|
|
 |
|
|
|
Letter From Japan: How to Squander a Nation's Wealth
Could Japan be on the verge of bankruptcy?
By PETER McKILLOP
October 1, 1999
Web posted at 4 a.m. Hong Kong time, 4 p.m. EDT
The Japanese, everyone knows, are among the world's greatest savers. Unfortunately the government is spending money faster than it can be saved. A growing number of economists are warning that Japan's fabled piggy bank is almost empty. Not since the Russians tried to keep up with Ronald Reagan's trillion-dollar "Star Wars" anti-missile scheme has a nation spent so much money, for so little return, for so many ill-conceived projects.
| |
ASIA BUZZ
|
Asia Buzz: The Return of Chairman Snoopy
The mighty mutt of marketing has returned to Hong Kong McDonald's restaurants as the feature toy
- Friday, Oct. 1, 1999
Asia Buzz: PDA SOS
Users of Personal Digital Assistants cry help
- Thursday, Sept. 30, 1999
Asia Buzz: Glamour Boys
Suede comes home to Hong Kong
- Wednesday, Sept. 29, 1999
Asia Buzz: Married to the Mob
But Japanese companies begin to file for divorce
- Wednesday, Sept. 29, 1999
Asia Buzz: Help in Hand
In Jakarta on a mobile phone and a prayer
- Tuesday, Sept. 28, 1999
Asia Buzz: A Scorecard for China
Mao was 70% right. Is that any good?
- Monday, Sept. 27, 1999
|
|
|
ALSO IN TIME
|
Market Q&A
Each business evening with analysts around the region
|
|
ASIAWEEK
| |
|
Japanese households squirrel away money at an unprecedented rate--15% compared, for example, with a negative savings rate in the United States. The country's propensity for savings goes back to its feudal days when wealth, usually in the form of rice and gold, was stored in kura, or storehouses. (You can still see these elegant stucco bunkers connected to old Japanese homes.) In fact, the Japanese name for the Finance Ministry, Okurasho, derives in part from the fact that Japan's government, long ago, stored money and rice in huge kura.
There is an almost mythical belief among Japanese that when they put their money in the postal savings system, or in a public or private pension, those coins and yen notes will be deposited into giant kura somewhere, protected and secure. Think again, Japan. As the noted economist David Roche pointed out in an Asian Wall Street Journal opinion column this week, the government has squandered this great wealth on a series of ill-conceived projects whose primary aim is maintaining the ruling Liberal Democratic Party's political power. "Japan's public finances are in a shocking state. Japan is on the verge of bankruptcy," Roche warned.
Roche is not alone in his concerns. Japan's enormous debt load, says academic David Asher, "dwells like Mt. Fuji over Japan's economic future." These are not idle threats from Japan-bashing Western economists. Take a look at the figures: Japan's debt to GDP trajectory has the same look as the trajectory of an Internet stock--but with negative, not positive, effects. In 1980, Japan's debt to GDP ratio was 50%. Next year it will be 130%, according to estimates by the International Monetary Fund. By 2010 that could soar to 230%, says Asher.
It gets worse. As Japan's population continues to age at the world's fastest rate, both its public and private pension funds are near insolvency. Dozens of Japanese companies find their pension funds underfunded by more than 40%.
Still, Japanese savers, like lemmings to a cliff, continue to trust their money management to the government and its slippery hands. While Americans gleefully go into debt to buy the latest giant plasma television screen, the poor Japanese salaryman sees his wife take more and more of his hard-earned money and put it into the post office savings account--or what Roche calls the "Slush Fund Bureau." From here, he writes, it is used to finance "every lousy scheme and project" a politician can think of.
Roche warns that if the Japanese continues to spend like drunken sailors, financial and economic conditions will deteriorate to the point where the "resent élite will be swept away in a flood of retribution." I wonder. An almost feudal subservience to authority makes me think that the Japanese will, like the proverbial frog in kettle, slowly boil to death unaware, or at least unwilling to do anything about the increasing heat under the pot. Now, how much does that television cost?
Write to us at mail@web.timeasia.com
Search for recent Asia Buzz
TIME Asia home
| |
LATEST HEADLINES:
|
Click Here for the latest regional analysis from TIME Asia
|
|
|
