And no one is sure these estimates are accurate, so nobody knows where the bottom is. It is widely believed that Japan's banking practices, if exposed, would reveal scandalous favors for politicians and for the yakuza, the local mafia. Corporations, burdened by four times as much debt in relation to equity as American companies, are exposed to a much higher level of bankruptcy because they are no longer supported by rapid economic growth and ever rising land prices. Bankruptcies are at a higher percentage of gross domestic product than they were in the United States at the height of the Great Depression, note analysts David Asher and Andrew Smithers. And public debt, as a percentage of GDP, exceeds that of any other major industrial power.
Japan is caught in another peculiar dilemma.
There is a real danger of capital flight. If Japan keeps its interest rates down and the currency continues to weaken, national savings will go out to higher-yielding shores, notably the United States. And if Japan raises interest rates, it faces an avalanche of failures of highly and badly leveraged companies. The problems, in short, are not cyclical, as in the past, but structural. And there is no prospect of a soft landing.