Hmmm. Whaddaya know. Japan, said to be in a depression for the last 5 years, now says it faces economic disaster

greenspun.com : LUSENET : Unk's Wild Wild West : One Thread

FRIDAY MARCH 09 2001 Japan admits economy is facing disaster FROM ROBERT WHYMANT IN TOKYO JAPAN is close to financial disaster after running up a huge public debt trying to spend its way out of stagnation, Kiichi Miyazawa, the Finance Minister, said yesterday.

Issuing the most serious warning on the economy from a senior minister, Mr Miyazawa called for drastic action to reduce the public debt. “Japan’s fiscal condition is approaching a state of collapse,” he told parliament. “We have to make painful decisions.”

It is exceptional for government officials to express concerns about the economy so forcefully, and Mr Miyazawa’s comments triggered a sell-off of the yen.

The authorities have poured billions of yen into public works in a largely vain attempt to rescue the economy from its worst malaise in decades. Wasteful spending on airports, dams and roads has inflated public debt to the biggest in the industrial world. In the past ten years it has more than doubled to reach 134 per cent of Japan’s total annual economic output.

Mr Miyazawa, who admits that he has presided over the build-up of the debt, did not elaborate on what reforms he thought were necessary but hinted that taxes would have to rise to stave off catastrophe.

Alarmed by his candour, government colleagues rushed to put their own spin on his comments. Yasuo Fukuda, the Chief Cabinet Secretary, said Mr Miyazawa meant that “Japan would be in trouble if it didn’t do anything about its finances in the coming ten or 20 years”.

But Toshiro Muto, the Deputy Finance Minister, told journalists that Mr Miyazawa was referring to the serious state of the Government’s finances.

At one point the dollar rose above 120 yen for the first time in 20 months, helped by a growing view that Japanese authorities will tolerate a weaker yen.

Despite Mr Miyazawa’s concerns, the Government is not expected to tackle the runaway debt before the July election for the Upper House.

The nation lacks a leader capable of making tough decisions on how to clean up the financial mess. But even though the Liberal Democrats cannot agree on a replacement, the fate of Yoshiro Mori, the Prime Minister, is becoming clearer. After being condemned for repeated gaffes, he has agreed to go, probably next month.

-- Y2K (aint@over.yet), March 09, 2001


Moderation questions? read the FAQ