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Thursday, Dec 05, 2002

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Bursting of Japan's `bubble' economy

G. Chandra Shekhar

OSAKA (Japan), Dec. 4

IT is the story of a roaring Asian tiger that dominated the global business jungle for long years suddenly finding itself transformed into an ageing groaning weakling, unsure of its economic future.

Japanese are ruing the last decade - the 1990s - as a `lost decade'. The economic machine that changed the world and the way international business is done today is almost dysfunctional. Faced with boom conditions for over two decades since 1970s, despite oil shocks and rising competition, Japan grew into a powerful player in the global economic and political arena. The country's quest for sustained strengthening of competitiveness, particularly in hi-tech industries, was widely known.

The world keenly watched Japan even as its business systems became subject of great interest in the western world. Fuelled by sharp business acumen, strong cultural values and technological advancement, Japan's economic growth was the envy of many developed nations - more incomes, more demand, more investment, more employment _ all leading to more growth. Rapid economic growth of the 1980s had dramatically altered the lifestyles of citizens. Rising incomes transformed the once-conservative society into splurging consumerists.

Something went wrong in the early 1990s - the bubble burst; and Japanese academicians are not ashamed of terming it the `bursting of the bubble economy'. With the bursting of the economic bubble, the country moved from recession to long depression, called Heisei Depression.

Today, Japan is facing a series of problems. Commercial banking system is burdened with extraordinarily large accumulation of bad debts because land prices have crashed by nearly half and most banks advanced monies against land as collateral during boom time.

Companies losing their competitive edge in the global market are restructuring. But for the common man, the word restructuring has become a cruel euphemism for "firing from jobs'', as Prof Hirofumi Ueda, Associate Professor at Osaka City University, said.

Personal consumption growth is almost flat as everyone is looking for bargain prices. Opening up of the external trade has meant larger influx of low priced imports from abroad - especially from Asian countries led by China.

Worse, the age profile of the Japanese society is changing. In 1975, less than 8 per cent of the population comprised senior citizens; today, the size has grown to 17 per cent. Japan's GDP growth rate has tended to zero over the last few years. Small and medium enterprises are closing down. Consumption habits of citizens are undergoing changes, not for the better though.

Adding to the woes of the citizens is the unstable political system and financial difficulty the Government is finding itself in. "We need to address several problems simultaneously," according to Prof Ueda. Assessing the impact of globalisation; strengthening Japanese industrial competitiveness; stimulating personal consumption; and improving national finances are some of the areas that need the urgent attention of policy makers and the industry.

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