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タイトル JAPAN'S DECADE-LONG RECESSION Title 著者 Uematsu, Tadahiro Author(s) 掲載誌・巻号・ページ Kobe University Economic Review,45:19-29 Citation 刊行日 1999 Issue date 資源タイプ Departmental Bulletin Paper / 紀要論文 Resource Type 版区分 publisher Resource Version 権利 Rights DOI JaLCDOI 10.24546/81000919 URL http://www.lib.kobe-u.ac.jp/handle_kernel/81000919

PDF issue: 2021-10-07 Kobe University Economic Review 45 (J 999) 19

JAPAN'S DECADE-LONG RECESSION

By TADAHIRO UEMATSU

This paper attempts to analyze the structure of the decade-long Heisei Recession by clarifying the relation of the causes and effects of the recession from the start of the bub­ ble in the 1980s to the end of the recession in 1999. It is revealed that the reason why the Heisei Recession was so long and so severe lies in the fact that, because two causes of the recession (the continuous fall of land prices and the insolvency of financial institu­ tions) were new for the Japanese, the government made errors in finding policies appropri­ ate to overcome the recession. It was after passing the "nightmare" in the autumn of 1997 that the government established a system of financial stability which enabled the Japanese economy to get out of this recession. However, there are several tasks with which the Japanese economy has to cope in the near future.

1. Introduction Ten years have passed since the Japanese economy fell into the current Heisei Reces­ sion. It has been the longest recession since W orId War II. Rapid economic growth at an average of 10% per year was enjoyed in the 1950s and 60s, and moderate growth at an average of 5 % per year was achieved in the 1970s and 80s. Both were the highest among advanced countries in those decades. In contrast to this record, that of the 1990s is a very miserable one with a growth of about 1% per year. It has not been fully understood why the Japanese economy was caught in such a prolonged and severe recession in the 1990s. This paper is a short essay that attempts to analyze the process and structure of the decade-long recession.

2. The Bubble Economy It is clear that everything began with the bubble economy in the second half of the 1980s. That bubble economy was different from the booms in the 1960s and 1970s in two ways. First, during the bubble boom, the Japanese yen sharply appreciated from 240 yen per dollar in August 1985 to 122 yen per dollar in December 1987, that is the yen appreci­ ated 100% within 30 months. Usually an economy with such a sharp currency apprecia­ tion would suffer from huge trade deficits and a severe recession. But the Japanese econ­ omy in those days did not follow the usual course. There were two reasons for this. First, Japanese companies exporting products such as automobiles, office machines, cameras or semiconductors endeavored to reduce the costs of production and succeeded in preventing a decrease in the amount of exports, so that Ja­ pan's trade balance kept it's surplus: 46.1 billion dollars in 1985, 82.7 billion dollars in 1986, 79.7 billion dollars in 1987, 77.6 billion dollars in 1988, 64.3 billion dollars in 1989, and 52.1 billion dollars in 1990, or 10.9 trillion yen in 1985, 13.7 trillion yen in 1986, 11.6 trillion yen in 1987, 9.9 trillion yen in 1988, 8.8 trillion yen in 1989, and 7.6 20 TADAHIRO UEMATSU trillion yen in 1990 (on a customs clearance basis). Secondly, the Bank of Japan switched to an easy monetary policy by setting the pub­ lic discount rate very low in order to prevent a recession occurring in Japan. As a re­ sult, the growth rate of the money supply (annual average outstanding) rose from 8.4% in 1985, to 8.7 % in 1986, 10.4% in 1987, 11.2% in 1988, 9.9% in 1989, and to 11.7% in 1990. These two factors together brought about a unique economic situation, that is, (1) hav­ ing highly appreciated, the yen had a strong purchasing power for foreign products and real estate, and (2) while both commodities prices and service costs remained very sta­ ble, asset prices, such as real estate and share prices, rose sharply in Japan. This is because the companies and financial institutions which had ample funds in­ vested them in goods that were anticipated to rise in price, such as the real estate of cen­ tral Tokyo, the resorts of Hawaii, high-priced jewelry and Vincent van Gogh's "Sunflow­ ers" and etc .. Japanese companies also bought companies and real estate in the U.S. and European countries, which caused economic friction between Japan and those countries. Ordinary people who dreamed of becoming rich through speculation rushed to securities companies to buy shares. As a result, both land prices and stock prices rose sharply in Japan. For example, the posted prices of land (the average index of land prices throughout Japan as surveyed by the National Land Agency) rose by 21.7% in 1987, 8.3% in 1988, 16.6% in 1989, and 11.3% in 1990, and stock prices (the Nikkei average index of 225 major issues) rose by 42.6% in 1986, 15.3% in 1987,39.9% in 1988,29.0% in 1989 and recorded their histori­ cal peak of 38,915 yen at the end of 1989. The period of the bubble economy lasted for 52 months from December 1986 to March 1991, which was Japan's second longest boom, exceeded only by the Izanagi boom which lasted for 57 months from November 1965 to July 1970.

