Friday, April 8, 2011

Excessive Self-Restraint Will Lead to Shrinkages, Dispiritedness

If the whole country contracts, Japan will be ruined. While it is natural to want to put all our efforts into the revival of the quake- and tsunami-damaged areas, for a more long-term revival, we need to improve all of Japan. We need to energize the overall economy.

"Too much of a good thing is good for nothing."
— Ieyasu Tokugawa

Too much of this self-imposed control sweeping the country is dangerous. Overdo it, and Japan will shrink. Tokyo is already on the verge of overdoing it. If all of Japan overdoes it, Japan will be led down the road to ruin.

The government needs an aggressive economic policy. But then comes the Pavlovian response: An aggressive economic policy will lead directly to a financial collapse. If the nation's debt rises, so will interest rates. If that happens, there will be a steady procession of small and midsize companies heading for bankruptcy protection. Japan's economy will falter.

They want to push for a tax hike. And it's not just the Finance Ministry and its scholars saying this. The majority of the politicians in the Democratic Party of Japan and the Liberal Democratic Party as well as government officials are in agreement with the Finance Ministry. And the mass media provides the echo chamber. In fact, the media is more than an echo chamber; it's leading the charge.

But the Finance Ministry's austerity measures, fixation on debt repayment and push to hike taxes will shrink Japan's economy in the long run, increasing financial debt. In other words, if we follow the austere policies of the Finance Ministry, Japan will fall apart.

The abnormal level of self-imposed control and shrinkage after the great earthquake presents a new danger. Too much of this control could send Japan to the brink. We need to change policy right away.

I think that without a policy that plays on Japan's strengths, there will be no revival. The government needs to change course to aggressive policies. On March 11, 2011, everything about Japan — its politics, economy, society, international position — changed. We need to acknowledge this and change direction too.