Gottfried, I know what you mean about the economic complexities involved. Let me say this, I do not see an easy solution to the problem of the declining Japanese domestic economy. Declining GDP into the foreseeable future may be in large part due to the current state of Japanese demographics (a rapidly aging populace is not a population of rabid consumers) although even there, their problems have a self-made quality to them, since a large part of the reason that the birth rate is so low is that it is the most expensive place to live on the planet. It is also clear that the move in the US during the late 70s and 80s to force Japanese manufacturers to set up plants in the US if they wanted to sell cars (particularly) there has proved in my opinion wise for us and bad for Japan, because most of the costs involved in the production of those autos involves money cycled back into the US economy, not Japan's economy (although I don't believe unemployment is any real problem in Japan.)
What is infuriating in the extreme, however is the situation with the Japanese banks. Let me start out by saying that in Japan as elsewhere in Asia, there is almost no bond market. Nearly the entire market for debt capital is run through the banks. That is why a systemic failure in the banking sector will result in a real depression here, because the flow of money for business will stop: completely and totally. The only thing that has kept away Great Depression II in the rest of SE Asia is the intervention of the IMF to provide, in essence, bridge loan money. That is also why Americans should not be too quick to call for the cessation of the various IMF bailout programs. The Japanese have had, in essence, if you go back just to October of last year, almost 9 months to get a meaningful program of reform going involving, say, the bringing in of strong Western banks through merger activity to put Japan's banking house back in order. But that would open up the Japanese credit market to real competition and break the "cultural" monopoly that Japanese bankers and keiretsu bosses have had on the Japanese credit market. To preserve that monopoly is the reason that the Japanese government has refused to begin meaningful reform. The illusion that they've bought into for 9 months now is that when the economic recovery happens, everything will be alright again and the bad-debt problem will simply go away (as the banks return to profitability and can begin to write off the bad loans incrementally.) To pacify people so that they could maintain the ostrich mentality, they proceeded with the series of band-aid stimulus packages that never had any chance to succeed or make any dent in the problem. Now they are beginning to get the wake up call, that the economy isn't going to get better in the foreseeable future, and thus the problem in the banking sector is not going to go away and must be addressed. My prediction is that even now, on the knife edge of ruin they will still try denial at least one last time. I think Hashimoto must go before meaningful reform can commence. He has shown a truly Chamberlain-like willingness to appease the heads of the Japanese Banking sector.
For what its worth, late last week I listened to another economic idiot, Mahatir Mohammed, Prime Minister of Malaysia say that his country was going to turn down IMF bail-out money rather than implement IMF mandated reforms. My prediction is that within a year, and probably much sooner, Malaysia will be worse off than Indonesia.
jess. |
