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Jewish World Review March 23, 2001 / 28 Adar, 5761

Dale McFeatters

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Consumer Reports


Bush's free lunch, or: Why Dubya worries about Japan's economy

http://www.jewishworldreview.com -- JAPANESE Prime Minister Yoshiro Mori could be excused if he wondered why he should listen to economic advice from a nation where the six car models most prized by car thieves are Toyotas and Hondas.

We are full of advice for the Japanese, as indeed we are full of advice for everyone, and, as long as their economy is in the dumper, Japanese leaders have had to endure all sorts of prescriptions from us - deregulate, open your markets, write off bad debts, quit propping up failing companies.

Instead, on Mori's visit to the White House last Monday, President Bush remarked on the great weather, which it was, a nice, sunny day. The Bush administration has promised that, unlike the Clinton administration, it would not lecture the Japanese.

Bush, showing that he had boned up for the meeting, did remark that since Japan and the United States account for over 40 percent of the global economy, "therefore, our economies are very important to the world."

And even more important to each other. If Japan's economy goes off a cliff, ours could go too, and just as an economic slowdown cost President George H.W. Bush his job after one term, it could do the same for President George W. Bush.

Japan's stock market is at a 17-year low, and the economy has been moribund for a decade. And Japan's central bankers have been wrestling with a novel problem, the most sustained run of deflation in any developed country since the Great Depression.

In deflation, prices fall, which is not as good as it sounds. Economic growth depends heavily on consumer spending, and with deflation there is no inducement to spend and every incentive to wait as prices go down even further. With deflation, the yen stuffed under the futon are actually earning money; if prices fall 9 percent, as they have in Japan over the decade, that stash of yen has grown 9 percent.

The notoriously frugal Japanese are refusing to spend their money, and the government can't make them. One government proposed a large tax rebate, structured in a way that the taxpayer only got the rebate if he went out and spent it. The idea failed.

The Bank of Japan is lending money at zero percent interest - alas, not to you and me; it's a central bank. This is a small step from paying people to take the money away. In a truly offbeat economic threat, the bank says it's going to refuse to charge interest on its loans until prices start rising.

While aides insisted that Bush and Mori talked serious economic policy, it's unlikely. As for Mori, he's a lame duck. He'll be gone within a month and all of this becomes his successor's problem.

So why was he strolling through the White House Rose Garden admiring the new magnolia buds with the leader of the free world? Simple. China's deputy premier was coming, and for diplomatic reasons, it's important that we demonstrate to Japan and China that Japan comes first.

Basically, Mori flew halfway around the world to have lunch. But it was an excellent lunch, saffron pasta with shrimp, lobster and squid in a nettles broth to start with and a main course of roasted veal chop stuffed with roasted garlic with peppers and shiitake mushrooms.

And Mori could also be excused, as he departed the White House, for reflecting that at least Bush junior didn't throw up on him the way Bush senior did on Prime Minister Miyazawa just nine years ago this January. Altogether a successful trip.

Comment on Dale McFeatters' column by clicking here.

Up

03/21/01: Congress' growing nuisance
03/16/01: A new kind of layoff for the New Economy
03/09/01: Another snow job in the nation's capital
03/02/01: Bush either brave or naive
02/23/01: Long hours=great presidency? What our 'dim-bulb' of a president knows
02/16/01: Just what the spin-doctor ordered? Bush can't even get ridiculed on TV
02/09/01: A heartbeat from presidency, and both feet in obscurity
02/02/01: AlGore is continuing his fall from grace
01/26/01: "Fifteen Minutes in December"

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