> I have read that extra government spending in Japan within the last year or
> so has been as much as 40 pct. of GNP. I mean: They can do so once and
> maybe two or three times, but they can't continue to do so, can they?
> And up to now it seems this public spending has only had a limited effect.
Oh, they have the money alright. After checking with various OECD and press reports, it seems that Japan hasn't actually spent all that much in the real economy; much of the stimulus packages were smoke-and-mirrors or a shifting of accounts. Very little new real money (what the Japanese call, picquantly, "real water") was involved; maybe $250 billion or so from 1992-96, hardly enough to bestir Japan's massive $4.5 trillion annual GDP from its lethargy. This is much less impressive than Germany's $600 billion 1990-1997 bailout of East Germany, or the billions of ECU transferred from the rich EU countries to the semiperipheral ones via the EU structural funds and EIB lending and the like.
The bailout of the banks, on the other hand, involves some serious cash: $500 billion or so. But remember, this is all long-term debt, which can be financed at rockbottom interest rates. Japan's problem is not lack of capital: they're sitting on a $3 trillion mountain of liquidity and are running vast trade surpluses with the rest of the planet, but still act as if they were a poor, semiperipheral country, i.e. refuse to consume Southeast Asian imports. They can finance not only the current package, they could bail out the entire Pacific Rim economy -- and they will, because they have *no other choice* anymore. It's either a $1 trillion bailout boom or a global bust, and the executives of Mitsubishi, Hitachi, Sony et. al. who really run Japan Inc. are finally starting to realize this.
-- Dennis