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Monday, Sept. 25, 2006

JAPANESE PERSPECTIVES

Many fears, few hopes haunt Japan's transition


"Children should be seen and not heard."

This is a phrase we have long heard. Should not the same hold true for governments? After all, politicians are very much like infants. They make a lot of noise, most of which is incomprehensible, their attention spans are short, they get bored very easily and are incapable of cleaning up their own mess.

Junichiro Koizumi's government was an especially noisy one. Much sound and fury emanated from that great communicator. However, "Sound and fury signify nothing." This we also know from old. Or to be more precise, since 1606, when Shakespeare said so in "Macbeth."

Governmental sound and fury does need to be taken with a grain of salt. But it is important for us to be able to see what governments are doing. Again, the parallel with infants is quite exact. We need to be able to see what they are up to. How well will the new government score on this point?

This is difficult to tell right now. But we do know something about the economic landscape the new lot will have to tackle. In short, it is a landscape full of gaps -- income gaps, wage gaps and gaps between individuals, companies and regions.

We have escaped from the clutches of one d-word only to fall into the arms of yet another. That is to say, from deflation to disparity.

Deflation may not have disappeared yet, but disparity is certainly very much a feature of our current economic environment.

Disparity may indeed be the one thing that sets this recovery apart from others in the past, including the so-called Izanagi boom, with which the current recovery is being increasingly compared. The comparison is in fact an illusion.

The "Izanagi" expansion came by its name because it lasted for such a long time: 57 months from November 1965 to July 1970.

But it also gained distinction by virtue of its sheer expansive power. The Japanese economy expanded by as much as 80 percent in a span of just 3 1/2 years within that period. Izanagi is of course the name of the legendary god who supposedly gave birth to the Japanese isles, the implication being that Japan had not seen such prosperity since mythical times.

The comparison between that particular period and today is conspicuous for its lack of comparative relevance. Back then, Japan was starting to rev its engines at full throttle in preparation for economic takeoff.

Do people remember the "three Cs" that were so much the talk of the times? The Cs stood for color TVs, cars and coolers (air conditioners). Everyone wanted to have the three Cs. Everyone felt entitled to them and participated in the process that would open the gateway, so it was assumed, to their ownership.

But that was then and this is now. Now the Japanese economy is mature, aging and divergent. Not everybody is taking part in the recovery. Rewriting the Izanagi record in terms of duration and power is meaningless. Policymakers should be on the lookout to see who is actually participating in the recovery and who is being left behind. Even more importantly, how does policy mean to address national disparity?

Hopefully not by the control-freakish methods that seem to have been suggested by Shinzo Abe in the leadership campaign.

One can only hope we are about to get a government that is easy on the eyes for its transparency and gentle on the ears in its cacophony. What would be really abhorrent is a government that is neither seen nor heard. Such stealth would be totally unacceptable.

Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.


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