The repeated warnings by Financial Secretary Donald Tsang Yam-kuen that, despite the recent surge in stock and property prices, Hong Kong cannot expect to experience a lasting recovery until the Japanese economy begins to revive were given added weight yesterday. While the SAR has sunk further into recession with worsening growth figures, the news from Tokyo was of indicators showing that the world's second largest economy is still a long way from any hint of recovery. As in Hong Kong, Japan's unemployment rate is stuck at a high. At the same time, retail sales are tumbling, raising fears of deflation. Nor is there any sign Japan's economic stimulus packages are having any impact. Indeed, the latest measures have already been discounted by the markets. Despite predictions from Prime Minister Keizo Obuchi of renewed growth next year and a recovery in 2000, few doubt that his country's economy will continue to shrink throughout 1999. Japanese leaders may try to convince the world that they are serious about tackling the recession, but the reality is that the politicians are still putting their own factional interests ahead those of the nation - and, indeed, all of Asia. It was noticeable yesterday, for example, that Mr Obuchi said nothing about lowering the controversial consumption tax, which is one of the main immediate causes of the economic problems. Nor is forcing the restructuring of insolvent companies, which often enjoy strong political connections, on his agenda. Instead, political survival is the name of the game. That was why the Government signed up to the silly scheme to give shopping coupons to the elderly and families with children, which had been demanded by one opposition party. A cut in consumption tax would have been far more useful. Internal factors within the ruling group may also partly explain the refusal to agree to China's demand for a whole-hearted apology for wartime atrocities that would have angered right-wing supporters. No one denies that Asia's recovery hinges on a turnaround in the region's most powerful economy. But, without leadership from the Japanese Government, this is likely to be a long time in coming. For all his rhetoric, it is clear that Mr Obuchi is better at forging political alliances than at guiding his nation back towards economic growth. That bleak reality must temper any discussion about whether Hong Kong is now moving towards the brink of recovery. The continuing evidence from Tokyo is that one of the main causes of Asia's woes remains as serious as ever.
