Wall St. crisis threatens Japan<\/p>\n
Yoshikuni Sugiyama, The Daily Yomiuri, Asia News Network, Tokyo<\/p>\n
In Japan, economists appear to be divided into two groups
\nconcerning their interpretation of a report issued by the U.S.
\nFederal Reserve Board in June. Written by Fed staffers,
\n\"Preventing Deflation: Lessons from Japan's Experience in the
\n1990s,\" is a study of the bursting of Japan's economic bubble
\nthat also describes how monetary policy may be utilized to guide
\nthe economy to a soft landing, with the aim of preventing the
\nbursting of the U.S. stock bubble.<\/p>\n
Those economists and bureaucrats critical of the Bank of
\nJapan's monetary policy have interpreted the report as indicating
\nthat the bursting of Japan's economic bubble was due to the
\ncentral bank's failure to take \"bold\" easing measures. Such
\ncritics have utilized the U.S. study as powerful ammunition with
\nwhich to attack the bank's handling of the economy.<\/p>\n
However, another interpretation has focused on the threat of
\nthe bursting of the U.S. stock bubble. A researcher from a
\nprivate sector think tank said: \"The report indicates that the
\nU.S. monetary authorities are very afraid of the bubble bursting.
\nThey're worried that the United States will suffer the same
\nplight as Japan.\"<\/p>\n
The researcher said the thinking of the U.S. authorities was
\ndominated by the possibility of the U.S. bubble bursting.
\nConcerning such a prospect, the researcher warned of the damage
\nJapan would suffer if the nightmare of the U.S. authorities
\nbecame a reality.<\/p>\n
The number of those who have adopted the second interpretation
\nhas been growing in the wake of the recent plunge in prices of
\nshares listed on the New York Stock Exchange.<\/p>\n
An industry insider said glumly, \"The latest plunge in stock
\nprices has demonstrated that even (Fed Chairman Alan) Greenspan's
\nmagic couldn't prevent the collapse of the bubble.\"<\/p>\n
Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and
\nIndustry, expressed apprehension last Monday about the effect the
\nsudden plunge in U.S. stock prices would have on the Japanese
\neconomy.<\/p>\n
Speaking at a news conference, Yamaguchi said: \"The fall in
\nstock prices is serious. It will have a major negative impact on
\nbanks in their disposal of bad loans.\"<\/p>\n
Hiroshi Okuda, chairman of the Japan Business Federation, also
\nexpressed his concern Thursday that the Wall Street slump was a
\n\"serious crisis\" for Japan.<\/p>\n
While business leaders appeared apprehensive, government
\nfigures seemed less concerned. Heizo Takenaka, state minister in
\ncharge of economic, fiscal and IT policy, said he did not think
\nfalling U.S. share prices would have any serious effects on
\nJapan.<\/p>\n
However, the substantial drop in New York stock prices has
\nbrought a new dimension to Japan's economic situation, with the
\neconomy already suffering from deflationary pressures.<\/p>\n
The latest development on Wall Street has rocked the Japanese
\ngovernment's rosy scenario of an economic recovery that was
\ndevised prior to the puncturing of the U.S. stock bubble. While
\nthe economy has bottomed out, there are fears that it could not
\nonly fail to recover, but also suffer a double-dip recession.<\/p>\n
Nevertheless, Prime Minister Junichiro Koizumi has repeatedly
\nsaid there is no \"quick fix\" for the ailing national economy.<\/p>\n
It is a matter of concern that in Kasumigaseki -- the center
\nof government -- the general consensus appears to be acceptance
\nof the prime minister's stance.<\/p>\n
A bureaucrat said the nation's \"financial and monetary
\npolicies have reached their limits,\" warning that the problems
\nwould only be compounded if the government took further measures.<\/p>\n
The official appeared to believe that the best policy for the
\ngovernment at present was to let matters take their course.<\/p>\n
However, the government does not appear to have the luxury of
\ntaking this approach in view of the fact that the turbulent U.S.
\neconomy has changed the whole scenario. If the United States
\nsuffers an economic meltdown, there would be fierce deflationary
\npressure on both Japan and the global economy.<\/p>\n
Under the circumstances, Koizumi must devise policies to
\ncombat deflation and prevent the economy from suffering the
\nfallout from New York.<\/p>",
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