This is interesting because I was always under the impression that state
intervention has been rather high in Japan. Perhaps this intervention
does not show up as a budget deficit, but directing the economy to raise
aggregate demand has always been a Japanese feature. This has been done
largely through industrial policy, in an environment of favorable macro
policies. It could be argued that industrial policy could generate
longer term growth (intergenerational) than fiscal policy which is by
definition aimed to deal with the short term. I am aware of course
that separating growth rates over the long haul from ind policy and
Keynesian policy may be difficult.
On a related note my discussion with Japanese academics and ministry
officials also gave me an impression that Keynesian ideas are quite
strong in the establishment. Public spending, particularly in
infrastaructural development, has been common.
Perhaps the change is a new twist, delighting the NYT which loves to see
the rest of the world emulate the US:).
Anthony P. D'Costa
Associate Professor Senior Fellow
Comparative International Development Department of Economics
University of Washington National University of Singapore
1103 A Street 10 Kent Ridge Crescent
Tacoma, WA 98402 USA Singapore 119260
On Thu, 16 Jan 1997 LYNN TURGEON, PROFESSOR EMERITUS OF ECONOMICS, HOFSTRA UNIVERSITY,
[EMAIL PROTECTED]@anthrax.ecst.csuchico.edu wrote:
> Peter Passell's Economic Scene (NYT, p. D-2, January 16, 1997) correctly points
> out that deflationary expectations on the basis of Japanese price movements in
> recent years has produced high real (inflation-adjusted) interest rates despite
> low nominal rates today.
> Passell also concludes that most people seem to win as a result of
> overall deflation just as most people seem to lose from overall inflation and
> therefore tend to go along with fighting inflation as a national policy. No
> wonder there is inertia among Japanese policy-makers when it comes to reversing
> deflation.
> What the Japanese have forgotten is their Keynesian roots in the Great
> Depression. The Japanese finance minister before his assassination in 1936 was
> Korekiyo Takahashi, who was a practicing Keynesian before Hitler. His
> deficit-spending permitted the Japanese economy to grow during the Great
> Depression. Japan thus avoided the sharp deflation found in the Unit ed States
> and Germany until 1933.
> In their zeal to remove any taint of fascism in postwar Japan and
> Germany, the allied control authorities created a postwar bias against
> deficit-spending in both countries. The German bias disappeared after the first
> postwar German recession in 1966-67, but the Japanese bias has remained.
> Japanese recent pump-priming produced a short-term spurt in Japanese
> growth which has now ended. We should be reminded of Franklin Roosevelt's
> disappointing experience with pump-priming in the 1930s and its general failure
> to generate significant growth until after Pearl Harbor.
> Japanese insistence on going through with their plans to raise both the
> income and sales taxes in April thus represents a continued failure of the
> Japanese to remember their Keynesian experience in the thirties.
>
>
> deflation.
>
