>From the latest issue of the Economist:
Public borrowing and spending, in true Keynesian fashion, have helped support demand, but they have been overwhelmed by the drop in private demand. In one stimulus package after another, the government has pumped what it claims is close to ¥80 trillion ($600 billion) into the economy since the Japanese bubble burst in 1991 (though only about a third of this was genuinely new money). This, it hoped, would revive personal spending. Yet only in one year since 1991, in the house-building boom following the Kobe earthquake of 1995, has consumer spending grown by more than a meagre 1-2%.
Worse, personal spending is now actually shrinking. People brought up on the notion of lifetime employment have begun to feel the chill wind of redundancy, while also worrying about the safety of their savings in banks and life insurance companies. First, overtime and bonuses were slashed; now, as Japanese manufacturers close factories and rationalise production, unemployment is on the rise. Firms that are no longer cushioned from pain by banks that are themselves in trouble are falling like flies. The value of the liabilities left behind by bankruptcies soared last year by 75%. The unemployment rate has climbed above 4% (see chart 1). That sounds low by western standards, but is probably equivalent to 8-10% if measured in an American or European way.
Job insecurity and falling incomes are only part of the story. Deflation is also a factor. As households see prices falling, they wait for goods to get cheaper before they buy—and they are not put off by earning so little interest on their savings meanwhile.
Louis Proyect
(http://www.panix.com/~lnp3/marxism.html)