Modesty may be a Japanese virtue but you can have too much of it. Pity poor Masaaki Shirakawa as he takes over as governor of the Bank of Japan knowing that the long-term prospects for the Japanese economy are pretty grim. Whether he or his successors can do much about it seems somewhat unlikely though, given the global banking mess, Japan's vast government debt and the hesitancy of the government or opposition to dare raising the consumption tax to help offset the revenue deficits.
Japanese politicians, commentators and academics appear to be in general agreement that the nation's real growth is going to be modest indeed over the next decades. Economy minister Hiroko Ota wrote last month that her "best-case scenario" can only project real economic growth of 1.7% and her most pessimistic one suggests a mere 0.9% growth. And she is far from alone. A brand new co-authored text, under the decidedly optimistic title of "Acclerating Japan's Economic Growth," comes up with equally grim figures for the years to 2020-2025 that are guaranteed to give Shirakawa lots of sleepless nights.
Call it the nightmare scenario if you wish, but perhaps it's in the best interest of the Japanese economy that the patient hears the bad news. It's surely more likely that the correct medicines may be prescribed if first we have a thoroughly accurate prognosis.
Given their remit to pump up growth, it is hardly surprising that the book's four authors reckon that it's not all black if -- and only if -- concrete measures are taken to raise productivity levels across the board and the nation willingly embraces new technologies. This could well transform the distribution system and telecommunications business plus giving a kick-start to infant high-tech industries.
Cynics will immediately respond that they have heard all this dozens of times before. Yet the joint team of American and Japanese economists stress that to "speed up the long-term growth of the Japanese economy is the fundamental challenge of policymaking" and time isn't on Tokyo's side, when even the once lazy Brits and those strange folk in Euroland continue to do better than Japan. In other words, the pols have got to get their acts together -- no more roads to nowhere and bridges over streams please -- and those stiff-necked bureaucrats should stop thinking only of their own turf and reckon with the national interest for a change.
Since the old mantra of "reform" appears to have quickly turned into a soggy mess, the public has reason enough to mutter about out of touch professors swimming in the calm waters of academia. Tenured economists, after all, can call for the use of a sharp sword without being in much danger of actually feeling the pain, yet the authors are correct. Without substantial change, as opposed to the quasi-shifts of the last decade in the financial sector, public works, local government and education, Japan is in for a rougher and rougher ride. Few though are willing to volunteer to be the messenger for fear that calls for retraining and downsizing will create anxieties and lead to the loss of tons of votes.
Of course, no one is likely to take such warnings seriously until the crisis hits Tokyo but by then it could be too late. Arguing for high growth will, by definition, demand greater changes from the public and intelligent investment from corporations in areas that it may have neglected to date. If successful, though, it would help solve the revenue problems that the Bank of Japan is so anxious over and also make a major difference to Japan's decidedly weak self-confidence. The sooner Japan confronts the choices of continuing with comfortable stagnation or accepts the necessity of a more hands-on reform program, the better. For now, though, all the money is on drift and resistance.© Japan Today