• Voter paralysis

    With so much tilting voters against change, democratic reason is the loser, says Solly Moeng.

  • The power of perseverance

    True grit is a reliable predictor of who will achieve success in life, says Ian Mann.

  • It's the system

    The system sucks and it’s being used far too often as an excuse, says Mandi Smallhorne.

All data is delayed
See More

Flunking the reform test

Mar 11 2012 10:44
*Wayne Arnold

JAPAN's remarkable recovery from last year's tragic earthquake leaves big lessons unlearnt. The economy bounced back more quickly than expected after March's earthquake, tsunami and resulting nuclear leak.

But the government flunked a bigger test by failing to push through painful reforms. Now Japan is a year older, deeper in debt and facing the same economic downward spiral it was in before the catastrophe.

The Japanese spirit of gaman - enduring the unendurable - enabled the country to cope with the disaster.

Industrial production is on track to return in March 2012 to where it was at the end of 2010, according to Merrill Lynch.

That's small triumph: gross domestic product (GDP) is likely to grow just 1.7% in 2012 and slow thereafter, the IMF projects. Japan's trade balance fell into deficit last year for the first time in 31 years, and it has net debt equivalent to 131% of GDP.

The post-earthquake period was a chance to administer economic remedies. Civic-minded citizens were switching off appliances and taking stairs instead of lifts to help conserve power.

But squabbling politicians squandered the mood of public sacrifice. Rather than cut pensions or raise taxes to help ease the national debt, the government has managed only to pass ¥21 trillion ($253.6bn) of emergency reconstruction packages. Winning opposition support for those cost former prime minister Naoto Kan his job.

Progress on more contentious reforms - such as doubling the 5% consumption tax - has ground to a halt amid political infighting. Corporate crises too are allowed to drag on: think of the accounting scandal at Olympus, or the prolonged insolvency of Tokyo Electric, the utility at the centre of last year's nuclear scare.

Japan still won't tolerate more immigration to offset a declining birthrate that, by government estimates, will reduce its population by 30% in 50 years.

For now, such gloomy demographics are keeping Japan from lurching into fiscal crisis: its greying savers help finance its massive debt. When they start drawing down more than they save, it will be too late.

Japan has managed to struggle back to where it was before the disaster, but it has wasted valuable time that could have been used to avert its own fiscal reckoning.

 - Reuters

* Wayne Arnold is a Reuters Breakingviews columnist. The opinions expressed are his own.

japan  |  japan earthquake


Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

We're talking about:


Debt is one of the biggest financial issues facing South Africans today. Find out how you can avoid and manage your debt with Fin24 and Debt Rescue.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Would you take out a payday loan?

Previous results · Suggest a vote