3. Corruption, Illegal Compensation and Bad Loans At the beginning of the 1990s, the bubble burst and both land prices and stock prices fell. Land prices (the posted prices of land) declined by 4.6% in 1991, 8.4% in 1992, 5.6% in 1993, and by 3.0% in 1994, and the Nikkei Average stock price index dropped by 38.7% in 1990, 0.4% in 1991, and 26.4% in 1992. After the collapse of the bubble, three kind of problems were revealed, i.e. bribery scan­ dals involving senior politicians and top bureaucrats of the central government, illegal compensation of losses caused by stock dealing, and an increase in bad loans made by banks. The bribery scandals included several different affairs. (1) First uncovered was the Re­ cruit Affair in which the Recruit Company sold the stocks of a subsidiary company to sen­ ior politicians, high-ranking bureaucrats of the central government and managements of big companies at a low price before listing its shares on the market, in order to enable them to earn a profit of the difference between the price before and after listing. As the re­ sult of an investigation, the Vice-Minister of Education and the Vice-Minister of Labor with a former Chairman of NTT (Nippon Telegraph and Telephone) were arrested and the Prime Minister (Noboru Takeshita), and the Ministers of Finance (Kiichi JAPAN'S DECADE-LONG RECESSION 21

Miyazawa), Justice (Takashi Hasegawa), and the Economic Planning Agency (Ken Harada) were forced to resign because they received a lot of money and unlisted stocks from the Recruit Company. (2) The Tokyo Sagawa Express Affair was exposed in 1991 and Shin Kanemaru (Vice­ President of the LDP (the Liberal Democratic Party) at that time and nicknamed the "Don" of the LDP) was arrested because he received 500 milion yen from the Tokyo Sagawa Express Company, and he resigned as a member of parliament. As mentioned later, the downfall of Kanemaru caused the LDP to lose its position as the ruling party, which in effect brought about the chaotic situation of Japanese politics that remains un­ til the present. (3) The Aya Group Affair, in which the Aya Social Welfare Group gave a bribe to bu­ reaucrats of the Ministry of Health and Welfare in return for getting permission to build new facilities, was exposed in 1996. A few top bureaucrats, including a former Vice­ Minister of the Ministry of Health and Welfare, were arrested and one was dismissed from his post. (4) The MOF and the BOJ corruption Affairs were made public after 1995; that is high ranking financial inspectors of the Ministry of Finance and the Bank of Japan had secretly announced the date of their inspections beforehand to the staffs of specific com­ mercial banks in return for hospitality and entertainment. As the result of investiga­ tions, several members of the MOF and the BOJ were arrested and took responsibility for these cases, the Minister of Finance (Hiroshi Mitsuzuka) and the Governor of the BOJ (Yasuo Matsushita) resigned in March of 1998. Lastly, 98 of the BOJ staff and 112 of the MOF staff were punished within their institutions in March and in April of 1998 respectively. Such a large scale, in terms of the number of people and the amounts of money, of cor­ ruption of the politicians and bureaucrats of the central government had not occured since World War II in Japan. Hearing the corruption cases occur one after another, ordi­ nary people felt acute indignation Secondly, illegal compensation cases for stock dealing losses were uncovered twice. (1) The first incident was exposed in 1991, in which four major securities companies (Nomura, Nikko, Daiwa, and Yamaichi) provided 128 billion yen in total to 198 compa­ nies and nonprofit organizations, and another 13 securities companies provided 44 bil­ lion yen in total to 386 companies and nonprofit organizations. Having been accused of this illegal compensation, the managements of the major securities companies were forced to resign their posts. (2) The second incident in 1996 revealed that Dai-ichi Kangyo Bank had provided 45 billion yen in total to a sokaiya (a corporate racketeer, or professional stockholder who extorts money from companies) over several years, who spent this money in deal­ ing in stocks, and four major securities companies (Nomura, Nikko, Daiwa, and Yamaichi) compensated him by 2.5 billion yen as a part of his losses in dealing. As the re­ sult of an investigation, more than ten top managers of Dai-ichi Kangyo bank and of four securities companies were arrested under suspicion of illegally damaging their compa­ nies, and they resigned their positions. Thirdly, the decline of land prices and stock prices caused bank lending to real estate companies and construction companies to become non-repayable lending, i.e. bad loans. 22 TADAHIRO UEMATSU

