The Political Economy of Japanese Financial Markets: Myths Versus Reality
By Dick Beason and Jason James
St. Martin's, 1999, 320 pp.
Restoring Japan's Economic Growth
By Adam S. Posen
Institute for International Economics, 1998, 180 pp.
Two informative books on the troubled Japanese economy. Beason and James offer a storehouse of information on the Japanese financial market since the 1970s, concluding that it is now largely liberalized. They are more sympathetic than many commentators to the Japanese officials who handled the loan crisis following the real estate boom in 1989, arguing that their policies reflected proper concerns over possible public panic and political constraints. Although Japanese financial problems are serious and the system is overdue for an overhaul, the crisis is fully manageable and remains far less acute than sensationalist accounts claim. But the authors also believe that Japan still requires substantial changes in corporate governance. This is a useful handbook for anyone contemplating investing in Japanese markets.
Posen gives Japanese officials far lower marks for macroeconomic management than Beason and James do for financial management. He offers a trenchant examination of Japanese fiscal policy during the 1990s, finding it too dominated by traditional budget and debt orthodoxy and too disengaged from its role as a balance wheel for the economy. The result has been an unnecessary waste of resources, not only in Japan but also in those countries heavily dependent on a vibrant Japanese economy. He persuasively debunks the argument that fiscal stimulus cannot work in Japan and suggests that the government should be even more aggressive in priming the economy than recent measures have been.