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Japan Accentuates A Bit of Positive
OKINAWA, Japan, July 21 –– The health of Japan's economy figured right at the top of Prime Minister Yoshiro Mori's agenda today when he launched the opening session of this year's summit for the Group of Seven industrialized nations.
Consider the good news, he urged the other leaders In the fiscal year that ended in March, Japan managed to eke out positive economic growth, after shrinking for three years.
Whether Mori's counterparts applauded--or merely snickered at--this milestone could not be learned from the Japanese government officials who soberly described the session for journalists here later this evening.
Perhaps, though, it's just as well that in this country modesty is such a cherished virtue. For Mori this week, it would also appear to be a necessity.
The Japanese government is going all-out to make a good impression--shipping in tens of thousands of security police and spending a staggering $850 million on new facilities for this impoverished southern island to make sure the three-day summit is a success.
But that organizing and hospitality have failed to obscure the fact that the committee of aging politicians who make policy decisions in this country has so far failed to deliver the one thing the rest of the world wants most sustained recovery of the planet's second-largest economy.
Mori, the genial college rugby star who was thrust into the nation's top spot following the unexpected death of Keizo Obuchi, is working to avoid embarrassment at these proceedings. But he confronts a thankless task. As chairman of the summit meetings, he is expected to lead discussions of policies aimed at stimulating growth and raising living standards worldwide. But as the rookie prime minister of the Group of Seven's most disappointing economic laggard, he seems uniquely ill-suited to that role. The Group of Seven--the United States, Britain, France, Germany, Italy, Canada and Japan--becomes the Group of Eight tonight when Russia joins the proceedings.
In 1999, Japan's economy grew by a mere two-tenths of a percent. By contrast, Italy, the group's next-worst performer, grew 1.4 percent, while the two top performers, the United States and Canada, each grew more than 4 percent. A survey of international economists by Consensus Economics, the London-based forecasting firm, found that on average experts queried expect Japan to grow no more than 1.5 percent this year and next--trailing well behind growth rates in the other G-7 nations.
"What I see for Japan" in years to come is "a continued muddle-through scenario," said Ron Bevacqua, a Tokyo-based economist for Commerzbank Securities. "It'll be pockets of strong growth [in sectors such as information technology], surrounded by large, stagnant pools of decline."
What makes the road forward so perilous for Japan, many experts say, is that the government has already tried the familiar policy levers. It has pumped hundreds of billions of dollars into the economy in the form of stimulative deficit spending programs, pushing the ratio of government debt to annual economic output to a dizzying 130 percent. The central bank, meanwhile, has kept interest rates at or near zero for almost a decade.
Now, the only real solutions left also happen to be the most politically wrenching, argues Keio University economist Haruo Shimada. Japan "has no choice but to take on structural reform," Shimada said. "Our whole system is antiquated, incapable of meeting the demands of the new era. We've lost the last decade. . . . Now there is a chance Japan would lose another decade to come."
Politicians and business officials in the group's other nations share Shimada's fear--as, indeed, do leaders from the developing economies in Africa and Asia whose support Japan has cultivated so assiduously at other gatherings this year. Perhaps in deference to the host, those concerns received only glancing mention in the joint communique issued by the G-7 leaders following today's meeting. The document said only that Japan's economic policies "should continue to be supportive to ensure domestic demand-led growth."
The communique also called on Japan to push ahead with reform of its corporate structures. But the Japanese government's extreme reluctance to unleash such changes was on display this past week as bureaucrats from the Ministry of Posts and Telecommunication teamed with top diplomats from the Japanese Foreign Ministry fought against a U.S. effort to lower fees charged for access to local phone lines and the Internet by the nation's largest telecommunications provider, Nippon Telegraph & Telephone Corp.
Japanese columnist Nobuhiko Shima is one of a growing number of Japanese observers who argue that, in failing to face up to the challenge of restructuring its own economy, Japan is forfeiting its claims to speak on behalf of other nations in Asia.
The surest way for Japan to seize leadership in Asia, he reasons, is to become a large consumer of Asian goods, and thus central to the well-being of its neighbors' economies. "If Japan can import Asian commodities into our market, that would show the Asian countries and the world that we can lead the economies in Asia," he said.
"In the '70s and '80s, Japan was big by its own power. But we are losing that grasp. Japan's influence in Asia is declining."
Correspondent Doug Struck in Nago, Okinawa, and special correspondent Akiko Kashiwagi in Tokyo contributed to this report.
© 2000 The Washington Post Company
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