Bearish business and consumer sentiment appears to be based on a belief that the Hashimoto administration does not appreciate the depth of the economy's problems. Press reports that government and Liberal Democratic Party officials are staging mock public debates over economic policy as a means of saving face in advance of a policy shift give the impression that policymakers in Tokyo are more interested in political survival than meaningful economic policy responses. The gloomy assessments should not be extrapolated, however, to imply a meltdown in economic activity in Japan. For one thing, Messrs. Ohga, Hayami and others are reacting, in large measure, to the same limited number of facts. Moreover, absent devastating war, hyperinflation or central planning, modern economies simply do not unravel in the way that a football team does, for example, in the face of a rout.
Japan suffers from none of the necessary preconditions for a collapse.
Economies have powerful self-righting tendencies, many of which stem from the actions of capitalists who take advantage of depressed conditions. Moreover, monetary and fiscal policies are always options if market mechanisms fail. Finally, contrary to Mr. Ohga's assertion, even a sharp economic decline in Japan would not necessarily produce depressed conditions abroad. That statement reflects not the attitude of Herbert Hoover but current economic reality. Japan's condition is bleak but not catastrophic.