09/21/98 IN JAPAN, LACK OF INNOVATION WAS NOT THE PROBLEM (int'l edition)

IN JAPAN, LACK OF INNOVATION WAS NOT THE PROBLEM (int'l edition)

There can be no objection to the argument in ''The innovative society'' (Editorials, Aug. 24-31) that nations can rise and fall as they try to adapt new technologies. But you are wrong in applying this concept to Japan.
First, Japan's decline is supposedly attributed to its inability to adapt to new technologies. What a bad joke this is. Economists agree that current stagnation in Japan stemmed from the burst of economic bubbles. Many of them quickly add that the bubbles were caused by unreasonably low interest rates forced on Japan by the U.S. at the time of the Plaza Accord. The simple fact may be that despite many efforts by Japanese businesses to develop and use new technologies, they couldn't overcome the aftermath of the enormous, and admittedly stupid, economic bubbles we had.
Second, Japan is assumed to have turned to a beggar-thy-neighbor policy of currency devaluation, unable to adapt to information technologies. This is nonsense. In a country such as Japan, where free flow of capital is assured, a currency devaluation ''policy'' can never be plotted. Rather, it is more likely that U.S. traders and fund managers played with the yen to lower its value.
Hideaki Yamashita
Funabashi, Japan