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Does Japan's Fiscal Tonic Have Any Kick?


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DOES JAPAN'S FISCAL TONIC HAVE ANY KICK?

The article "Tokyo is finally grabbing the economy by the horns" (International Business, Sept. 25) overestimates the effect of recent government moves to revive the Japanese economy. The yen's current lower value is entirely artificial, and its maintenance depends in part on a quick revival in consumer spending (which would increase imports and reduce the trade deficit) in order to become permanent. The rise in the Nikkei index since its June low has had almost nothing to do with the Sept. 8 rate cut and a lot to do with foreign investment in the market. Foreigners are in effect propping up Japan's financial system.

Aside from the discount rate cut, the Ministry of Finance's moves to resolve the banking crisis are pathetically weak, and the projected solution to the housing-loan corporation crisis has been pushed back to December at the earliest. On the deregulation front, precious little has actually been done. If there is even a modest turnaround, it is likely that the process will grind to a halt.

Finally, the likely ascendancy of Ryutaro Hashimoto to Prime Minister signals a return to old-style Japan Inc., a world where bureaucrats work late into the night devising measures to expand exports and limit imports. It might work in the short run, but never in the long run.

John M. Tofflemire

Tokyo


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