The country endured its worst recession since World War II from late 1997 to early 1999. The economy shrank 3 percent in 1998, and finally began to grow in the spring and summer of last year. U.S. embassy observers said the economy is expected to grow through the first six months of 2000, but should turn down again in the fall. But it isn't simply a matter of the Japanese economy turning a corner. It needs wholesale change.
Japan has the most rapidly aging population in the industrial world.
Combine that with low inflation, low interest rates and uncertainty about the health-care system. The aging in Japan are saving furiously to pay for uncertain retirements, so consumer spending is stagnating, inhibiting economic growth. The aging of the population also raises questions about where future workers will come from. But in Japan, government bureaucrats are forced to retire at age 55, after which they spend the rest of their working years employed by the companies they used to regulate. Deregulation would obviously destroy that system, so the people charged with deregulating the system have no incentive to do so.