Japan--Worse is yet to come
TOKYO -- Japan's economy is in the midst of a long winter, and spring isn't yet in sight.</br></br>In the past two years, Japan has experienced the shocks of a stock market collapse, export contraction, plummeting corporate profits, credit crunch, and toppling of a political order. Regardless, worse is yet to come as Japan flounders halfway between a managed or market economy, between a rigged or open political system. There's no going back to the pretenses and protectionism of the past, yet there is great pain -- low growth and high unemployment -- in moving toward a more open economic and political system.</br></br>To make matters worse, the Clinton administration has chosen this of all moments to launch a frontal assault on Japan's trade practices. More important than the poor timing is the fact that the get-tough policy is short-sighted for America. Hopes for sustained global growth, and thus expanding U.S. exports, are dependent on hitching Japan's economic engine to our own. The most effective spur to nascent U.S. recovery would be growth in Japan. Yet most predictions put annual growth in gross domestic product this year at well under 1%, compared with 3% for the U.S.</br></br>At the core of Japan's economic problem lie national and corporate noncompetitiveness. The combination of an unrealistically strong yen, a padded work force and years of export-at-all-cost corporate strategies has left Japanese companies with big losses and their bankers holding big debts. For the first time, Japanese companies can't export their way out of these difficulties because the high yen makes their products uncompetitive overseas.</br></br>Japanese banks, with their own assets severely reduced by the 1992 market collapse, lack the ability or inclination to bail out Japanese companies. Japanese consumers, meanwhile, can't be counted on to rescue corporate Japan by buying overpriced Japanese goods. Despite these realities, Japan has yet to taste the bitter medicine America has taken since the end of the '80s -- corporate downsizing and restructuring, layoffs and rising unemployment, economic pain at home for economic competitiveness abroad.