The poor performance of the Japanese economy is troubling for Japanese and foreigners alike. Koo, an economist at the Nomura Research Institute, advances a clear, plausible explanation for Japan's lackluster performance since 1990: excessive corporate debt and the resulting preoccupation with paying down debt to improve corporate balance sheets and reluctance to borrow for new investment. In Koo's view, the correction of this imbalance still has time to run, so the Japanese government should relax regulation, particularly of land use and construction contracts, and end archaic practices that have prolonged the stagnation by stifling both investment and household consumption. Koo also offers illuminating discussion of aspects of the Japanese economy not often evident to nonresidents -- such as how heavy weekend traffic combines with corporate pressure to give up paid vacation time to discourage the purchase of second homes.
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