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No. 34 — September 4, 1998
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*** JEI Report will not be published September 11 due to the Labor Day holiday. ***
*** The next issue will be dated September 18. ***

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Feature Article

JAPAN'S CONSTRUCTION INDSTURY: THE ECONOMIC ENGINE THAT CAN'T by Jon Choy

 

Summary

Japan's construction industry is a linchpin of domestic economic and political activity. Compared with its industrialized peers in the West, it employs a relatively large share of the labor force and accounts for a significant portion of national output. The government repeatedly has relied on public works spending — and, therefore, construction activity — to counter economic slowdowns.

In the 1990s, however, a confluence of events has drastically reshaped the situation. Construction not only appears to have lost its efficacy as an engine of economic growth, but it even seems to have become a source of economic troubles. Just as Japan's financial and industrial sectors are being forced to recast themselves in the crucible of a globalized economy, so is the construction industry coming under similar pressures.

*** JEI Report will not be published September 11 due to the Labor Day holiday. ***
*** The next issue will be dated September 18. ***

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Weekly Review

*** JEI Report will not be published September 11 due to the Labor Day holiday. ***
*** The next issue will be dated September 18. ***

JAPANESE STOCK MARKET HITS 12-YEAR LOW AMID GLOBAL ECONOMIC TURMOIL by Douglas Ostrom

Americans crying over the sharp decline in U.S. equity prices should consider this: their situation would be far worse had they invested in the Japanese stock market. U.S. shareholders have reason to be unhappy that Wall Street gave up about seven months of gains in August, but the Nikkei average of 225 leading stocks traded on the Tokyo Stock Exchange at the same time lost the gains it had made over the past 12 and a half years. The woes on Wall Street reflected the economic and political turmoil in Russia as well as speculation that the long-running American expansion may be approaching an end. The problems in Kabuto-cho, Tokyo's financial district, are a consequence of those same concerns on top of a still growing sense that the Japanese economy faces chronic problems of historic dimensions.

 

BANK-RESCUE BILLS TIED TO FATE OF LONG-TERM CREDIT BANK by Jon Choy

Prime Minister Keizo Obuchi, Finance Minister Kiichi Miyazawa, Bank of Japan Governor Masaru Hayami and Financial Supervisory Commissioner Masaharu Hino appear determined to use the proposed merger of Long-Term Credit Bank of Japan, Ltd. and Sumitomo Trust & Banking Co., Ltd. as a showcase for their approach to resolving the bad-loan problems of Japan's major banks. Along with the ruling Liberal Democratic Party, these guardians of the financial system have opted to engineer a "soft landing" for troubled LTCB, first helping it clear nonperforming loans from its books with government money, then putting intense pressure on Sumitomo Trust officials to proceed with merger talks.

 

JAPAN'S ECONOMIC COMPASS CONTINUES TO POINT SOUTH by Arthur J. Alexander

New numbers released by the Management and Coordination Agency, Tokyo Shoko Research Co., Ltd. and the Ministry of International Trade and Industry only confirm what analysts have been saying for months: Japan's economy is in a steady decline. Bankruptcy numbers are up, overall employment is weak and production continues to fall.

 

TOKYO PROTESTS NORTH KOREAN MISSILE TEST, FREEZES KEDO FUNDS AND FOOD AID by Eric Altbach

Tokyo reacted angrily to North Korea's August 31 test of a ballistic missile that flew over Japanese territory before falling into the Pacific Ocean off the coast of the Tohoku region. Following a special meeting of the National Security Council of Japan, Foreign Minister Masahiko Komura announced that the government would suspend its $1 billion contribution to the Korean Peninsula Energy Development Organization, curtail recent efforts to resume talks aimed at establishing diplomatic relations with North Korea and refuse requests to provide food aid for that country, which has been suffering from widespread shortages. Analysts predict that the political fallout from the missile launch is certain to throw relations between Japan and its isolated, unpredictable neighbor back into a deep freeze after several years of modestly improving ties (see JEI Report No. 44A, November 21, 1997).

*** JEI Report will not be published September 11 due to the Labor Day holiday. ***
*** The next issue will be dated September 18. ***

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