Asia Times: EDITORIAL: Dimly bright Japan



	July 02, 1999	atimes.com

Japan

EDITORIAL: Dimly bright Japan

The Japanese haiku verse form is rendered in English as three unrhymedlines with a total of 17 syllables. Short and to the point - well, somepoint or other, anyway. Poems in this form often are on some subject innature and should contain references to the season, weather and so on.

Judging by his statements over the past several months, Economic PlanningAgency (EPA) chief Taichi Sakaiya is an experienced practitioner of thistype of wordsmithing. On a Sunday TV program he described the Japaneseeconomy as ''close to sunrise,'' adding: ''Even when the sun comes up,the day could be rainy."

Not to be outdone when it comes to such circumlocution of economicconditions, a Nihon Keizai Shimbun survey of 30 industries says severalsectors serving consumer demand expressed a ''dimly bright'' view ofbusiness conditions for the July - September period, up from ''gloomy'' inthe previous quarter. The amusement sector even predicted ''bullish''prospects, improving from ''dimly bright.'' Ah, Japlish, how we love you!

To make it all even brighter, dimly, the Japan Federation of EconomicOrganizations (Keidanren) has drawn up a list of projects focusing oninformation technology, the environment and care for the elderly, to beconducted jointly by government and industry. The list of proposalsdesigned to reinvigorate Japan's industries is to be presented to PrimeMinister Keizo Obuchi's Competitiveness Commission at its next meeting inearly July. Projects include developing an ultra-small device fortranslation tasks, a system to input data into computers by use ofsound and digitizing all government documents within two years.

Sadly not included is a haiku-length statement telling the government tobutt out of private-sector business and stay out. Instead, the emphasis ison undertakings ''conducted jointly by government and industry,'' confirmingour suspicion that the Competitiveness Commission is little more than athinly disguised life-support system for ailing firms and for arrangementsto have the government shoulder investment risks in new technologies - risks thatJapanese companies are not prepared to take.

Japanese ministries, notably MITI and MOF, have for decades supportedindustry with not just directed credit and capital but final demand. Now, as corporate restructuring is on every bureaucrat's and corporate executive's lips and as money for subsidies is running out -the OECD forecasts that Japan's deficit onnational and local government spending will account for 9.0 percent of GDPin 2000, while the U.S. budget surplus will be 1.8 percent and averageEuro-land deficits around 2.0 percent - the same old ''irontriangle'' game between government, the LDP, and the ''Big Four'' economicorganizations is nonetheless continuing. It's dim-witted, with no sign ofbrightness in evidence.

As Goldman Sachs Japan managing director Kathy Matsui says: ''Unless thegovernment steps aside and allows market forces to determine the pricingand allocation of capital, companies will continue to operate withoutdiscipline from the capital markets, meaning that the road to greater assetefficiency and improved returns on capital could be a long one."

Not much to add to that. Back in the 1970s, Japanese industry produced 114yen in output for every 100 yen of capital stock. By 1997, that measure ofproductivity of asset allocation had dropped to a miserable 47 yen forevery 100 yen of capital. If government continues aiding and abettingmisallocation of resources, the road to improved returns and in-depthbusiness recovery won't just be a long one, it will end abruptly at theedge of a steep precipice.

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