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Ex-U.S. official urges ‘true’ reform> Japan must take the plunge and carry out true deregulation if the nation wants to revive its “half dead” economy and achieve healthier trade relations with the rest of the world, Clyde Prestowitz, a former senior official of the U.S. Commerce Department, said Oct. 27 in Tokyo.

Speaking at the Foreign Correspondents’ Club of Japan, Prestowitz, who is now chairman of the Washington-based Economic Strategy Institute, warned that the two nations would enter another series of trade friction unless Japan acts decisively and turns itself into a domestic demand-led economy.

“We are at a juncture, it seems to me, in which the story is about to repeat itself except at a higher level of intensity and (with) fewer tools and fewer areas (in which to) maneuver,” he said.

Prestowitz said the current situation, characterized by the strengthening of the dollar and Japan’s soaring trade surplus, resembles that of the 1980s, when the two nations experienced fierce trade friction. U.S. officials are once again lecturing the Japanese on stimulating the domestic economy and deregulation, but the prospect remains grim, he said.

Referring to the ongoing “Big Bang” financial reform of Japan, Prestowitz said, “There will be some deregulation but it won’t be a through-going deregulation.” However, he said Japan must gather its courage to carry out true deregulation and reform if it wants to stimulate its own economy without causing friction with the rest of the world. Prestowitz said that Japan’s huge trade surplus is “serious enough” in terms of U.S.-Japan trade relations but it has gone beyond mere bilateral relations.

Japan, which is at the head of the so-called flying geese model of economic development in Asia, was supposed to have long grown into a domestic demand-led economy, becoming a major importer and providing growth to other economies in the region, he said. Japan’s repeated failure to become such a domestic-led economy is putting “enormous pressure” on other Asian economies that are facing growing pressure from China, he said.

“The future of the Japanese economy, the future of other Asian economies and even to some extent the future of the U.S. economy,” he said, “rest upon the ability or lack of ability of Japan to truly deregulate and restructure its economy.”

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