The Global Economy in Turbulent Times

CHAPTER 57 Japan in Deep Hibernation¹

I am privileged to be associated with the Asian Economic Panel (AEP), first convened in 2002 on the initiative of the Centre for International Development at Harvard University, Keio University, and the Korea Institute for International Economic Policy. This forum promotes quality analysis of key economic issues in Asia, and offers creative solutions by drawing on the collective wisdom of worldwide economists. The prime movers are Professor Jeffrey Sachs and Professor Eisuke Sakakibara. When Jeffrey moved to Columbia, his new Earth Institute replaced Harvard. Brookings has since come on board.

The AEP last met at Keio University (Tokyo) on September 11, 2010. Observations on what’s happening in Japan by Professor Naoyuki Yoshino, a respected insider from Keio with deep knowledge of official thinking, were insightful. He is optimistic that Japanese economic activity will gradually improve, shake off deflation, and return to steady nominal growth since the bubble burst in 1990.

Sure, the economy is stuck with deflation; public debt is rising, population is aging, and Japan still has to define and find its “proper place” in the world. But Japan is unique. Contrary to conventional wisdom, it is simplistic to say all Japan needed is a strong leader with guts to do what everyone knows has to be done. Yes, Japan’s leaders have so far vascillated and shirked hard choices. To be fair, solutions are far from obvious. A visitor to Tokyo sees no outward ...