It's almost over; let it go. No one in their right mind can deny that 2009 has been the most unpleasant year in decades for the global economy. At times, it looked as if we might be in for a nasty, brutal and lengthy recession before things began to gradually stabilize across several sectors.
At year's end it is legitimate to suggest that the storm is beginning to blow itself out. We may have had something approximating to the crash of 1929 but we are not likely to get another great depression along the lines of the 1930s. The banking crisis that began in the autumn of 2008 was gradually contained this year via a concerted and massive set of government-led interventions in North America, Japan, Britain and Euroland. International cooperation with Keynesian weapons appears to have done the trick - in stark contrast to the beggar-my-neighbor, cost-cutting orthodoxy of the interwar period.
The world is now breathing more easily as cash injections galore shore up the very financial institutions that had started the mess in the first place. No wonder there has been anger in the West at the manner in which banks that were first granted emergency blood donations have been slow to lend again. No wonder, too, that politicians in the West have slammed the banks for celebrating their rescue courtesy of the taxpayer by rewarding themselves with handsome bonuses.
Yet it may well pay to be cautious over Japan's prospects for the new year. While other major economies can at least begin to reckon with greater inflation on the horizon, the reality for Tokyo is the creeping return of the "D" word. The bogey of deflation is already hitting us and it is surely going to take a series of full-scale emergency packages to avoid a repetition of its lost decade.
The Japanese public does not need to be told of the advantages and disadvantages of deflation. It knows, of course, that once deflation has set in, the chances are that it will be around for a mighty long time. As it becomes more and more entrenched, the temptation is for Mrs Watanabe to postpone her big ticket shopping for a few more months and simply wait to see how much further prices will keep on coming down.
Such thinking makes perfect sense for the family budget but it inevitably prolongs the nation's economic woes. It may also contribute to the fact that her husband receives less overtime and that their eldest son can only find low-paying part-time work at the suburban convenience store or bicycle repair shop.
The evidence over deflation was underlined this week by a visit to my local supermarket down on the coast. With consumers stocking up for the holidays, this usually means a case of seasonal price hikes but not this year. No sir. My receipt shows that ripe avocados are going for 68 yen each and that excellent value Chilean wine can be found for 590 yen.
For now, though, Japan is still pretty content with its coalition cabinet led by Prime Minister Yukio Hatoyama when compared with the dismal ratings of recent LDP administrations but the big challenge remains the economy. Getting more people back to work, while fulfilling its manifesto promises, will require yet more increases in the government debt, even if this will probably worry the electorate far less than seeing what happens to promised child allowances and their parents' pensions.
It's true that department stores and supermarkets keep on registering lower sales and that major corporations are merging out of necessity but Japan should take a little bit of comfort from two factors. First, there is GDP growth, unlike Britain and much of the Eurozone, and secondly, its financial position has its positive side through hefty trade surpluses.
As 2010 approaches, Japan senses that other nations have had an even harder time of it this past year. Japan has certainly had its share of troubles but with a new government and a spot of luck, it could be in for a brighter future. At least it won't have to endure being on the receiving end of any more lectures on the benefits of the Anglo-Saxon economic model or how best to supervise its financial system. Blessings, indeed, that are surely set to continue.© Japan Today