Summit solutions

PUBLISHED : Monday, 21 September, 1998, 12:00am
UPDATED : Monday, 21 September, 1998, 12:00am

The Japan-United States summit, which begins tomorrow, promises to involve what are known in diplomatic circles as 'frank exchanges' between the world's two richest nations.

Certainly, the summit will not be judged productive if there are not any frank exchanges. Indeed, Prime Minister Keizo Obuchi must receive a tough grilling from President Bill Clinton on what exactly is going on in Japan. More specifically: what is being done to fulfil promises of strong government action to prevent the Japanese economy from imploding and therefore sucking in the rest of the world? The answer, up to now, is clearly: not much of value. What is being done is having quite the opposite effect, particularly on Asia. Japan has cut lending, reduced imports and its currency has weakened.

Little has been done over the much discussed banking reforms - while a new reforming law has been drafted, it still waits to be passed.

Stimulation of the economy was also promised in the shape of a 16,000 billion yen package of investments. But where is the money? Public investment actually shows a fall, year on year. There is no doubt that Japan is seen by economic analysts as the key to the gathering global economic crisis, a crisis which now threatens to tip the world into a depression.

But the central problem in Japan is that of a weak political system which seems incapable of bearing the responsibilities of a super-rich nation.

The 'iron triangle' of politicians, industry and bureaucrats working as a team is collapsing under the weight of the task ahead, with each component now simply intent on survival.

Clearly, spending money by itself will not solve Japan's problems because confidence cannot be restored by propping up inefficient and crumbling enterprises.

What the Japanese Government is doing is simply putting off the inevitable, and the rest of the world, particularly Asian economies, is suffering as a result.

What is necessary is for Japan to let nature take its course, however painful the process, and allow rotten enterprises to die.