The incredible shrinking prime minister; after promising a revolution of reform, Japan's Junichiro Koizumi is just more of the same.

Just as investors and analysts were beginning to write off Japan for good, Junichiro Koizumi galloped onto the political scene. Thumbing his nose at the business elite, the bureaucratic Mafia and the old guard of the ruling Liberal Democratic Party--the triumvirate that has colluded to control and manage the Japanese economy for decades--Koizumi pledged to rip the system out by the roots. Declaring that members of his party were either for him or against him, he vowed to remake the LDP or destroy it.

This brashness struck a chord. With opposition parties making inroads into the electorate and polls showing the LDP with its lowest approval ratings ever, a coalition of reformers and party members fearful of losing power combined to put the self-styled revolutionary at the helm.

In Japan, it was time for an economic revolution. After an unprecedented 12-year downturn, Japan needed a leader who recognized the nation's problems, comprehended what needed to be done, and had the guts to battle entrenched interests to reform a financial and political power-house risking collapse. Upon his accession to the premier's chair on April 24, 2001, Junichiro Koizumi promised to be that man. So far, he has delivered nothing.

Japan remains an economic basket-case. Public debt lingers around 150 percent of Gross Domestic Product; bad loans account for as much as 30 percent of GDP; industrial production fell 7.9 percent in 2001; and the Tokyo stock market is teetering. At the end of May, one U.S. dollar could be exchanged for 125.9 yen--45.9 yen more than two years ago. Unemployment, currently well above five percent, is the highest since the Japanese postwar economic miracle began.

And that's not all. Banks wrote off $60 billion in bad debts last year but haven't changed their lending practices, meaning more bailouts lie in the future. The only reason many Goliath corporations survive and massive projects continue is because the Bank of Japan maintains as close to a Zero Interest Rate Policy as possible. And when money is essentially free, it's rarely directed to worthy enterprises--especially when the government guarantees that the lion's share of the loans go to large inefficient corporations. This keeps operating cash away from promising start-ups and small and mid-sized companies that might actually work.

But Japan's economic woes aren't confined just to its islands. With the nations of the world increasingly interdependent on one another for stability, the large number of shaky financial markets necessitates that those economies at the top of the food chain carry a disproportionate amount of weight to keep the whole system running. That means Japan, as the second largest economy in the world, is more important than ever. So who's been tending the store?

Not Koizumi. For his first six months in power, in the eyes of the public the prime minister could do no wrong; his personal approval ratings jumped and hovered at 80 percent. A cult of personality developed around what increasingly was referred to as Koizumi's "rock `n' roll image." The Japanese media fawned over his shaggy haircut (one headline bizarrely went so far as to call him the "fifth Beatle"), his appreciation for heavy-metal rock music, and even the fact that he was divorced--which was seen as positively progressive in the socially conservative circles of Tokyo public life. Lo, virtually overnight a star was born.

The reality of shootings stars, however, is that eventually they fall. After just a half year in office, it began to appear that more of the prime minister's time was being dedicated to furthering his superhero celebrity status than anything else. In what old-timers viewed as a degrading stunt but what Koizumi strategists marketed as outreach to the women's vote, the prime minister posed for what can best be described as beefcake calendars. He released an album of his favorite Elvis Presley songs, the cover of which was emblazoned with a caricature of the prime minister sporting a slicked-back hairdo and 1950s-style muttonchops.

Meanwhile, reform was stagnant. In mid-May Koizumi shelved partial postal privatization indefinitely after promising such would be the bare minimal reform he would bring. His administration pressured the Bank of Japan to return to pretty much free money through ZIRP. Bailouts have continued; Japan almost had a trade war with China. And it now looks likely that retaliatory tariffs will be directed at U.S. products in a tit for the Bush administration's steel-quotas tat. Even more yen has been spent by the government in efforts to resuscitate the long-dead economy, and substantial tax cuts aren't on anyone's agenda. In short, the horrific policies Mr. Koizumi said he would reverse not only have continued, they have increased.

If the rise of "reformist" Koizumi generated optimism about Japan's future, the realization that there won't be any systemic changes anytime soon--if ever at all--has generated an international backlash against Japanese institutions. In May, officials in Tokyo screamed bloody murder when Moody's Investors Service made moves to drop Japan's domestic-currency debt ratings down to the level of Botswana, where per capita GDP is about $3,700 and 80% of the population ekes it out on subsistence agriculture. This came one month after Standard & Poors similarly downgraded Japan's sovereign debt rating. The lack of faith in the system is reflected in puny levels of foreign investment, which have been pegged at under $100 per capita. By comparison, the rates of foreign investment per capita in Singapore and the United States are $1,793 and $1,034, respectively. Japanese are also pulling their money out of banks and buying up gold at record rates.

