Mr. Chairman and members of the Trade Subcommittee, I appreciate the opportunity to come before you today to discuss the current economic problems in Japan and their impact on U.S.-Japan trade relations. Putting the matter bluntly, Japan's economy is a mess. The 1990s have been a lost decade, with growth since 1992 averaging around 1 percent a year. A recession, and perhaps a serious one, is now under way.
Unemployment is at record highs.
A black hole of bad debt has sucked the life out of the banking system. Those are just the short-term problems. The deeper structural flaws of the Japanese system are even more daunting. Japan's whole system for allocating capital is broken. The rate of return on capital has now fallen below that in Europe and is less than half the U.S. rate.