Economic observers say Japan is following the same Keynesian theories that were discarded long ago by other developed nations, specifically that when an economy is slumping the government can spend it back into prosperity. Japan now predicts its economy will grow by only 1.9 percent in the 1997 fiscal year, the lowest forecast ever. Throughout most of this decade, prices have been either stagnant or falling. But these measures are not working. Companies are now building more plants overseas than they are at home.
Interest rates are now near zero.
With the banking system in a crisis citizens keep as little money in banks as possible and banks are being forced to make as few long-term loans as possible.