The right direction
We are long accustomed to bad news about Japan. It has been more than a dozen years since the days when Japan was almost No 1. Yet it is still frightening to watch the Nikkei Index come close to 9,000 as it reached an 18-year low of 9,217.04 in trading yesterday. Below that threshold, Japanese banks could face another round of defaults, followed by mandated nationalisation, similar to 1998. Tokyo has a huge bailout fund ready to spring into action.
That's the point. As in 1998, the most likely outcome of a slumping market is more of the same policy mix we have seen in the past, combining government bailouts and a sturdy resistance to painful restructuring. While the global economy may suffer another round of jitters, Japanese banks have long since ceased to be a force in the international financial markets despite the huge size of their assets. They simply don't do anything, much like the Japanese economy itself, which has experienced three recessions in a decade, with falling productivity, minimal growth and rocketing debt.
So what are we to make of Prime Minister Junichiro Koizumi's odd exercise in big-time diplomacy with his planned mission to Pyongyang on September 17? Mr Koizumi has explained himself by saying: 'Without dialogue, there can be no progress. I will be happy if we move even one step forward.' He hopes to launch a six-nation forum to build confidence in northeast Asia, with divided Korea, Russia, China and the United States, in addition to Japan.
This minimal form of diplomatic activism is the political counterpart to Japan's Noh-like financial reforms. They have been reluctant, stinting and next to invisible.
Yet perhaps the way to look at Japan is not as a collapsed giant but as the world's last socialist nation struggling to inch its way into the 21st century. The country's size is less relevant than the fact that it is moving in the right direction. We might recommend a higher gear, but have learned not to expect too much.