International -- Editorials
THE BUREAUCRATS ARE BOGGING DOWN JAPAN (int'l edition)
This decade has been a nightmare for the world's second largest economy. Japan hasn't managed a string of decent annual growth rates since 1992. It grew by all of 0.1% in the latest quarter and will be lucky to advance 1% in 1997. Declining land prices, a stagnant stock market, bank closures, and record corporate bankruptcies have triggered deep consumer anxiety.
We blame the bureaucrats. The Finance Ministry's traditional grab bag of policies isn't cutting it. The MOF has little to show for a massive $540 billion in public spending packages other than an Italian-style budget deficit. Nor will a further stage-managed devaluation of the yen be tolerated by Japan's trading partners. The one-shot boost to corporate profits from the yen's 40% decline against the dollar is about to end.
What's needed is a shock therapy program of administrative reform and deregulation to lower prices in Japan and unleash new growth. Bureaucrats micromanage Japan's economy with some 10,000 regulations and licenses. This opaque system keeps domestic and foreign competitors out of shielded domestic markets like retailing, wholesale distribution, and transportation, and drives up costs and prices.
With Japanese companies investing mostly outside the country, people are increasingly worrying about jobs. Prime Minister Ryutaro Hashimoto can turbocharge the economy with reform, but it will require taking on the bureaucrats. If he doesn't, Japan may well be a no-growth economy well into the 21st century. Neither Japan nor the world can afford that.