TOKYO - Japan's economy in 1999 might be a little better than the recession year of 1998. Or it may be worse - much worse.
On the plus side, Japan's political rulers finally are ending the denial that has kept them from effectively attacking the country's economic problems. After years of only reluctantly admitting that Japan's banks might be carrying some bad loans, the Diet has passed a series of bills aimed at bailing them out.
In late October, the Economic Planning Agency abruptly reversed its growth forecast for the fiscal year ending March 31, 1999, from plus 1.8 percent to minus 1.8 percent.
Still, admitting that a problem exists doesn't solve it. Optimists are hoping that a ¥17 trillion, or about $145 billion, stimulus package that was passed at mid-year should get the economy back on track. In case it doesn't, Prime Minister Keizo Obuchi has called for yet more government pump-priming.
Nearly broke locals
The pessimists doubt that will be enough. Much of the money is supposed to be spent by local governments, either at the central government's urging or as matching funds to Tokyo's outlays, but local governments are very nearly broke.
Moreover, the government spending will do little to alleviate the worries that have kept consumers out of stores and car dealerships. Unemployment is at a record-high 4.3 percent and would be double that if tallied by Western standards.
Overtime hours and pay have evaporated. Record numbers of bankruptcies continue to throw people out of work. Plans to cut pension benefits prompt workers to save more now for later.
Bright exports dimming
Even the export sector, long the sole bright spot in Japan, is dimming. The dollar's fall to between ¥110 and ¥120, from a high of ¥147.26 on Aug. 11, trims Japanese goods' competitiveness on foreign markets and reduces the yen profits that a Japanese exporter books for each U.S. dollar in sales abroad.
The Organization for Economic Cooperation and Development predicts that Japan's economy, after contracting 2.5 percent in 1998, will 'remain mediocre for some time to come.'
Takashi Nakamae, president of independent Nakamae International Economic Research, predicts Japan's economy will fall another 5 percent in the fiscal year from April 1999 to March 2000, before rebounding the following year.
He argues that Japan needs a doubling in its unemployment and a drastic increase in corporate bankruptcies and workouts under Japan's equivalent of America's Chapter 11 bankruptcy law in order to sweep away the excess capacity dragging Japan down.
Nakamae's prescriptions are probably too harsh for the government to swallow. But they are a blunt reminder that the medicine may be bitter indeed if Japan is to recover from its current economic malaise.