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NO. 14 — April 10, 1998

 

Feature Article

LIMPING TOWARD THE MILLENNIUM: JAPAN'S ECONOMY IN THE LATE 1990S by Douglas Ostrom

Summary

Japan began 1997 on a hopeful note, its economy finally seeming to break out of a six-year slump. By yearend, however, the prognosis had changed. Some observers — and many Japanese — were more nervous than ever about the economy's prospects. The consumption tax hike, problems in the banking sector and the Asian economic crisis all had an adverse impact. A few experts even saw signs not only of a recession but of a depression.

Tokyo has responded to these developments with a series of economic programs that foreign critics generally have derided as too little, too late. Two recent proposals — one a ¥30 trillion ($250 billion at ¥120=$1.00) fix of the banking system, the other to inject as much as ¥16 trillion ($133.3 billion) into the economy — could have significant effects, however, if fully implemented. Japan's economic problems are so extensive, though, that these initiatives probably will prove insufficient to boost the economy's performance in 1998 to levels considered satisfactory on either side of the Pacific. For this year at least, Japan will remain an economic underperformer.

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Weekly Review

INDICATORS, COMMENTS POINT TO DECLINE IN JAPANESE BUSINESS AND CONSUMER CONFIDENCE by Douglas Ostrom

April 1 starts a new fiscal year for the government and thousands of firms in Japan, but the optimism of new beginnings and spring was conspicuously lacking this time around. Instead, economic gloom was pervasive, encompassing the ranks of business executives and consumers alike. In fact, the pessimism extended to the head of the nation's central bank and even to an international bond-rating agency.

 

LEADERS CALL FOR UNITY AT ASIA-EUROPE SUMMIT by Eric Altbach

Leaders of 25 Asian and European countries concluded a two-day summit in London April 4 with a statement reaffirming their commitment to work together to overcome the economic crisis in Asia. At the second biennial Asia-Europe Meeting, the 15 European participants promised to keep their nations' markets open to Asian imports and to send business missions to the region to expand investment. They also called on Asian countries to make certain that needed financial reforms were carried out.

 

TOKYO TAKING JAPAN RAILWAYS FIRMS FOR A RIDE by Jon Choy

Faced with mounting pressure to act boldly to stimulate the faltering economy, the government of Prime Minister Ryutaro Hashimoto has engineered a plan to pay off nearly ¥28 trillion ($233.3 billion at ¥120=$1.00) worth of obligations left over from the 1987 privatization of the Japanese National Railways. As part of this move, however, Tokyo is insisting that JNR's successors — the seven regional Japan Railways companies — get on board and shoulder part of the burden. The rail services firms — three of which have listed their shares on the Tokyo Stock Exchange — are determined to resist, arguing that they already have taken on as much of JNR's debts as they can bear.

 

LDP CONTINUES LOCAL WINNING STREAK DESPITE ECONOMY'S PROBLEMS by Barbara Wanner

The victory of a Liberal Democratic Party-backed candidate in the March 30 by-election for a Tokyo lower house seat seemed to suggest that, notwithstanding the economy's multiple problems, the electorate still wants to keep the long-ruling LDP at the helm rather than take a chance on a fledgling opposition party. By a vote of 50,242 to 35,521, the LDP's Kensaku Morita handily beat Jin Matsubara, a former Tokyo Metropolitan Assembly member endorsed by Minyuren, a parliamentary group comprised of four centrist parties that plan to merge under the Democratic Party of Japan banner later this month.

 

NOTES: JAPAN'S DEREGULATION PLAN

Experience has taught the White House not to count on Japan's internal deregulation process to advance the U.S. market access agenda. The first installment of a FY 1998-FY 2000 regulatory reform program, announced March 31, reinforced that lesson. More important, it served as a particularly vivid reminder that an economically struggling Japan will get no near-term help from deregulation — the one set of policy initiatives that could alter today's dim prospects for a rebound.

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