March. 1987- TOKYO Business Today

A favourite political story, a true one, is about the man who spends all his life struggling to become Prime Minister. Finally he makes it. As his followers flock round to congratulate him, someone asks him what it is like to have the top job.

He pauses: "You know, you spend all those years fighting your way up the ladder. And all the time you take it for granted there is someone at the top running the show and keeping you down. Then you get to the top and you discover there's nothing there after all. It's a vacuum."

As in the rest of the world, even more so in Japan. We know that there is a Keidanren, a Nikkeiren, an LDP, a Cabinet, a bureaucracy, a Prime Minister, etc. But is there anyone really running the show?

That at least is the first question to spring to mind as one watches the current mismanagement of the Japanese economy. For some time it has been obvious to anyone but the untutored that (a) speculative pressure on the yen was not going to end quickly, (b) the harm caused to the Japanese economy by yen appreciation far outweighed the benefits in all but the very long term, (c) much of the harm could be overcome by a vigorous program of domestic investment and (d) massive domestic investment is needed to give the Japanese people the standard of living they have earned.

Blind to the Economy

Meanwhile what has been happening at the top? We have a Prime Minister who told us happily that everything in the economy would be fine by the end of the year (last year that was), who is far more interested in theories about the racial purity of the Japanese than in economics, and whose main aim in life is to stride the world stage (even if it is only in Finland and East Europe).

We have an LDP so wrapped up in succession problems, boosting military spending, reforming the schoolkids, privatising various goodies and watching the health of Mr. Tanaka that it does not even see the economy. We have an opposition that does nothing. We have a Finance Minister who realizes what needs to be done, but who for the sake of domestic politics brings in a budget that actually cuts public investment. We have a business community that prefers to put its money into a shameless, wasteful and ultimately destructive round of stockmarket and land speculation rather than productive investment.

On top of all this we have by default a set of government policies that encourage this senseless speculation. In the process they choke off the infrastructure investment that is so badly needed because no one can afford to buy the land needed for the investment. In 1985, at the beginning of the current land boom, we were told left and right that the demand of office space in Tokyo made the land boom inevitable. The other day we had the president of Mitsui Real Estate admitting publicly that the inflated land prices make it impossible to build office space Tokyo needs so badly!

The Land Fever Cure

According to the government Japan has almost no inflation. That is nonsense. For anyone in Japan's major cities who wants to buy a house, last year the inflation was 100 percent. The year before that it was also close to 100 percent. This year it will continue. Most have seen the effective value of their house-purchasing savings wiped out, without anyone in the government even realizing it.

There are two things Japan needs to do, tomorrow if possible. One is to impose sensible land taxes to kill the land fever and allow the government to recoup some of the gains it creates for the community as a result of its spending on infrastructure.

The other is to embark on a program of major national development programs. Fill in Tokyo Bay, level Mt Fuji, relocate the capital if necessary. Anything that keeps in Japan the $50 billion dollars a year the Japanese currently export to the U.S. will do.

But is there anyone up there at the top listening ?


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