2002 September 26 Thursday
Japan: Deer In The Headlights

The Financial Times has an article about the inability of the Japanese to make changes to fix their stagnant deflating economy:

Nobuyuki Nakahara, until March a BoJ board member of a dissident frame of mind, makes a similar point. He quotes Arnold Toynbee, the British historian, as saying that all societies are better at dealing with external threats than internal ones. Japan is the prime example, he says.

Mr Nakahara compares the country's adept response to the external oil shocks of 1973 and 1979 with today's dithering and obfuscation. "The bubble was made from within so it is very much harder to deal with," he says. "Unless the situation worsens very much, no major policy initiatives will be adopted."

Japan's deflation is deepening:

In April to June, Japan's broadest measure of deflation, the gross domestic product price deflator, fell 1.0 percent after a 0.4 percent drop in January to March -- the first deterioration from one quarter to the next since the last three months of 2000.

Reckoning prices will fall even further, many shoppers are delaying big purchases -- a painful reminder for retailers like Ogawa that bargain prices in one of the world's most expensive countries are still no elixir for consumer spending.

Research firm Teikoku Databank, which compiles statistics on bankruptcies, cited a "deflationary depression" as a reason behind 1,814 corporate failures in July -- a 28 percent increase from June and the worst number this year.

Modest proposal for the Japanese government: Cut taxes and have the BOJ buy up most of the sovereign debt.

Share |      By Randall Parker at 2002 September 26 10:19 PM  Economics Political


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