Japan, the world's second largest
economy, is in recession. This follows a prolonged
period of lackluster growth: during the 1990s, Japan has exhibite the
worst economic performance of any industrialized country.
Japan faces three interrelated problems. In order
of immediacy these are inadequate domesticdemand, a weak financial
system, and structural
inefficiencies. The Japanese government has
begun to grapple with these issues, but reform will
require enormous political will, and success is by no means assured.
The election of July 12 is widely interpreted as a repudiation of the
ruling
Liberal Democratic Party, and Prime Minister Hashimoto has announced
his resignation. These political developments intensify the uncertainty
surrounding Japan's response to its crisis.
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Demetre A Constantinide

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