JAPAN - LAND OF THE SETTING SUN
Asia Times, March 31, 2010
Japan announced this week that it was partially withdrawing its planned Post Bank privatization, so that the government would retain a third of the bank's shares. Meanwhile the latest Japanese budget shows a deficit of 10% of gross domestic product (GDP), at a time when Japanese public debt exceeds 200% of GDP.
Through two decades of economic malaise, I have remained optimistic that Japan would solve its problems and emerge into a new era of rapid economic growth. Alas, that enlarged red sun in the east may now be setting rather than rising.
For the 20 years since the Japanese bubble peaked in 1990, I have been generally bullish on the place. Labor productivity growth according to the Conference Board. That performance, comparable to the much vaunted US productivity growth (1.91% annually in the same period) and higher than that in Europe, showed that the prolonged economic stagnation was not adversely affecting the impressive Japanese economic strengths in manufacturing and technology.
The pro-business Liberal Democratic Party remained dominant in the Japanese political system - there was no move to socialism, although public spending and debt increased much too fast. China grew much faster, of course, but growth in the Chinese market offered valuable opportunities to Japanese companies, which were able to outsource much of their low-value-added manufacturing to the behemoth next door while retaining the design and research facilities domestically.
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