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Japan's crisis goes from bad to worse

Today is the 20th anniversary of the bursting of Japan’s bubble economy of the 1980s. The culmination of attempting to deal with the relentless impact of two decades of precipitous decline has destroyed the health of two finance ministers in less than a year and the prospects for their successor are not bright.

The fate of these two individuals stands as a cipher for the interaction of economics and politics which threatened the lives of the six billion of the world’s rising population before Copenhagen’s failed talks, and threatens them even more as every day passes.

The latest casualty, Hirohisa Fujii will spend the New Year holidays in hospital, recovering from apparent exhaustion after weeks of intense work on next year's record trillion dollar budget, according to reports.

Fujii, Minister in the three-month old Democratic Party-led government, took on the job after Shoichi Nakagawa was found dead in the bedroom of his Tokyo home in September. In February he appeared to be drunk at a news conference during the Group of Seven financial leaders’ meeting in Rome in February.

Fujii’s budget is a renewed attempt to return the Japanese capitalist economy to profitable growth using the same measures which have consistently failed there, and are failing now throughout the world in the wake of the global meltdown of the last 30 months.

Trying to pump prime the global economy to “return to growth” is exactly the worst possible medicine to deal with climate change, but they all keep on trying because they have nothing else to offer.

Since 30 December 1989 Japan’s stock market has lost three quarters of its value, dropping to the second largest in the world, behind the US, measured by the proportion of global capital registered there, and its fate remains of immense importance.

Until the global crisis shattered the global bubble in 2007, corporate profits in Japan had increased by 62% at the expense of continuously falling wages, but now the economy is in a deep slump with prices dropping. Despite loudly trumpeted signs of recovery the rest of the world is set to follow Japan’s downward trajectory.

As Tony Roberts, a fund manager at Invesco Perpetual, puts it: “Over time large, global companies have grown profits more quickly than domestic ones and so we are investing less and less in the Japanese domestic economy as each year passes.” Capital follows its own logic and capitalist governments have no choice but to bow to its needs, whatever controls people like Russia’s government under prime minister Putin may want to impose.

Even if the faint hopes of increased exports to China materialise, Japan’s gross public debt is budgeted to increase to 200%. This means that government debt equivalent to double the value of the country’s projected production of goods and services - way beyond the worst nightmares of Western countries – will be required to keep the capitalist economy afloat.

The UK’s economy is following Japan’s over the cliff. Since 1989, the value of the UK’s stock market has fallen from third to fourth behind China, and in the first decade of the new millennium the UK recorded its lowest growth of the post-war period and the worst returns for stock-market investors since the 1930s. Its manufacturing output actually contracted over the decade by 1.2 per cent annually.

The billions of individuals who make up the world’s population can no longer leave their fate to the insane logic of capital accumulation which has now turned into its self-destructive opposite. Help us with the project to draft a Manifesto of Revolutionary Solutions with the aim of challenging capitalist power, economically and politically.

Gerry Gold
Economics editor
30 December 2009

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