprisingly large increases in profits. As ever, there will be opportunities for astute investors.
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