Japan's growing debt could wreck the world economy
TOKYO: Japan's ballooning public debt, made worse by wasteful public works
spending, is a time bomb that could wreck the world economy, two Japanese
academics said Friday.
"We are looking at a danger signal blinking near and bright," said Akio
Ogawa, a lecturer in the Graduate School of Public Policy at Tokyo's Chuo
University.
Ogawa and Takayoshi Igarashi, a professor of law at Tokyo's Hosei
University, spoke at the Foreign Correspondents' Club of Japan about the
need to slash both public works spending and the debt if Japan is to truly
regain its economic might.
Attempting to jump-start the economy, the government has lavished funds on
bridges to sparsely populated islands, concrete linings for rivers and roads
to nowhere, they said.
Rather than helping the economy or the people, the spending mostly benefits
an "iron triangle" of powerful politicians, bureaucrats, and businesses,
Ogawa and Igarashi said.
The second-richest country in the world is also the world's most indebted
nation. Its public debt exceeds 600 trillion yen (dlrs 5.5 trillion), or 130
percent of gross national product - the total of goods and services produced
by the country, Ogawa said.
Worse, the government may be hiding another 100 trillion yen (dlrs 926
billion) in debt from a special coffer that the Ministry of Finance uses to
make loans to public corporations for infrastructure projects, Ogawa said.
A Finance Ministry official, who spoke on condition of anonymity, declined
to comment on the figure. He did say that none of the loan recipients is in
danger of defaulting.
Japan racked up debt mostly over the past decade as the government, urged on
by the United States, tried to spend its way out of its longest economic
slump since World War II.
In 1997, Japan spent dlrs 402.1 billion on roads, bridges, ports and other
public works projects, more than the United States, Canada, Germany, France,
Italy and Britain combined, Ogawa said.
Anger over excessive public works spending boiled over last month when 90
percent of voters in Tokushima, western Japan, rejected a government plan to
spend 103 billion yen (dlrs 954 million) to dam a river.
Opponents say it will destroy the ecosystem. Construction Ministry officials
say it's necessary to stop possible flooding. The government says it will go
ahead with the project despite the vote.
Unless Japan breaks up the league of bureaucrats, executives and politicians
who benefit from such largess, it'll be the taxpayers footing the bill,
Ogawa said.
"Now we face a dire choice between huge tax increases or hyperinflation to
help reduce, if not wipe out, the debt that has already got out of control,"
Ogawa said.
Yet the last time the government raised taxes, in April 1997, the economy
sank into recession and dragged down the rest of Asia.
Printing more money, on the other hand, would reduce the value of savings
and force up prices, hurting consumer demand and ultimately the economy.
Either way, Japanese purchases of everything from Italian suits to
American-made computers and Asian commodities would suffer.
"It's an accident waiting to happen," said Matthew Poggi, an economist at
Lehman Brothers (Japan) Ltd.(AP)
For reprint rights: Times Syndication Service
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