Economists Unimpressed

U.S. President Bush’s six-day visit to Asia in February began on a serious note—a meeting with Japanese Prime Minister Junichiro Koizumi to discuss the distraught Japanese economy.

The meeting was more than Mr. Bush simply encouraging Mr. Koizumi to implement bold reforms. Japan—possessor of the world’s second-largest national economy—carries enough economic clout for ripples of its woes to be felt the world over, and it has the potential to aggravate the U.S. recession significantly.

With public confidence in Koizumi’s determination to implement an economic overhaul waning, Japan’s economy is suffering more than ever. Its public debt has risen to the highest level of any major industrialized country—a whopping 130 percent of the Gross Domestic Product. The major banks’ real assets are not valued at much more than the $56 billion in public money that was given them three years ago in a “one time” bailout. The country is in its fourth recession in a decade, and, as though to deal a final psychological blow, the Nikkei-225 stock index closed at 9,791.43 on February 1—dipping below the Dow Jones industrial average for the first time in almost 45 years.

As Yoshihiko Miyauchi, chairman of a government deregulation panel, commented, “In the last five years, Japan’s best contribution has been to not have collapsed” (International Herald Tribune, Feb. 18).

Koizumi’s leadership will be tested in the coming months as he struggles to keep Japan afloat. Despite Bush lauding Japan as “one of America’s greatest and truest friends,” signs of real economic progress are scarce, and the dialogue between the two leaders disappointed economists. Akihiko Suzuki, an economist at Sanwa Research Institute and Consulting, summarized the visit: “Nothing changed for Koizumi’s reforms before and after Bush’s visit” (Agence France Presse, Feb. 18).