Bruce Rutledge of Japaninc.com writes:
++ VIEWPOINT: A Contrarian Economist Says Koizumi Just Doesn’t Get It
For those of you cheering on Prime Minister Junichiro Koizumi in his
fight to reduce the size of government spending, Gregory Clark, the
chairman of Tama University, has a message for you: You’re dead wrong.
“There are large areas in the structure of the Japanese economy which
badly do need reform,” the professor says. “Unfortunately, that’s not
what Koizumi and his friends are really looking at. They’re more
interested in an economic policy of fiscal restraint and, until
recently at least, letting the weak go to the wolves, which in a
normal, healthy economy is quite reasonable. But when you have an
economy as weak as Japan’s is at the moment, it’s highly dangerous.”
Clark wades through the 700 trillion yen in public sector debt and the
several trillion yen more in bad bank loans to point to what he says
is a tremendously important figure: Japan has 1,500 trillion yen in
personal financial assets. That’s about $90,000 for every man, woman
and child. That is not a typo — a nine followed by four zeros for
every person in Japan. In US dollars.
“You could have the most efficient enterprises in the world, but
without demand, you’re finished. This should be obvious,” Clark says.
The Japanese are happy to sock their yen away in postal savings
accounts, bank time-deposits and other low-interest vehicles like
government bonds. In other words, Japan is starved for demand.
It’s not that the Japanese are cheapskates. Just ask the people at
Luis Vuitton or NTT DoCoMo. But Clark says the Japanese consumer just
doesn’t want the things Westerners want. “The thing is that us
Westerners, particularly the Anglo Saxons, just want everything and we
want it now — round-the-world trips, yachts, second houses, the
latest electronic gadgetry, second cars, third cars; you name it.”
He calls excessive demand a “tremendous aphrodisiac” for an economy.
But it’s rare in Japan. And while the West often chides itself for not
saving more, Clark points out that savings and economic health do not
go hand in hand. “We have this situation today where there is an
absolutely clear inverse correlation between economic health and
savings rates,” Clark says. “America is at the top of the health scale
and zero savings. Australia is very close behind. Some European
economies are lower because they save 8-10 percent. And there’s Japan
at the top of the savings scale, even during the bubble, and it’s the
weakest economy.”