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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (733)	3/8/2001 3:14:36 PM
From: Wally Mastroly	Read Replies (1) \| Respond to of 10065

Japan's crisis could soon haunt world By Paul Erdman, CBS.MarketWatch.com Last Update: 1:07 PM ET Mar 8, 2001 SAN FRANCISCO (CBS.MW) -- I don t want to be an alarmist, but there is a crisis brewing in Asia that could soon begin to haunt all of us. I'm talking about Japan, the world's second largest economy, the anchor of the Asian economy, and a major provider of capital to the rest of the world. Today it was no one less that Japan's Finance Minister, the highly respected Kiichi Miyazawa, who put it bluntly: "Japan's public finances are very near collapsing." There is no doubt that he is telling the truth. As a result of eleven stimulus packages and a decade of recession-shrunken tax revenues which followed the bursting of the financial bubble at the beginning of the 1990's, Japan's public debt is now almost 130 percent of its GDP, the worst in the industrial world. This debt explosion has prompted Moody's to downgrade Japan's yen-denominated debt twice in recent years, and the way things are headed, junk bond status may soon follow. Japan's economy continues to not only stagnate, but is falling once again into a recession. It suffers from outright deflation. Industrial production in January posted its largest fall in more than five years. The stock market (65599W10: news, msgs, alerts) is at a 15 year low. The yen (C_JPY: news, msgs, alerts) is at a 15 month low. And all this is happening despite those eleven stimulus packages. Not only has wildly expansive fiscal policy failed to revive the Japanese economy, but the world's most accommodating monetary policy there has proven to be equally ineffective. Japan is in a classic liquidity trap. Even at near zero interest rates, no one is enticed to borrow. On top of all this there is a totally lack of political leadership in Japan. A few years ago the rest of the world almost got blindsided by the Asian currency crisis which began with the collapse of the Thai baht and then spread up and down the Pacific rim. Prompt and massive financial intervention by the IMF and US Secretary of the Treasury, Robert Rubin, contained that crisis. This time around there is really nothing that the rest of the world can do to help Japan escape what is increasingly resembling an economic death spiral, a process that could drag down all of Asia and have serious effects on the entire global economy. This is just the type of "external shock" we don't need, given the current shaky condition of most of the world's stock markets. Economist and author Paul Erdman is a CBS.MarketWatch.com columnist. His column also appears on FTMarketWatch.