Reform vital for Japan’s economy

THE topic was supposed to be ‘Trading with the land of the rising sun’. But those who met and listened to the Ambassador to Japan, John McCarthy, may have left wondering if the current story of Japan was better illustrated as that of the setting sun.

Speaking at the ‘Meet the Ambassadors’ breakfast series hosted by WA Business News in conjunction with the Department of Foreign Affairs and Trade, Mr McCarthy said the current Prime Minister Junichiro Koizumi was carrying out a reform process, but it was happening at a very slow pace.

But, Mr McCarthy said, unlike five years ago people in Japan were now recognising that reform was necessary.

“There is a sense that Japan has slumped and is no longer the country it was five year ago,” he told the audience.

“The indications certainly are that it will never return to the strong position it held during the 1980s.

“But reform is now on the agenda as it never was two or three years ago.”

The Ambassador painted two commonly held and possible directions that Japan’s future will take.

 “The first scenario is that it will decline gradually so that by the end of a generation it will be regarded a bit like Britain during the ‘60s — ‘Old lady sinking into the sea never to get up again’,” Mr McCarthy said.

“The second view is that Japan has the capacity to turn on a sixpence. The advocates of this view point to after the Second World War, and they point to the period of restoration.”

However, the Ambassador said he believes neither scenario is likely.

“It is not the case, as after World War Two things were so bad that they could only get better,” Mr McCarthy said.

But he also believes that despite its current difficulties, Japan is not another Argentina, which is also tackling problems of high debt and a poor banking system.

Instead, the Ambassador believes slow continuous reform under Mr Koizumi looks most likely.

“Despite the hair and his change in mould from the normal politician, he is still a very careful politician,” Mr McCarthy said.

He said Australian businesses and government needed to encourage the Japanese government to continue the reform process and not take for granted the relationship that already exists between the two countries.

Japan is WA’s largest export market, taking almost three times the value of the State’s second largest export market, South Korea.

In 2001-02 exports to Japan exceeded $7.7 billion.

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