As if the economic numbers weren't humiliating enough, the Japanese received an embarrassing lecture from U.S. Treasury Secretary Paul O'Neill, who reminded officials in Tokyo that the world expects more responsible leadership from a country with a GDP of around $5.5 trillion. In a speech to the Japan National Press Club in January, the secretary bluntly stated that the time was now for "decisive actions" that must be "quick and effective," and with no more "partial measures." While O'Neill surely could have been more strident, even these basic suggestions were considered harsh and contradicted the previous Clinton administration's policy of not criticizing Japanese financial mismanagement.

Japan's diminishing international prestige has,resulted in plummeting poll ratings for the government. By late May, Koizumi's support sat at a meager 40 percent--his lowest ever and just half of what he enjoyed only a handful of months earlier. Even more poignant for the prime minister's political standing, his approval rating among women--the key constituency he worked so hard to woo--dropped to 37 percent. Overall, a vast majority of Japanese voters has decided that the current government is useless. On April 26, the Yomiuri newspaper published a poll in which 66 percent responded that the prime minister had accomplished "nothing in particular."

Clearly, these numbers should serve as a wake-up call. Japanese originally liked Koizumi for his bold ideas and his courage to take on the establishment, but support flip-flopped as his agenda began to look unimpressively mainstream. The obvious elixir to restore confidence in his government and his leadership is to return to the reform agenda that voters want and that the economy so desperately needs.

Unfortunately, this is not the path the prime minister has chosen to take. Instead, recent activity has chiefly been limited to political stunts and a certain circling of the wagons with LDP leaders. At the end of April, Koizumi almost reneged on a campaign promise and admitted that he was thinking about reshuffling his cabinet--a traditional old-school tactic that guarantees every LDP heavyweight gets his turn in an important post. While Koizumi eventually hung fire, this served as a signal to party powerbrokers that their prime minister isn't totally off their reservation. Seeking favor with nationalists and populists, Koizumi twice visited the Yasukuni Shrine, a controversial monument to Japanese war dead, including convicted war criminals. But most worrisome of all was his January firing of super-popular Foreign Minister Makiko Tanaka, the most outspoken reformer in his cabinet. The white noise surrounding the dismissal notwithstanding, Tanaka was sacked to undermine her all-out effort to wrestle ministry bureaucrats under control--a potential shakeup that worded the establishment.

So where does all this leave the rebel reformer? At worst, Koizumi's political posturing and genuflections to the old guard reveal a man who is not serious about reform--his blustery rhetoric was merely a ruse to get elected and divert voters away from the opposition. Allowing a little charity, it can be said that the job of restructuring the way Tokyo works is a near-impossible undertaking for any one man. But under either interpretation, Mr. Koizumi is still a failure at this point.

Considering that many Japan watchers labeled him the country's last honest shot at change, many are worded that his lack of success will lead to economic collapse. There are two polar schools of thought on the subject. The first is pessimistic: Japan is going down and will bring Asia and maybe the global economy with it. The second is naively optimistic: Japan is too big to fail, period. The truth most likely lies somewhere in between. It doesn't look like the LDP will reform soon, the meek taxpayers aren't likely to stage an all-out revolt right away, and the huge Japanese economy is probably big enough that it can gnaw on its own limbs for a long time before harming the rest of the world. That's not a pretty outlook, but it's not doomsday either.

Junichiro Koizumi's predecessor as premier, Yoshiro Moil, was chased out as head of the LDP after only 12 months because confidence in his administration disappeared when he promised much and delivered nothing. Aside from even more daring rhetoric, at this date nothing substantial distinguishes Koizumi's record from that of the disgraced and forgotten Moil. Talk, after all, is cheap.

The task to revitalize Japan's economy is not impossible, but the nation will only be able to maintain its privileged place in the world if the politicians decide to set aside personal benefits and party politics for the good of the people. Someone will have to convince the old guard that this is necessary. So far, Koizumi hasn't been that leader.

Mr. Decker is an editorial page writer for The Asian Wall Street Journal and the Far Eastern Economic Review in Hong Kong.