Japan’s “Mori-bund” Economy

The new Japanese prime minister may believe that he was chosen by God, but that view does not seem to be shared by the Japanese people. During his first month in power, Mori’s approval ratings dropped by 16 percentage points to 21%. Then in the June 25 elections, his Liberal Democratic Party lost its absolute majority in Japan’s lower house of parliament, forcing the prime minister into a coalition.

The economy has not been blessed either. In April, Japan’s public debt reached 120% of GDP, amid fears that the already-swollen budget deficit would rise to 10%. Between 1990 and 1998, Japan’s economy contracted by 3%, even as Europe’s expanded by 10% and the U.S. economy grew by 34%. This is not good news — especially for someone supposedly sent by God.

Mori has a vision for the Japan of the 21st century. It is known as “The Rebirth of Japan.” He also calls his closest circle of advisors the “Cabinet for the Rebirth of Japan.” Fittingly, perhaps, one of his coalition partners is the Buddhist-backed Komeito Party. This all suggests that the new prime minister is a deeply spiritual person — or that he is simply confused about what kind of “rebirth” he really means.

Despite all of Mr. Mori’s talk about preparing Japan for the future, his critics are asking which century he is living in. As the economist Paul Krugman cynically remarked in the New York Times: “Japan has managed to create 1930’s economics at the dawn of the 21st century.”

The truth is that Japan’s economy is in a moribund state, which is just another way of saying doomed. Factories are churning out consumer electronics and cars no one in Japan wants, exposing much of the economy to dangerous reliance on exports.

Like America’s mistaken policy makers in the 1930s, successive hapless Japanese governments have tried to stimulate growth the discredited and old-fashioned way — spending more on public works.

As Japan’s tenth prime minister in 12 years, Mori may simply perpetuate the torpor his name suggests. If he is to revitalize Japan, he will need divine intervention indeed.