Which ’’Recipe” for the Japanese Economy?

Abstract

"Quick fix" recipes for Japan's economy are as fallacious as cultural pessimism. It remains a fundamentally strong economy: per capita income at US level, huge household savings intact, cutting-edge technologies. Like Germany's economy, it is maturing, beset by a shrinking demography and molded by 130 years of reliance on indirect financing. Policy problems are cyclical and structural. The bubble, induced by misguided US pressure after 1985, was ruptured with dogmatic brutality, the resulting debt deflation mismanaged until March 2002'. But Koizumi's reform has recovered strategic pragmatism: short-term anti-deflation measures, medium-term reform of banking structures, long-term public debt reduction, backed by improved division of powers in government.