In fact, in the first few years the amount of bad loans which banks held was not an­ nounced correctly, partly because each bank was afraid that if the sum of its bad loans were found to be larger than that of other banks, depositors might shift their deposits to other banks, and partly because the Ministry of Finance was confident that it could solve this problem by assisting troubled banks with special expediency based on the frame­ work of the convoy system. But, as time went on, the burden of bad loans increased, sev­ eral banks went bankrupt one after another, and the confidence of bankers and com­ pany managers in the convoy system of the Finance Ministry declined.

4. The Effects of Economic Policies After the collapse of the bubble, consumers who observed the fall of land prices and stock prices felt that, while their outstanding residential loans remained large, their asset values were decreasing. In fact, as Figure 1 shows, the value of real estate and that of stocks decreased steeply, while the net worth of financial assets steadily increased. As a re­ sult, consumers tried to spend less and save more, which reduced the demand for prod­ ucts and services, and made the recession worse.

rrillilln 'Yen 14~W 1500

Ikal Estat.:: Assds 1212 1164 .... - 1200 11 -).)1 103 1076 1053

()OO R03 X07 N.::t Finan.::ial ASSds

600

300 Balam:.::s ofSto.::khohJing

118

o~--~--L-~--~--~~--~--~~--~--~~- 85 86 87 88 89 90 91 92 93 94 95 96 97 FIGURE 1. Real Estate Assets and Financial Assets of Households (including Individual Enterprises) Note 1. Net Financial Assets is the difference between Financial Assets. 2. The balance of Stockholding is a part of the balance of Financial Assets. Source: Economic Planning Agency, Annual Report of National Accounts.

However, just after the collapse of the bubble economy, neither the government nor business leaders took the situation seriously, because the record of the rate of economic growth was not at all bad (5.1% in 1990, and 3.8% in 1991). But as the recession JAPAN'S DECADE-LONG RECESSION 23

Trillion Yen 318

Balances of debt of the Central Government

0, 166 '0 8 32

7 2X 24.0 Scale of Stimulatory Eeonollw Polin/ 6 (right -hand'scale)' . 24

5 20 16.6 4 16

3 12

2 X

4

0 0 Aug Apr Sep Feb Apr Sep -1 1991 92 93 94 9) 96 97 -4

-2 Rate of Economic Gro\\1h (left-hand scale) -8 .., -,) -12

-4 -16 FIGURE 2. The Scale of Economic Policies and Their Effects. Note 1. The units of balances of both central government debt and the scale of stimulatory economy policies are trillions of yen. 2. The rate of the economic growth is compared with the same quarter of the previous year. Sources: Economic Planning Agency, Annual Report of National Accounts and Nihon Keizai Shinbun eN ewspaper). lasted longer and became severer than anticipated, the government was forced to imple­ ment special policies to stimulate consumption in addition to the regular fiscal expendi­ ture. As Figure 2 shows, those special policies were introduced eight times during the pe­ riod 1992-1998. The amount of the first policy to be introduced was 10.7 trillion yen in August 1992, that of the second was 13.2 trillion yen in April 1993, that of the third was 6.0 trillion yen in September 1993, that of the fourth was 15.3 trillion yen in Feburary 1994, that of the fifth was 7.0 trillion yen in April 1995, that of the sixth was 14.2 trillion yen in 24 TADAHIRO UEMATSU

