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Economy, No.2  Sept. 24, 2010


These days people are talking about how Japan’s public finances are in danger of going bankrupt, but I frankly do not understand what they consider to be a state of bankruptcy. Certainly the government has gone heavily into debt, but for the most part, the outstanding government obligations are domestic in nature. That is, they are bonds held by Japanese parties, not by overseas investors. In effect, the Japanese are in debt with each other. It is like a family in which the husband has borrowed money from the wife, not from some loan shark. Under the circumstances, no problem will arise as long as inflation does not set in and interest rates do not rise too high. To be sure, the government needs to keep on meeting interest payments and rolling the debt over, but it has the financial tools for that. The ... ... [Read more]

Economy, No.2  Aug. 6, 2010


On June 18 the cabinet of Kan Naoto, Japan’s new prime minister, approved a growth strategy for “a strong economy, robust public finances, and a strong social security system.” Kan’s Democratic Party of Japan suffered an embarrassing setback in the July 11 House of Councillors election, when it was unable to garner a majority of the upper house seats, but his administration remains determined to incorporate the strategy’s policy measures, including a cut in the corporate tax rate to strengthen the competitiveness of Japan-based companies, in the budget for fiscal 2011 (April 2011 to March 2012). The hope is to rescue the nation’s economy and society from the two decades of stagnation that have followed the bubble boom in the second half of the 1980s. Through the combined efforts of the public and private sectors, the administration seeks to realize an average 3% nominal ... ... [Read more]

Economy, No.2  Aug. 4, 2010


Subsequent to the outbreak of the global financial crisis symbolized by the bankruptcy of Lehman Brothers in September 2008, the United States, Japan, and other Asian countries have all been recovering, each at its own speed. Even Europe has returned to growth, although the Greek debt crisis has slowed the pace of recovery there. Particularly compared with Britain, which is transitioning into the postindustrial age and has, accordingly, seen a long-term decline in industrial production, Japan’s recovery was quick. Germany also bounced back fast, though its upturn has recently lost momentum. Japan’s real gross domestic product and real consumption bottomed out in the January-March 2009 quarter and have returned to growth. Statistics on Japanese employment do not yet show improvement, but workers are spending more time on the job, and eventually the longer working hours will lead to gains in the... [Read more]

Economy, No.2  Aug. 2, 2010


ITOH MOTOSHIGE How does the current global business environment look to you? HOMMA MITSURU The American economy has been extremely active of late. And even though unemployment remains high, pricey consumer products in cars and electronics have begun to move, in particular in May and June. If we don’t see a recurrence of the financial problems, I think the recovery will move forward steadily. On the other hand, Europe is still not showing much sign of recovery following the Greek financial crisis. But solar power generation is doing well; this is probably due to the “feed-in tariffs” whereby privately generated power is purchased at a set price. ITOH I heard that FITs had been a failure in Spain. HOMMA Yes, it’s true that the system did collapse in Spain at one stage. Following this failure, countries such as Germany are moving ahead... [Read more]

Economy, No.1  Jul. 30, 2010


Two decades have passed since Japan’s bubble began to burst in 1990, and throughout this period the economy has been in poor health. It has encountered successive financial crises, experienced price deflation for the first time since World War II, and seen the public debt mushroom, all the while limping along at a very slow growth rate. This has been a bewildering change for a nation that until then was registering spectacular growth. After all, over a period of more than 40 years after the war’s end, Japan’s economy had grown into an entity so weighty that it was even said to have become a threat to the economy of the United States. Why did a speculative bubble with so much destructive power inflate in the second half of the 1980s, and why has the impact of its deflation lasted so long? These are ... ... [Read more]

Economy, No.1  Jun. 3, 2010


In September 2008 the world economy, hit by the financial crisis symbolized by the bankruptcy of Lehman Brothers, went into a tailspin, but in the second half of 2009 it pulled out of the dive and began to regain altitude. Then in March and April 2010, just when optimistic views were becoming widespread, yields on Greek government bonds suddenly rose, and a crisis of sovereign risk came into view. Confidence in the euro was badly shaken, and worries about European economies and the global economy spread. Once again the future of the world became shrouded in uncertainty. Stock markets tumbled, and many countries in Europe and other parts of the world experienced a mushrooming of fiscal deficits, since tax revenues had declined following the Lehman shock, while government spending had been stepped up to apply stimulus. With Greek government bonds sustaining a crippling blow, ... ... [Read more]

Economy, No.1  Jun. 1, 2010


Late last year the news that a Korean-led consortium had won a major order for a nuclear power project in Abu Dhabi brought further gloom to an already downbeat Japan. The Japanese media noted that South Korea’s President Lee Myung-bak had visited Abu Dhabi repeatedly in support of the Korean bid and suggested that the Japanese government did not have an adequate setup to back Japan’s bid. A senior official at the Ministry for Economy, Trade, and Industry offered this postmortem: “This is a defeat for the Japanese business model. Japan was trying to sell Abu Dhabi nuclear power plants. But Korea was offering to provide a steady supply of electricity for sixty years. The Koreans were selling electricity.” The South Korean government and the company leading the bid shared the same objective and conducted repeated top-level sales in order to achieve it. They ... ... [Read more]