| Analysis |
that preclude demonstration of results 13,May 1998 |
| The Birmingham summit will start on May 15th. It is obvious that the discussions
in the summit will focus on Japanese economic policies. The Hashimoto administration
has already decided to implement an economic stimulus package that includes
a 16.5 trillion yen public investment and a 2 trillion yen tax cut. Nevertheless, the Japanese economy shows no signs of recovery and domestic demand has not improved at all. Foreign investors and the media continue to criticize the measures taken by the Japanese government, and to express their doubts about whether Japanese politicians truly understand economic policies. However, it appears that Japan will incur even more such criticism and distrust during and after the upcoming summit. In early May, the Liberal Democratic Party (LDP), the ruling party of Japan, sent many of its members to Washington D.C.to prepare for the forthcoming summit. However, they spent all their energy and time desperately explaining the status quo, and had no concrete plans that would resolve the problems. It is inevitable that the United States believed that the visit was merely a gesture made by the Japanese government to make excuses in fear of increased pressure from the United States. The only statement made by the delegation that vaguely resembled a plan was the remarks made by Mr. Kato, the Secretary General of the LDP, that the LDP would make all efforts to handle the bad loans issue. The politicians and the bureaucrats believe that the situation would somehow resolve itself through the implementation of conventional concepts and methods; they are not thinking at all about demonstrating results, the most critical factor. If the economy does not recover, and no improvement is seen in deregulation and growth of domestic demand, the Japanese will inevitably be seen as not keeping their word. During the symposium hosted by Asahi Shimbun Publishing Co. in April 1994, Professor Lester Thurow of the Massachusetts Institute of Technology who had been a high-ranking official in the United States government made some strong remarks against Japan's foreign policy as demonstrated by such behavior. He pointed out that in spite of the fact that the Japanese government had promised to decrease its trade surplus, it had done nothing to achieve this over a period of 20 years, and warned then Prime Minister Miyazawa who had been a participant at the symposium that not keeping its word means that a country is no longer to be trusted. It has been four years since then, but the situation has only worsened. Lack of decisiveness on the part of political leaders is not the reason for the lack of improvement in deregulation and structural reform. The true reason is that they are unable to establish policies that threaten special interest groups such as general contractors and major financial institutions that oppose deregulation, largely because they have provided the financial backing that has been instrumental in placing these politicians where they are today. Furthermore, public investment does not lead to an increase in general consumer demand, since the majority of the investment goes to public construction and is absorbed by developers, large construction companies and major contractors, and part of the profits are kicked back to the politicians themselves. The most essential structural reform is the restructuring of inefficient special interest groups that depend on the national budget for their survival, such as general contractors, by healthy competition. It is probably useless to hope that the politicians of existing political parties will truly implement such reform. Structural reform will become a reality only when voter-oriented groups, such as the Northern League of Italy, seize political influence. The expansion of such movements will probably turn the wave of the stock market from the current selling of Japanese stocks to the purchase of Japanese stocks. |
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