Japanese Economy Stagnates Bailout Plans Leave Economy Struggling Under Debt BurdenBy Clay Chandler
THE WASHINGTON POST -- Japan’s deteriorating economy, after faltering for a decade, has strained the government’s resources to the breaking point, Finance Minister Kiichi Miyazawa warned Thursday, saying that “Japan’s public finances are very near collapsing.”
Miyazawa’s reference to Japan’s huge public debt was a staggering concession for leaders of the world’s second largest economy. But it underscored the growing debate in Japan over how much longer the government can, or should, keep spending money to prop up the economy.
Numerous government bailout packages that pumped hundreds of billions of dollars worth of taxpayers’ money into the economy over the past decade have left the government with the worst debt problem in the industrialized world.
Even with all that spending, the economy shrank in the July-September quarter, and some analysts expect the government to report Monday that it contracted as well in the October-December period. More recently, machinery orders plunged in January at twice the anticipated rate. Household spending dropped. So did bank lending. The Nikkei stock index hit a 15-year low last week. Public confidence in the government has plummeted with daily media reports that Prime Minister Yoshiro Mori is struggling to cling to power.
The government is scheduled Friday to unveil yet another set of measures to prop up the economy. But a growing number of critics contend such spending is a waste, and will only add to a debt burden that by 2015 will make it difficult for Japan to care for its aging population.
These critics -- which include financial analysts, economists and entrepreneurs -- argue that Japan’s biggest mistake has been to keep propping up a once-triumphant but now outdated economic system. They say that letting it collapse, while painful in the short-term, would free capital and other resources for more productive ventures that would foster real growth in the long-term.
A shrinking economy? Falling stock prices? Floundering banks? Massive layoffs? Bring it on, say some. “Yes, of course!” said Yoshiaki Murakami, who worked at Japan’s powerful Ministry of International Trade and Industry until two years ago.