September 1995, that of the seventh was 16.6 trillion yen in April 1998, and that of the eighth was 24.0 trillion yen in November 1998. The total amount of the eight policies reached 107.0 trillion yen, which is, roughly speaking, equal to one fourth of the GDP of 1989 or one fifth of that of 1998. Then what was the effect of those economic policies? Figure 2 tells us that overall they were not very effective, except in 1995, and that overall the duration of the effects was short, often about two quarters. In fact the real growth rates of GDP in this period were 3.8% in 1991, 1.0% in 1992, 0.3% in 1993,0.6% in 1994, 1.5% in 1995, 5.1% in 1996, 1.4% in 1997, and -2.8% in 1998 (calendar years). Why were the stimulatory economic policies not very effective? There are two reasons for this unexpected result. One is that the cabinets changed so often during this period that they could not develop good ideas for stimulating the economy. Indeed after the ar­ rest of Kanemaru, the Don of the LDP, the party split itself into several groups, some of which left the LDP and established new parties including the Ozawa group which estab­ lished Shinseito. As a result, having been defeated in the general election of July 1993, the LDP lost its power in the Diet in the following month. This election was the turn­ ingpoint of post-war Japanese politics because it put an end to the 35 year long rule of the LDP over the Diet. After this election, the composition of the ruling parties changed frequently and the duration of each cabinet was very short compared to that of previous cabinets. Let us check. the record of the series of cabinets. (1) The first was the Hosokawa cabinet which started in August 1993 based on the coa­ lition of eight non-LDP, non-Communist parties. Mr Hosokawa was a former governor of Kumamoto prefecture, and established Nippon Shinto (the Japan New Party) in 1992, when he did not have a seat in the Diet. Although the popularity of Hosokawa as prime minister was very high at first, the Hosokawa cabinet lasted only eight months. This was partly because there were too many coalition parties, and the struggle among them over political initiatives made it difficult for Hosokawa to control the government, and partly because Hosokawa had not had experience of national politics, so he could not control the leaders of other ruling parties. (2) The second was the Hata cabinet which, succeeding the Hosokawa cabinet, started in April 1994 based on five of eight non-LDP, non-Communist parties (the other three parties left the coalition cabinet), but it lasted only two months because it had a minority in the Diet. (3) The third administration was that of the Murayama cabinet which was based on a coalition of the LDP, the Social Democratic Party of Japan and Sakigake. Since Prime Minister Murayama was well-known as a leftist member of the SDPJ, the policies of this cabinet attracted the attention of the people, but it did not introduce significant policies during its 19 months from June 1994 to January 1996 except for the rescue and as­ sistance activities for the victims of the Hanshin Earthquake which occurred in January 1995. (4) The fourth was the Hashimoto cabinet which was based on the same three party coalition. Since Hashimoto was the President of the LDP, this was the first cabinet in which the LDP had held the post of the prime minister since August 1993. the Hashimoto cabinet started in January 1996 and, with a reshuffle of ministers in JAPAN'S DECADE-LONG RECESSION 25

November 1996, lasted two and a half years until July 1998. Prime Minister Hashimoto declared that he would perform six reforms just after he was reelected prime minister in November 1996, and he promoted policies including the deregulation of the economy, the introduction of a Japanese Big Bang, the cutting of the budget deficits, the reform of central ministries and agencies, the introduction of a public nursing insurance system and the reform of the education system. But he could not achieve the curtailment of the size of the bureaucracy and the cutting of public expen­ diture so the LDP was defeated in the election of June 1998, and Hashimoto resigned the post of prime minister. (5) The fifth cabinet, the Obuchi cabinet started in July 1998, when the ruling party was only the LDP at first, but since the LDP did not have a majority in the upper house, the LDP formed a coalition with the Liberal Party (the Ozawa group) in Janu­ ary 1999, and absorbed the New Komei Party into the coalition in autumn 1999. Generally speaking, the duration of cabinets was reduced after 1970, but compared with the longer lasting cabinets such as the Yoshida cabinet in the 1950s (6 years), the Sato cabinet in the 1960s (7 years), and the Nakasone cabinet in the 1980s (5 years), it is clear that the duration of cabinets in the 1990s was quite short. The reason why the duration of each cabinet was short, and why there were many coa­ lition cabinets after August 1993 is that no party could hold a majority in both the lower house and the upper house. Also, the coalitions of ruling parties were very fragile so that the prime minister of each cabinet could not maintain solid control.. That was one reason why the stimulatory economic policies of governments were not very effec­ tive. The other reason is that the governments mobilized Keynesian policies such as public works on the social infrastructure (e.g. the renovation of local roads, the construction of fishing ports, and the building of public assembly halls mainly in rural areas) to stimu­ late business, but these kinds of expenditure did not serve to solve the core problem of the Heisei Recession, i.e. the financial crisis caused by the fall of land and stock prices and the large amount of bad bank loans. Why then did the governments spend so much money (100 trillion yen) on ineffec­ tive items? One reason is that there are a lot of farmers who work in public works projects in the off-season (as a result, the construction industry employs one tenth of the Japanese working population), and rural people as an electorate demanded that gov­ ernment implement this kind of public expenditure to get additional income. The second reason is that the construction industry, in which the management and workers give strong support to the candidates of conservative parties in both national and local election campaigns, was severely damaged by the collapse of the bubble econ­ omy, so they demanded politicians to increase the expenditure on public works. It must be noticed that this huge amount of public expenditure caused an increase in the deficits of both central and local governments. As Figure 2 shows, the balance of the central government bond issues rose from 173.6 trillion yen in 1991 to 180.9 trillion yen in 1992, 195.1 trillion yen in 1993, 209.3 trillion yen in 1994, 227.9 trillion yen in 1995,247.4 trillion yen in 1996, 273.9 trillion yen in 1997, and to 317.6 trillion yen in 1998 (end of fiscal year base), and that of local governments rose from 58.7 trillion yen in 1991 to 65.0 trillion yen in 1992, 72.3 trillion yen in 1993, 80.5 trillion yen in 1994, 26 TADAHIRO UEMATSU

