Bradford Hughes (University of Southern California, USA)
As Professor Shishido and Ms. Hama have drawn lines in the sand over how to rebuild Japan's economy, it seems that the argument is an economic question of which came first; the chicken or the egg? There is no one in Japan who would argue against structural reform; rather the debate is over when it should occur and what exactly should be changed. Ms. Hama makes the strong argument that things must change with regard to economic structure before any macroeconomic alterations can have an impact. Prof. Shishido on the other hand, stays with the position that the "Big Push" will offset any immediate structural needs by spurring demand and increasing growth.
Ms. Hama is likely correct in her belief that without structural reform, any new macroeconomic recovery will go down the same road as past economic rebounds. It is unclear to me how Professor Shishido thinks that any of the new economic growth obtained from his "Big Push" plan will suddenly react differently than any previous growth has reacted within the Japanese economic structure. The reality seems to be that structural reform, before economic growth, is the only way to assure long-term success. (A sinking boat will only stop sinking if you patch the hole and repair its structural integrity, any other remedy will be ineffective). However, with regard to reform, Ms. Hama believes, "that nothing short of a total departure from what worked for Japan in the past will suffice." This argument puts great pressure on the willingness of the fundamental Japanese economic structure to change without some serious struggles. Postwar Japan has been the blue print for economic success in other regions of Asia, most notably with regard to "industrial policy". A complete and immediate removal from the past would not help the system, but rather only confuse an already weak economy. What is needed is a structural reform that will quickly breathe new life into the economy without re-writing the entire rulebook on Japanese economics overnight.
In order to restore some fiscal balance to the government in his "Big Push" scenario, Professor Shishido apparently feels that there will need to be tax increases on personal income and on consumption sometime around 2006. Yet it is unclear how fiscal balance can occur without government fiscal responsibility in the first place. Mr. Koizumi's current popularity as a reformer is no guarantee that he will be able to restore some level of fiscal responsibility in the future, a fear that is hinted at in Ms. Hama's essay. A strong fiscal reform policy in line with other structural reforms will be a better foundation to Prof. Shishido's "Big Push," rather than waiting for 5 years into his plan to bring about such fiscal balance. An early government plan for fiscal balance will be a better base for the economy to achieve the projected 2010 estimate, and maintain it beyond then. Prof. Shishido best summarizes the overall theme of Japan's recovery, when he says, "a policy package of structural reforms and a macro economic policy...are not competitive with each other, but rather complementary." Therefore, the Japanese economy cannot rebound with macroeconomic policy alone, nor can it sustain any growth without some structural reforms. Thus, the two ideologies must work hand in hand.
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