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Still Unresolved Bad Debt Problem
On December 6 of last year,Dr.Allan I.Menderowitz,Executive Director of U.S.Trade Deficit Review Commission,came to Japan to deliver a speech on the economic relationship between Japan and the U.S.under the new presidential administration.
He stated that a closer economic relationship between the U.S.and Japan is in the best interest of the entire world. He also noted that Japan is showing signs of structural reform, which will help it to better contribute to the world. And he stressed that Japanese government must
carry out the necessary fiscal and monetary policies,deal with its bad debt problems, and not worry so much about corporate failures.
On this same day the OECD Economic Survey of Japan 2000 was released. This survey underlined the importance of clear and concise inflation targets in order to maintain the loose fiscal policies needed for handling the challenges of bad debt and restructuring.
The world is now waiting for Japan to hammer out aggressive political measures that will bring about an economic recovery and satisfy critics in oversees markets. The fiscal stimulus measures carried out by Japan up until now have proven to be inefficient and of little significance.
With the combined debts of the national and local government totaling 666 trillion yen, we must ask if Japan is going to continue sinking public funds into public works projects that have been largely ineffective.
There have been some signs that even those within the Ministry of Treasury are concerned about the limits to such fiscal stimulus methods.
One political analyst has made the harsh assessment that not even half of Japan's bad debts have been processed, and that there is still the fear of many corporations going under and a continuation of poor disclosure practices despite the introduction of bankruptcy law last April.
Japan must now carry out the following three points. First it must clarify the amount of bad debt held by financial institutions. Then it must make the financial state of institutions more transparent. And thirdly, the Monetary policies of the Bank of Japan must be made more transparent.
By clarifying these areas, gaining the trust of the markets, and creating the conditions for direct investment, the Japanese markets will likely once again become attractive market for doing business.
Who Will Orchestrate Japan's Structural Reforms?
Structural Reform" has been a popular phrase among economists lately, but these same economists are at a loss when ask just how these reforms are to be realized.
Prime Minister Yoshiro Mori was able to put down a revolt from within his own party, but he has yet to win the support of the Japanese electorate. In fact, distrust of the government continues to grow.
Just who will come up with an industrial reorganization plan that incorporates this idea of "Structural reform" The blueprint for Japan'sindustrial reorganization in 1965 centered around prominent figures in Japan's financial circles such as Mr.Sohei Nakayama, and financial capital was used to create a scenario for major amalgamations of the auto industry, steel industries and others. The Japan Economic Research Institute (JERI) played an important role at this time.
On January 9, JERI reported that it would be chaired by Yoshihiko Miyauchi, the chairman of Orix corporation.In a report entitled "International Economy for the 21st Century and Issues for Japan" JERI takes up the themes of "new dynamism and catch-up strategies" The report stresses the importance of the lessons to be learned from America, but offers very little in terms of concrete proposals for realizing these goals.
The following three scenarios emerge when analyzing whether or not Japan will be able to push forward with structural reforms. The first scenario is that some politician will seize the initiative in proposing and executing a reform program.The second scenario involves the private sector realizing these reforms with the help of political backing.
And the third scenario involves foreign pressure being applied to push reforms forward. However,if the status quo is maintained, Japanese politicians will avoid reforming themselves and the fate of the needed reforms will be determined by "Gaiatsu" the amount of pressure from foreign countries.
Related site
-OECD Headquater
http://www.oecd.org/publications/Pol_brief/economic_surveys/japan-e.pdf
-Japan Economic Research Institute (JERI)
http://www.nikkeicho.or.jp/
http://www.nikkeicho.or.jp/miyauchi/pressrelease.htm
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