92.9 trillion yen in 1995, and to 103.3 trillion yen in 1996 (on an end of fiscal year base). Including other debts of central and local governments, it is estimated that the to­ tal amount of government debts reached 600 trillion yen in total at the end of the 1998 fis­ cal year.

5. The Crisis of the Financial System While the Keynesian-type economic stimulus policy of governments did not have an ef­ fect sufficient to move the economy out of recession, as Figure 3 shows, the business re­ sults of financial institutions worsened year after year, and there were several banks which fell into insolvency. A few representative examples are mentioned here.

Trillion Yen

~n

15

In

()

-5

-I () FIGURE 3. Balance of Bad Loans and Management Policies of Major Banks Source: Kinyu-Zaisei Jijo (in Japanese)

(1) Hyogo Bank, the largest second-tier regional bank was revealed to be insolvent in September 1995, and on the same day Kizu Credit Union, the largest credit union, was de­ clared to be insolvent by the Osaka prefectural government, which supervises credit un­ ions in Osaka prefecture. (2) Seven housing loan companies were declared insolvent and were liquidated in the summer of 1996, when a government fund of 685 billion yen was allocated for this pur­ pose. (3) Hanwa bank, the largest regional bank, was revealed to be insolvent in November 1996. That was the first regional bank insolvency since W orId War II. (4) Hokkaido Takushoku Bank was declared insolvent in November 1997, as the first JAPAN'S DECADE-LONG RECESSION 27 city bank to go bankrupt since World War II. Both Sanyo Securities, which was a medium-sized securities company, and Yamaichi Secturities, one of the four major securi­ ties companies were declared insolvent in the same month. The successive insolvency of three financial institutions (Sanyo, Hokkaido Takushoku, and Yamaichi) within a month gave Japanese people a shock and made them feel uneasy. Just after these insolvencies, many people rushed to banks to with­ draw their deposits, hearing rumors that their banks might possibly soon go insolvent. At this time, Japanese banks also faced another task, namely they had to observe the standard of the BIS (the Bank of International Settlements) to keep their ratio of net worth to lending at no less than 8% for banks engaged in international business, and 4% for banks engaged in domestic business from April 1998. Banks tried to tighten their lending in order to raise this ratio, which caused damage to the operations of busi­ nesses, especially small and medium-sized companies. Public opinion demanded that the government restore financial stability with a funda­ mental reform of the financial system. The government, responding to this request, threw 1.8 trillion yen of public funds into 21 major banks in March 1998 with the condi­ tion that management reform the banks and supply enough lending to small and medium­ sized companies. The government also established the Financial Supervisory Agency in June 1998 which, independently of the Ministry of Finance, is able to supervise the managements of banks and securities companies, and order a stop to the operations of in­ solvent financial institutions. In addition to the establishment of the Financial Supervisory Agency, the government had several laws for financial stability enacted in the Diet in 1998. The most important law was the Bank Recapitalization Law, enacted in October 1998, which indicated that the government could establish a Financial Reconstruction Committee which could choose one of three options in dealing with bankrupt or near-bankrupt banks, the first be­ ing to put the bank under temporary state control, the second being to liquidate the bank, and the third being to transform the bank into a government bridge bank. In or­ der to make this policy effective, 70 trillion yen of public funds was made available. It was under these policies that both the troubled Long-Term Credit Bank of Japan and the Nippon Credit Bank were placed under temporary public control in October and in December respectively. Since the LTCB and the NCB are two of the three long­ term banks of Japan, the influence of the insolvency of these two banks could have been great. It was because the cases of these two institutions were properly settled that the un­ easiness felt by people was not so significant. Looking back, the autumn of 1997 was the most serious period for the Japanese finan­ cial system and the overall economy.

