Japan's bickering politicos have finally agreed on an economic plan to get the country out of its deflationary, debt-ridden slump. To hear the term "watered-down" as often as when you read the plan's media coverage, you'd have to hang out at a really stingy bar. If this plan were a screwdriver, most journalists would swear the bartender forgot the vodka.
Japan needs a plan because its banks have something like $350 billion in bad loans. That's $425 billion when you count institutions that aren't banks. And those are the official reports. Try "two to three times that," said the New York Times, while USA Today said "private analysts" guess two to four times higher. OK, that's a lot. But the new economic minister Heizo Takenaka, described as a maverick and a tough reformer, promised to save the day. And he might have, if his original plan, leaked last week, hadn't terrified both the government and the banks. Bankers threatened to sue the government, and politicians had fits. Presto change-o, new plan.
Here's where the watering comes in. The proposal had plenty of seemingly good ideas such as asking banks to get rid of half their bad loans over the next two years, introducing huge tax cuts, establishing a government agency to handle bad loans, inspecting banks, and implementing new rules to evaluate borrowers. Nice suggestions, but they're just that: suggestions. One controversial item, making banks stop using tax credits to prop up their capital, went from a mandate (in last week's unofficial plan) to something to be "swiftly considered." "The words that dominated the Takenaka Plan were: 'considering,' 'hoping,' 'urging' and 'if,'" complained the Financial Times' David Ibison. "The words conspicuously absent were: 'will,' 'can,' 'should' and 'immediately.'" Suddenly, everything seems so fuzzy and nebulous. Are you sure there's no vodka in this thing?
With so many business writers hating this plan so much, we wonder how any outlets came up with the good spins they did. BBC News Online's sources must have thought it was Opposite Day. "It's not watered down from the initial proposals," one analyst told the BBC, while another said, more tepidly, "It wasn't a worst-case compromise." Closer to Japan, Singapore's English-language Straits Times also made the plan sound decent, saying, "The measures unveiled last night were generally welcomed by economists and analysts, who heaved a sigh of relief that the government did not shrink from acting, even if it had tempered some of its earlier proposals."
The few Japanese newspapers Unspun found online in English were polite but critical. "It is questionable whether a new antideflation package will be able to bring the nation out of the current deflationary crisis," began an editorial in The Daily Yomiuri. Perhaps we should "swiftly consider" that the plan is harmless but ineffectual. - Jen Muehlbauer
Japan Acts To Address Banks' Bad Debt Crisis
http://news.independent.co.uk/business/news/story.jsp?story=347450
Japan Settles for Baby Steps to Help Banks Buried in Debt
http://www.nytimes.com/2002/10/31/business/worldbusiness/31YEN.html
Japan Unveils Watered-Down Bank Reforms
http://www.usatoday.com/money/markets/world/2002-10-30-japan-usat_x.htm
Japan Ruling Coalition Approves Watered-Down Reform Package
http://online.wsj.com/article/0,,SB1035958722404777391,00.html
(Paid subscription required.)
A Fairly Drastic Plan - But A Very Drastic Plan Is Called For (Financial Times)
http://tinyurl.com/2c68
(Paid subscription required.)
Japan Unveils Revival Plans
http://news.bbc.co.uk/2/hi/business/2375763.stm
Economists Welcome Japan's Banking Reforms
http://straitstimes.asia1.com.sg/topstories/story/0,4386,151978,00.html
Editorial: Antideflation Package Falls Short
http://www.yomiuri.co.jp/newse/20021031wo81.htm
Opponents Deflate Deflation Package
http://www.asahi.com/english/politics/K2002103100441.html
