BusinessWeek: January 11, 1993

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THE SETTING SUN?

THE BUBBLE ECONOMY

By Christopher Wood

Atlantic Monthly Press 210pp $21



Just as economies swing in cycles, so do publishing themes. Several years ago, at the height of Japan's "bubble economy," a slew of books warned of Japan's inexorable global expansion. Now that the bubble has burst, Christopher Wood offers one of the first of what will probably be a flood of tomes predicting doom and gloom for Japan. That country's impending "full-scale crash," Wood writes, "...now threatens the stability of Japan's post-1945 political order" and "could sink the world into a 1930s-style deflationary depression."

Wood, The Economist's Tokyo financial editor, has consistently been ahead in predicting the pain the wanton late-1980s would inflict. Focusing here on banks' indiscriminate lending to real estate speculators and the unwarrranted runup in stock prices, he marshals impressive numbers, cases, and arguments to depict Japan's profligate plight.

Wood may well be right that worse is yet to come. But he won't convince most knowledgeable readers that Japanese-style capitalism and politics are headed for history's junk heap. He asks readers to take most of his forebodings on faith--mainly faith in neoclassical free-trade economics. Now that Japan has internationalized its once-isolated economy, he reasons, market forces will finally have their way with it. Indeed, the formidable documentation notwithstanding, this book often reads like a tract. People who disagree with him, Wood suggests, are either "quislings or bashers." He flippantly distorts the important "revisionist" analysis of Japan, which holds that Japan operates by different rules, and states that Japan will soon converge with the West. Having repeatedly defied its obituary writers, Japan deserves more benefit of the doubt than Wood is willing to grant.

ROBERT NEFF
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