In early September the Nikkei stock average dropped toward 9,000, the lowest level in nearly two decades. Eisuke Sakakibara, a former top finance ministry official known as "Mr. Yen" for his aggressive intervention in Japanese monetary policy, declared September 7, "A financial crisis is unavoidable. It could happen this month, or in three to six months’ time."

By July share prices had fallen for 34 consecutive months. From 1990 to 2000 Japanese equity prices--the prices of stocks--fell 40 percent. They have dropped a further 50 percent since 2000, and by 25 percent between May and early September of this year.

Unemployment stands at unprecedented levels for Japan, whose rulers boasted full employment--as recorded in official statistics--for several decades following World War II. Official April figures placed it at 5.2 percent, the eighth consecutive month the figure had exceeded 5 percent.

In August, 1,562 Japanese companies went bankrupt, leaving in their wake $8.75 billion in unpaid debts. Nearly 40 percent of the debt had been held by two large companies, Chisan Co. and Gashu Enterprises.

The bad loan burden of Japanese banks amounts to more than 52 billion yen, or $428 billion, according to official government figures. Private estimates in the banking industry put the figure higher. "Questionable loans," reported the New York Times, have reached $1.25 trillion.

The banks have been undermined not just by these loans to bankrupt or crisis-ridden enterprises and by the 11-year slide in real estate prices; they have also been hit by the sharp decline in the value of the shares that make up a big part of their assets.

The latest "remedy" under discussion is a proposal by the government-owned Bank of Japan to buy share holdings held by banks with the aim of boosting their assets and giving them, however temporarily, a better bottom line in half-year reports at the end of September.

Economy minister Heizo Takenaka called the decision "surprising" and "hard to understand."

One Japanese-based credit analyst employed by Merrill Lynch said that the move would shift the stock-market risk from private banks to the central bank, without addressing the banks’ problem of unpayable loans. "I have no idea what the Bank of Japan is thinking," he said.

Japan’s debt-to-gross domestic product ratio is expected to hit 157 percent this year. This means that the country’s debts stand at more than 50 percent higher than the total value of the goods and services produced by Japanese workers and farmers in a year--by far the highest such figure among the imperialist countries, including Japan’s major rivals in North America and Western Europe.  
 
A weak, export-led recovery
Against this bleak picture, exports rose almost 9 percent in May over the same month the previous year, while the utilization of factory capacity climbed by 3.8 percent. The weakness of the yen in relation to the U.S. dollar in recent years has helped boost Japan’s trade surplus--the amount the value of exports exceeds that of imports--to more than $8 billion. In September, however, the rise in the yen’s value to 121 per dollar from 129 in early May prompted Japan’s rulers to intervene by massively selling off yen to weaken the currency and maintain export competitiveness. Such moves have a direct impact on working people by slashing the buying power of their wages.

Wall Street Journal writer Phred Dvorak remarked that Tokyo’s "hand-wringing over its currency, even as the yen remains relatively weak, shows how fragile the underpinnings of Japan’s nascent economic recovery may be." Even during the recovery in the first months of this year from the most recent recession--the fourth in a decade--New York-based Moody’s International Investors Service Inc. downgraded Japanese bonds by two notches. When it was pointed out that this gives the Japanese bonds a rating worse than the African nation of Botswana, the minister of economy, trade, and industry, Takeo Hiranuma, said, "Half of the people of Botswana are AIDS patients." He was later forced to apologize for his remarks.

Another ratings agency, Standard and Poors, recently warned that unless Tokyo moves ahead with "structural changes," including cutbacks in government spending and a shake-up of the banking sector, Tokyo would see its ratings downgraded further. "Many... painful decisions--such as those concerning public-sector reform, fiscal policy and the banking system--have been postponed," stated a report from the agency released August 19.  
 
‘Put up with pain’
Japanese prime minister Junichiro Koizumi came into office in 2001 vowing to carry out just those kinds of "structural reforms"--code words for cutting the social wage, reducing taxes on the billionaire ruling families, selling off state enterprises, knocking out weaker, debt-ridden capitalist enterprises in favor of stronger ones, and other such measures. "My fundamental philosophy is that you have to put up with pain today for tomorrow’s sake," he said.

Koizumi now faces criticism from capitalist commentators for blinking on carrying out such measures. In a typical comment, Takatoshi Ito, professor of economics at Tokyo University, said this month the Koizumi administration is "missing an opportunity to impose real market discipline" on the banks.

Recent articles in London’s Financial Times have pointed unfavorably to Japan’s "relatively rigid" and "inefficient" labor market, Koizumi’s failure to "pursue his real ambition of privatizing the vast postal savings and insurance funds," and "the overcapacity and high labor costs that have hurt Japan’s competitiveness"--terminology that will be familiar to workers around the world, who have frequently mounted, and continue to organize, stiff resistance in the face of similar attacks from the capitalist ruling classes.

Meanwhile, Japan stands more exposed than any other imperialist power to jolts to the supply and price of oil from the Middle East that could result from the Washington-led drive to war against Iraq. While the government has reduced the economy’s dependence on oil from 73 percent of its energy needs in the mid-1970s to 52 percent today, fully 87 percent of the oil it uses comes from the Middle East.  
 
 
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