• Tokyo


I am really sorry to write this, but in my opinion Kumiharu Shigehara’s Nov. 3 article, “Central banks ‘experimenting’ to counter deflationary pressure,” is out of it.

After the financial bubble burst in 1991, governments started to support the economy with more and more expansive stimulus plans and subsidies when it would have been better to let the economy fall by pushing interest rates up and restoring public finances. Social costs would have been hard for a while but would have been softened by social support to the unemployed. Once the economy hit bottom, a real stimulus would have helped rebuild the economy, eventually by authorizing direct foreign investments and opening markets. Japan would have a strong and highly competitive economy by now with a reasonable public debt burden.

But the reality is poor productivity and the temptation, as in Italy, to let the currency cheapen as the nation piles on debt. The problem is that 2010 will be a crucial year for debt. Economists have started thinking that the notation of Japanese debt will be lowered. After all, the Spanish economy is not as bad as off as Japan’s, and its notation has been changed, forcing the government to begin budget restoration.

I have heard talk of the risks to Japanese finance. This means Japan could default within five years because of the out-of- control budget. This is not the Hatoyama administration’s fault, but the fault of all governments up to now. The economy is deflationary because nothing has been done for 15 years beyond the pursuit of a cheap money policy and debt accumulation. Comparisons with Western countries are not valid, as England, the United States, France and Germany do not fear “national” corporate bankruptcies or foreign investments. Japan does.

I’m afraid the only solution is to let poor-performing companies like Japan Airlines Corp. fail and then let foreign companies invest. And start raising interest rates because Japan is going to need some cash to escape default soon.

madjid ben chikh

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