Japan in 2002 continued to grapple with many of the same economic problems it has faced over the past 10 years, with a familiar lack of success. Although the economy has not imploded, as some feared last year, it is showing few signs of staging a sustained recovery. Prime Minister Koizumi Junichiro remained in office, but almost all of his efforts to reform the moribund economic system were watered down by resistance from affected groups. The foreign policy agenda was dominated by the growing crisis over North Korea's intensification of its nuclear weapons development program. This crisis cancelled out Koizumi's earlier progress at normalizing relations with Pyongyang.
The year 2003 was a study of contrasts for Japan. In the first half, news on the economic front was all bad. With Japan headed for a new period of recession, which would have been its third in the last 10 years, the already deep pessimism about the economy sank even lower. Prime Minister Koizumi was besieged by critics from all sides, but by the end of the year, the domestic situation had brightened. In foreign policy, Japan responded to crises on the Korean Peninsula and in Iraq by continuing to increase its military capabilities and roles. The decision to dispatch its military forces to a still unstable Iraq represents a potential watershed event for postwar Japan.
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