Blessing to U.S. Bush administration and calamity to Japanese people -- Akahata editorial, June 28, 2001
The Koizumi Cabinet has approved the "basic policy for structural reforms" in preparation for the June 30 Japan-U.S. summit talks.
The "basic policy" calls for the early write-off of bad loans from banks' books as the first thing to be done. This is exactly what U.S. President George W. Bush called for in the March Japan-U.S. summit talks at which then Prime Minister Mori Yoshiro submissively accepted the demand. The issue is now at the center of economic policy.
Propping up U.S. economy
The U.S. economy, which is structured on the inflow of enormous funds from abroad for U.S. national bonds and stocks, now faces an economic recession. The U.S. wants Japanese banks to strengthen their financial capacity so that they can prop up the U.S. economy by buying more U.S. bonds and stocks.
The "basic policy" is the Koizumi Cabinet's answer to the assigned task. To the Japanese people, the policy is disastrous.
The basic policy will clearly bring about bankruptcies of small- and medium-sized enterprises due to the write-offs of bad loans, higher social service charges imposed on the people, a possible increase in the consumption tax rate, and a further deregulation of the money supply which will lead to a vicious inflation and wreck fiscal and budgetary discipline. It is certain that the people will have to endure enormous burdens.
What will happen if the two key players of the Japanese economy, household consumption which accounts for 60 percent of the demand and the small- and medium-sized enterprises by which 80 percent of workers are employed, are forced to undergo such an unendurable pain with the economy having slumped to this extent?
Takenaka Heizo, state minister in charge of economic, fiscal and IT policy, said that unemployment arising from bad loan write-offs will be at the level of 100,000 to 200,000, and said that Japan in the coming few years will have to accept a zero or one-percent low economic growth.
The government recognized the economy as being in a state of deflation with prices continuing to fall by more than 1 percent a year. To say that the real economic growth rate, including the price fall, will be at zero to one percent means that the people's livelihoods and businesses indicated in their take-home pay and sales turnover will be definitely on the minus side.
The government maintains that this outlook is based on the assumption that the "overseas economic slowdown will not continue" (Takenaka), an optimistic view that Japan's dependence on exports will continue, underestimating the number of dismissals.
Private sector research institutes warned that the government's policy of "early disposal of bad loans" will create unemployment reaching one million. They also estimate that the reduced income of workers will shrink the household economies as much as five times as what Takenaka predicts.
A private sector analyst points out that, "if the government pushes ahead with the maximum disposal of bad loans now, it will lead to an economic setback and then a drastic decrease in tax revenue; an increase in national bonds issuance followed by a sudden fall of their market price. The Japanese economy will then inevitably enter a 'radical inflationary stage'" (Morinaga Takuro, chief researcher at Sanwa Research Institute and Consulting Corporation, "Gendai" July issue).
Also, underlying the "basic policy" is the call that the people must pay more for medical care and other welfare costs, and especially, that the consumption tax rate will have to be drastically increased within a few years, as openly called for by Finance Minister Shiokawa Masajuro. This is a scenario that will ruin Japan's economy.
Reneging on political responsibility
In the coming summit talks, the U.S. government is expected to call on Japan to escalate its steps in disposing of bad loans in both scale and speed, and to carry out "quantitative easing of money circulation" to its extreme. If Koizumi meets such demands, the Japanese people will inevitably face intolerable burdens.
The task of the government is to curb the reckless moves of the market to safeguard the people's living conditions.
Any arguments will be in vain so long as they support government policy that neglects its own responsibility, giving an additional blow to Japan's depressed economy. (end)