LYCOS RETRIEVER 
Japanese Economy
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Established at Columbia Business School in 1986 under the direction of Professor Hugh Patrick, the Center on Japanese Economy and Business (CJEB) promotes knowledge and understanding of Japanese business and economics in an international context. The Center is a research organization widely recognized for its international programs, which provide prominent speakers from the public and private sectors a forum for collaboration and reflection on Japan, the United States, and the global economy.
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Faced with this serious decline of Japanese economy, criticisms against policies of the Hashimoto administration grew intensified both within and outside the country. The international community began to criticize loudly the Hashimoto policies worrying that the recovery of Asian economies may be hampered and more broadly the world economy may be disturbed seriously by the poor management of Japanese economic policies. Domestically, the anti-main stream group within LDP grew increasingly vocal in criticizing the failure of Hashimoto economic policies. For fear of giving in to the criticism of the anti-mainstream group, the Hashimoto cabinet and LDP executive officers hesitated to change their policy stance and thereby aggravated the deterioration of the economy.
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Thanks to the ongoing reform efforts, the Japanese economy has shown positive signs of change. Corporations are responding to keener competition resulting from globalization and deregulation, and consumers have benefited in this process in terms of lower prices and better services.
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The Japanese economy, in terms of demand, shows that personal consumption is at a standstill after a gradual recovery. This is mainly because income remains sluggish. Housing construction keeps the level higher than a year ago, as the starts of condominium construction have increased. Investment in plant and equipment keeps decreasing substantially as a trend. The implementation of public works is proceeding, despite the recent weakness in new starts.
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As the economy has become prosperous, the type of work which Japanese want to do has changed too. The young middle or high school graduates who gushed out of rural districts in the 1950s and took jobs in construction are now parents of children with university degrees. They would not think of taking on such work. Labor intensive industries must either move abroad, especially to Asian nations with lower labor costs, or bring in foreign workers to do the jobs. The one solution causes economic growth abroad and structural change at home; the other introduces social problems which few are willing to confront.
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If the current inefficient structure of the economy is kept intact, with insufficient implementation of structural reforms, the Japanese economy is doomed to long-term stagnation. Under this scenario, private consumption and business investment stagnate heavily as the"the expected rate of economic growth"among households and enterprises fails to recover. Even the recent economic package fails to boost private demand on a sustainable basis. If this scenario comes true, the average economic growth rate over several years after FY1999 would be far below 1 percent per annum, risking the possibility of a rapid rise in unemployment (figure 1, scenario of stagnation.)
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