Japan's Growing Debt Could Wreck The World Economy,Scholars Say
Associated Press Worldstream
February 04, 2000
TOKYO, Feb 04, 2000 (AP Worldstream via COMTEX) -- Japan's ballooning public debt, made worse by wasteful public works spending, is a time bomb that could wreck the world economy, two Japanese academics said Friday. ``We are looking at a danger signal blinking near and bright,' said Akio Ogawa, a lecturer in the Graduate School of Public Policy at Tokyo's Chuo University.
Ogawa and Takayoshi Igarashi, a professor of law at Tokyo's Hosei University, spoke at the Foreign Correspondents' Club of Japan about the need to slash both public works spending and the debt if Japan is to truly regain its economic might.
Attempting to jump-start the economy, the government has lavished funds on bridges to sparsely populated islands, concrete linings for rivers and roads to nowhere, they said.
Rather than helping the economy or the people, the spending mostly benefits an ``iron triangle' of powerful politicians, bureaucrats, and businesses, Ogawa and Igarashi said.
The second-richest country in the world is also the world's most indebted nation. Its public debt exceeds 600 trillion yen (dlrs 5.5 trillion), or 130 percent of gross national product -- the total of goods and services produced by the country, Ogawa said.
Worse, the government may be hiding another 100 trillion yen (dlrs 926 billion) in debt from a special coffer that the Ministry of Finance uses to make loans to public corporations for infrastructure projects, Ogawa said.
A Finance Ministry official, who spoke on condition of anonymity, declined to comment on the figure. He did say that none of the loan recipients is in danger of defaulting.
Japan racked up debt mostly over the past decade as the government, urged on by the United States, tried to spend its way out of its longest economic slump since World War II.
In 1997, Japan spent dlrs 402.1 billion on roads, bridges, ports and other public works projects, more than the United States, Canada, Germany, France, Italy and Britain combined, Ogawa said.
Anger over excessive public works spending boiled over last month when 90 percent of voters in Tokushima, western Japan, rejected a government plan to spend 103 billion yen (dlrs 954 million) to dam a river.
Opponents say it will destroy the ecosystem. Construction Ministry officials say it's necessary to stop possible flooding. The government says it will go ahead with the project despite the vote.
Unless Japan breaks up the league of bureaucrats, executives and politicians who benefit from such largess, it'll be the taxpayers footing the bill, Ogawa said.
``Now we face a dire choice between huge tax increases or hyperinflation to help reduce, if not wipe out, the debt that has already got out of control,' Ogawa said.
Yet the last time the government raised taxes, in April 1997, the economy sank into recession and dragged down the rest of Asia.
Printing more money, on the other hand, would reduce the value of savings and force up prices, hurting consumer demand and ultimately the economy.
Either way, Japanese purchases of everything from Italian suits to American-made computers and Asian commodities would suffer.
``It's an accident waiting to happen,' said Matthew Poggi, an economist at Lehman Brothers (Japan) Ltd.
Copyright 1999 Associated Press, All rights reserved.
By SCOTT STODDARD
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