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Japan: End of a win streak

"Japan: End of a win streak" Continued...

Issue: "Troops hunt for weapons," June 14, 2003

In 1990 government debt was 65 percent of GDP, but in 2002 it was over 140 percent of GDP. (U.S. government debt in 2002 was 58 percent of GDP.) One reason is that Japan spends about 9 percent of its gross domestic product on public works, compared to about 1 percent in the United States. Faced with recession, Japanese authorities in the 1990s deliberately pursued a policy of spectacular deficit spending in order to revive the economy, with a huge emphasis on new public works projects, public expenditures for social infrastructure, and bailouts for banks. None of this has worked, and the Japanese economy has continued to contract.

Not allowing readjustments, the Japanese are stuck with $5 cups of coffee and construction costs inflated by 30 percent to 50 percent-and perhaps things far worse. Rejection of the straitjacket has led some to the opposite extreme. Japanese talk of teen disenchantment and an increase of graffiti, theft, and chaotic classrooms. Twenty years ago students would wait to go to the bathroom, or in cases of desperate need would raise a hand tentatively. Now they get up and go. Once any kind of incivility on trains or buses was taboo; now, some people eat in those public conveyances and occasionally get into fights.

So economics and culture work on each other in what can readily become a downward societal spiral. A 2002 cover story in Newsweek's Asia edition captured the mood: "JAPAN TAKES IT EASY: The Former Juggernaut Seems Destined to Become Asia's Switzerland-Rich, Comfortable and Irrelevant." In 1990 average Japanese employees worked 212 paid hours more per year than Americans, the Organization for Economic Cooperation and Development reported. By 1999, they worked 31 paid hours less. Operating costs of Japan's businesses are now one-third higher than the average in other major industrialized countries. Ware ware Nihon-jin is now rarely heard, perhaps an indication that the harmony has been broken.

Unless Japan can generate faster economic growth-and end its debt dependence-there will someday be an immense crisis. This includes the possibility of a debt default. Lenders may refuse to lend because they don't believe the debt can be serviced. This could bankrupt financial institutions that already hold government debt. Just because Japan is richer than Argentina does not mean it is invulnerable to a comparable financial collapse, with cultural and religious effects hard to predict.

Marvin Olasky
Marvin Olasky

Marvin is editor in chief of WORLD News Group and the author of more than 20 books, including The Tragedy of American Compassion. Follow Marvin on Twitter @MarvinOlasky.

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