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about Asia Buzz
Letter from Japan: Economic Binge
It's cherry blossom time, just watch your step
By PETER McKILLOP
March 31, 2000
Web posted at 1:00 p.m. Hong Kong time, 12:00 a.m. EST
In a few days Japan's beleaguered salarymen will close the financial books on yet another dismal year, haul out blue plastic sheets and head to their favorite blossoming cherry tree where they will spend the next couple of days getting smashed out of their minds on beer and sake. To some, this is the most beautiful time in Japan. The cheery cherry blossoms are breathtaking against a sunny blue sky or a moonlit night. Parks are filled with singing happy revelers. But others can only see loud drunks lurching from tree to tree or can smell the urine and vomit that accumulates from the prolonged alcoholic binge.
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It is an apt metaphor for how the world views Japan--which is binary, either or; Japan the economic giant about to take over the world or Japan the fiscal chump down for the count at the turn of a new millennium. So, as we peer into Japan's New Year let's consider the prevailing conventional wisdom:
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'Down and out in Tokyo'
A decade-long economic slump has triggered more than a $1 trillion in government spending and all Japan has to show for it are useless government projects, and a government debt approaching 150% of GDP. Its banks are bust, its pension funds are grossly underfunded and its insurance companies are losing $26 billion a year. Deflation and job anxiety have most Japanese hoarding yen like squirrels with nuts. Drip-by-drip corporate restructuring keeps consumer anxiety high and spending low. Finally, the nation faces a numbing array of social issues: Women are refusing to have kids; kids are refusing to study in school, preferring cults or prostituting for Fendi bags and Gucci shoes; the old keep getting older and there is no one to replace them (or pay for their golden years.) Japan, the glass half-empty skeptics argue, is toast.
'Morning in Japan'
'Wrong' say the sake-swilling glass half-fullers. And here is why. Like it or not, Japan is the engine room of Asia. Forty years ago the American economy was 20 times bigger than Japan. Today the gap between economic giants has shrunk to less that 35%. Japan sits on the largest pool of untapped savings in the world--$13 trillion in personal savings and more than a quadrillion dollars in personal assets. Japan, the optimists argue, is on the verge of a colossal boom: a huge domestic economy, a mind boggling capital base, world class technology, a decent managerial class, and a growing appreciation of entrepreneurialism means that Japan is ready to kick ass in the new millennium. "These guys don't need anything from us," says one senior banker. "We--the West--have no leverage on this economy."
That makes the West's new global New Economy titans break out into a cold sweat. They know that Japan could A-bomb the New Economy in a day if it felt like it. They know that Japan still controls the world's largest supply of capital and access to the world's second largest economy. And yet they also know that Japan has been screwing everything up for a decade.
So whether you see the blossoms or the vomit, a half full cup of sake or a half empty can of beer, the future of Japan is in the hands of the Japanese, not the New Economy gurus we read about in TIME, Newsweek and Fortune. Japan, in the words of the legendary singer Frank Sinatra, is going to do it, "my way." And to borrow the phrase of yet another legendary figure, former Washington D.C. Mayor Marion Barry, for those who think they can influence Japan otherwise, it's time to "get over it."
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