6. Reconstruction of Companies' Management As consumers limited their consumption and banks cut lending to companies, the managements of both manufacturing and non-manufacturing companies became very tough. Under this environment, companies began to attach more importance to cost­ performance effects and adopted a severer attitude than before to their employees. It has been one of the traditional rules of the Japanese management system to avoid dismissing 28 TADAHIRO UEMATSU employees, even in a recession. But this rule seems to have been put aside recently, be­ cause there has been a steep rise in the number of lay-offs. As Figure 4 shows, the rate of unemployment was between 2.0% and 3.0% in the first half of the 1990s but it was 4.1% in 1998 and 4.9% in June of 1999.

% p 7.0 age :20-:24 ~ ~ ;:J_.d 6.0 If " ~ 5.0 P

4.0 average JJ , - - -9 3.0 ", age ;);)-;). n...... O--a ~---cJ 2.0 ... "'0--0•• 0 ' " age 45-49

1.0

86 87 88 89 90 91 92 93 94 95 96 97 98 FIGURE 4. The Rate of Unemployment Sources: Management and Coordination Agency, Labor Force Survey.

In a society where long-term employment and seniority-based promotion is a rule, a per­ son dismissed in his forties or fifties has two difficulties, one being the loss of a monthly salary and the other being the loss of self-confidence (Am I a redundant worker for my company?). It was reported in newspapers that the number of middle­ aged men who committed suicide increased sharply in 1998 (for example the number of men in their fifties was 6,000 out of 22,338 suicides in total) so that the average life span of men shrank a little, from 77.19 years to 77.16 years, while that of women in­ creased from 79.82 years to 80.01 years.

7. Tasks at the Beginning of the 21st Century There are several tasks with which the Japanese economy has to cope at the begin­ ning of the 21st century. (1) Financial reforms have been partly implemented. The Bank­ ing Recapitalization Law and the Financial Restruction Commission are contributing to financial stability, and the Japanese Big Bang, started in January 1998, has caused compe­ tition between banks, securities houses and insurance companies, including foreign compa­ nies. Citibank Japan now has branches in large cities throughout Japan. (2) The Public Nursing Insurance Scheme starts in April 2000. Based on the premi- JAPAN'S DECADE-LONG RECESSION 29 urns paid by all the people over forty years old, elderly people can receive nursing care at little personal cost. But since the speed of the aging of the population is very high in Ja­ pan, it is clear that premiums will increase very fast, which will cause disputes over this system. (3) Until now the accounting system of Japanese companies has been different from the international accounting system. For example, Japanese companies do not have to dis­ close consolidated statements including their affiliated companies, and this enabled Japa­ nese banks to force a part of their bad loans on to their affiliated companies and an­ nounce a smaller sum of bad loans. But, from March 2000, every company listed on the stock exchange, including financial institutions, will have to disclose consolidated state­ ments. Then those banks whose affiliated nonbank financial institutions have a large amount of bad loans will be rated as risky banks. At the same time, although companies now record the value of real estate and finan­ cial assets in terms of prime cost, keeping the difference between prime cost and market value as a latent gain or loss, from March 2001 they will have to disclose their financial assets in terms of the market value. The fluctuation of the stock prices will be reflected in their balance sheets. (4) The sum of debts of both the central and local governments is now about 600 tril­ lion yen, and it is expected to increase in the near future. These debts have to be paid even­ tually with taxes. In summary, we now stand in a position to see an exit from the long recession, but we can not be sure whether this is the real end to the recession or merely a temporary one (Remember that everyone felt that the recession was over in 1996, but that was only a temporary boom due to the stimulatory economic policies of 1995). What we see now is not the shining paradise of economic recovery but the bleak plain of the heavy bur­ den of taxes and social welfare that awaits us at the beginning of the 21st century.

REFERENCES

Sato, Akira (1998), "Documents on Financial Bankruptcy (in Japanese)", Iwanami. Asahi Shimbun (each year) Asahi Yearbook, Asahi Shimbun Co. Bank of Japan (each year) Annual Economic Statistics (in Japanese), Bank of Japan. City News Division of the Yomiuri Shimbun (1998) Why the Chairman Comitted Suicide (in Japanese), Shinchosha. Economic Planning Agency (each year) Annual Report on National Accounts (in Japanese), Ministry of Fi­ nance. Research Office of the Standing Committee on the Budget, House of Councillors (1999) Zaisei Kankei Shiryoshu (The Book of Public Finance of Japan, in Japanese), 1999 Edition.