Japan's economic prospects are improving. After a decade of stagnation, the consensus forecast is that a fragile recovery will, with careful tending, continue. The emphasis belongs on "fragile," however, not "recovery." While the future holds many unknowns, the government can do its part to minimize the uncertainty. That means building a foundation for sustainable expansion, which, in turn, will stand on three elements: ending the excessive reliance on bureaucrats for economic leadership; replacing them with the private sector; and promoting the structural reforms that will lead to a fair and vigorous economy.
After a decade of stagnation, the indicators are positive. In a report released last December, the government forecast real growth of 1.0 percent for fiscal 2000 (which starts April 1). This follows a 0.6 percent expansion projected for fiscal 1999. For those who remember the go-go years of the 1980s, it is hard to get excited about those numbers, but coming on the heels of two consecutive years of recession -- minus 0.1 percent in fiscal 1997 and minus 1.9 percent in fiscal 1998 -- they offer reason to celebrate. Nor should we dismiss the statistics as hype: All major private think tanks are predicting two consecutive years of positive growth in fiscal 1999 and 2000.
But if the experts agree that there will be a recovery, they part company on its causes and its durability. Official projections that growth will pick up in the next year are disputed by private-sector analysts. The chief difference is the outlook for capital spending. The government expects that it will increase 1.4 percent, the first rise in three years. Some private think tanks forecast a major gain in business investment in information-technology equipment, citing strong demand for personal computers and telecommunications equipment. Others expect a continued decrease in capital spending, however, citing a 40 trillion yen-yen gap between supply and demand.