Japan: Facing Economic Maturity

Japanisthegreateconomicsuccessstoryofthepostwarperiod,growingatunprecedentedratestobecomeoneoftheworld'smostadvancedindustrialnations.Butsincetheearly1970s,Asia'seconomicgianthashadtocontendwithmanyoftheproblemsencounteredbyWesterneconomies--slowergrowth,increasedunemployment,rapidchangesinthefinancialandindustrialsectors--problemsthathavepermanentlytransformeditseconomyandposecrucialchallengesforitsleaders.Inthisbook,EdwardJ.LincolndiscussesJapan'sburstofgrowthandthecomplexinterplayofdemographic,cultural,economic,andpoliticalforcesthatshapedthesubsequentemergenceoflargedomesticimbalances.ThemotivationandimpactofTokyo'ssuccessiveattemptstodealwithslowergrowthreceivespecialattention:ballooninggovernmentdeficitsthatsupporteddomesticgrowthinthelate1970s,adeterminedswitchtoausteritymeasuresinthe1980sasasurgingcurrent-accountsurplusconvenientlybuoyedtheeconomy,andasyetuncertainresponsestotherecentappreciationoftheyenthathascappedtheexternalsurpluses.LincolnfocusesonthechangesexperiencedbyJapan'sfinancialinstitutionsandtheirimplicationsforinternationaleconomictransactions.Slowergrowthandalteredmonetaryflowshavebroughtincreasingdomesticandinternationalpressuresforderegulatingfinancialinstitutions,andthegovernmenthasrespondedcautiously.ThestudyanalyzestheresultingtensionsandcrosscurrentswithinJapanandthestrainsthathavedevelopedinrelationswiththeUnitedStates.ItconcludeswithalucidpresentationofJapan'soptionsforstimulatingdomesticdemandthroughreducingprivate-sectorsavings,increasinginvestment,andraisinggovernmentspending,aswellasappropriateU.S.policiestopromotetheseoutcomes.WhateverpolicydecisionsJapanmakesinthenextfewyearswillbeshapedbytheeconomicforcesandinstitutionalframeworkLincolnoutlines.