Now that Japanese Prime Minister Junichiro Koizumi has a clear mandate for economic reform, he has wasted no time in transforming his electoral capital into practical results. Koizumi has finally unlocked the wealth now wallowing in the country’s “Yucho.” Japan’s stock market — indeed, its entire economy — is poised for years of sustained growth. This growth will help to buoy the world economy, too.

Last Friday, Japan’s Diet (Parliament) approved legislation that will privatize the $3 trillion held by Japan’s postal service. The postal service? In Japan, the “Yubin” is more than just mailing letters. For the last 130 years, post offices have also served as local savings banks for conservative grannies and grampas to stash their hard-earned money.

Japanese have stuffed $3 trillion into the Yucho or postal savings accounts, but have not received much in return. The “Ordinary Savings” account bears a whooping 0.005% APR. But more aggressive investors can get 0.060% from a “Teigaku” 3-year certificate of deposit.

In other words, investors are losing money in the Yucho — if you take inflation and taxes into account. The Japanese would have done better burying their yen in a coffee can in the back yard — or stuffing it into mattresses.

Prime Minister Koizumi has put an end to this economic farce, but not without some slick politics:

Parliament’s upper house, whose rejection of the bills in August triggered a general election that the ruling camp won by a landslide, approved the legislation by a vote of 134 to 100 following adoption by the more powerful lower chamber on Tuesday.

Privatizing the postal system has been the cornerstone of Koizumi’s agenda to wean the long-ruling Liberal Democratic Party (LDP) from its addiction to the wasteful public spending that had won votes but bred scandals and inflated government debt.

The big election win by the LDP and its junior coalition partner in the September 11 lower house poll — cast by Koizumi as a referendum on postal privatization — convinced most ruling party members of the upper house who had previously opposed the bills to vote in favor of the legislation this time.

Now the tremendous assets of the Yucho can be used for investing in and building Japan’s economy. We are not talking about rolling the dice with grampa and granda’s life savings, we are talking about banking in terms of a normal savings and loan model.

There are certainly smart business people in Japan. They will see that the Yucho’s assets can be used for small business loans, or investment in stocks, bonds, annuities — in other words, a balanced portfolio in which savers can receive a fair return on investment, not 0.005%. The Yucho’s assets can be invested in Japan’s economy, not buried in a coffee can. Previously, the Yucho has “funneled postal savings funds to money-losing projects and kept nonviable companies on life support.”

In the last year, the Japanese economy has once again starting acting like the powerhouse it should be. According to Toshihiko Fukui, Governor of the Bank of Japan (Alan Greenspan’s Japanese analog):

Japan’s economy has steadily strengthened its foundation through structural reforms, as seen in the substantial decline in major banks’ nonperforming loan ratios. Improvement in the corporate sector has been spreading to the household sector, and the economic recovery supported by domestic private demand is expected to continue.

Continuous efforts to accelerate and strengthen structural reforms are called for to raise productivity, which is needed to respond to the unprecedented rapid pace of aging of our population, and to meet the growing challenges of globalization. In particular, fiscal consolidation remains the top priority on the government�s policy agenda, and steady implementation of fiscal structural reform efforts will continue, with a view toward achieving a primary surplus for the combined central and local governments in the early 2010s.

This is not hype. The numbers back up what Fukui says. Japan is awakening from its 15-year hangover. As the world’s second largest economy, a strong Japan means a strong world. Japan is poised once again to be the House of the Rising Sun — but this time without all the corruption.

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Related: Economy, Japan

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