主题：【文摘】】Japan: "Lost Decade" and "The Second Defeat" -- Chieftain

TOKYO -- Strip away all the elaborate economic theories about the causes of Japan's malaise and you'll find that it's just not that complicated. The sad truth is that Japan might have avoided 15 years of lost growth potential had it only adhered to the simplest of principles: Costs don't disappear.

Credit-card holders worldwide understand that shoving the bill in the drawer won't change the fact that someone has to pay eventually, and it's usually a lot cheaper to just pay the bill when it arrives. But this lesson was ignored by Japanese decision-makers in the 1990s when they turned their backs on bad bank debt, and as a result jacked up its price. And for over a decade, the Japanese have been paying for this mistake.

Here's how it worked. The bursting of the asset bubble in the 1980s dealt a severe blow to the balance sheets of Japanese banks that made loans using real-estate assets as collateral. Experts now suggest various measures that should have been taken in the early-to-mid '90s to address Japan's banking woes. But there was one obvious -- though at the time unthinkable at least in the official view -- option: Failing banks could have been allowed to fail.

Of course, the short-term consequences of this would not have been pretty. A hard-landing approach might have resulted in a loss of confidence in the financial system, and might even have plunged the Japanese economy into a few years of sharp recession, with all the related woes of bankruptcies, a run on the banks and stock-market consequences.

This painful period, however, would have been short-lived. Some economists here confidently tell me that not only would the Japanese have recovered in a few short years, but the country's average gross domestic product would have grown significantly faster than the 1% that became the norm.

While Japan's growth has managed to stay ever-so-slightly positive in most of the last 15 years, we will now never know how much potential growth was lost when the government, fearing that the pain following a hard-landing was "too high a price to pay," opted for inaction. The Japanese people rested assured that none of their banks would be allowed to fail, and from 1990, that was pretty much the case. When a bank got into hot water, a bigger, healthier bank was directed to come to the rescue. The government protected depositors from losses, which is appropriate if possible, but was equally considerate of bank owners and executives, which is impossible in such circumstances.

Japan hoped that the economy would simply "grow out of the problem," but instead, the problem simply grew. An initial decline in asset values affected balance sheets of both borrowers and lenders, depressing business investment. As investment went down, GDP growth went down and profits of companies dropped, which put further negative pressure on stock prices. "If we had been able to stop this vicious cycle at the end of the first or second round, the cost of addressing the problem would have been a lot smaller," explains Kazuo Ueda, former member of the policy board of the Bank of Japan.

But instead, Japanese decision-makers helped ward off any sense of crisis among the population who never, ever, thought that a Japanese bank could fail. Eisuke Sakikabara, former vice minister of finance for international affairs, tells me that he remembers in the early '90s telling foreign journalists that Japanese banks don't fail, that the government would never let them fail.

"The moment you say certain banks may fail, they fail," Mr. Sakakibara explains. "Confidence in the financial system is a public good."

The problem is that the Japanese banking system wasn't deserving of this confidence. Paul Sheard, chief economist at Lehman Brothers Japan, says that bank deposit guarantees lulled the people into a false sense of security.

"By guaranteeing the deposits, the assets don't come back. Guaranteeing deposits allowed Japan collectively to ignore the problem or severely play it down, and therefore delay the resolution," Mr. Sheard explains. While guaranteeing deposits may sound nice in theory, when the money in the banks has already vanished, who is going to pay for these deposits? "The Japanese have been very fixated on avoiding the costs that are a manifestation of something that's already happened," says Mr. Sheard.

This brings us back to the original point: Costs don't disappear. Which is why the argument that the government was just protecting the people falls flat: The bills have to be paid sooner or later. Mr. Ueda explains how a "hard-landing" approach wouldn't have necessarily been more painful in the end: "A couple years of -5% growth would have meant a very small number of unfortunate people taking abnormally large losses. It would have been tough for people working in banks, and some of their borrowers. But those borrowers disappeared anyway. Because we weren't tough initially, banks continued to lend to zombies, but because we became fairly tough eventually, those borrowers had to disappear."

We may never know the true extent of costs accrued by 1990s policy inertia, but some experts can give a pretty good idea. Kenichi Ohmae, former partner at McKinsey and Company, says that the mistakes of the past have cost the taxpayers $2 trillion spent trying to keep the banks afloat, $500 billion in direct subsidies and $1.5 trillion in foregone interest on savings, because of zero-interest rates. And there are other costs as well: Japan, once on top of the world, remained mired in stagnancy while neighboring China enjoyed dizzying growth, leading Japan's economic recovery to become largely dependent on exports to China.

But perhaps one of the greatest costs is the least tangible to define: the younger generation's lack of hope for the future of Japan. The images of young women strolling through the streets of Tokyo toting their Louis Vuitton bags only glosses over a deeper current of pessimism underneath. Part of this may be the simple realization that the younger generation can not expect as high a rate of economic growth as that enjoyed by their parents. There is also a lack of confidence in Japan's leaders to effectively handle what is perhaps its greatest challenge: the nation's rapidly aging society.

The lack of hope among today's youth may be related to a sense of disappointment in Japanese leaders for not having taken decisive action when they had a chance. Kazuo Noda, honorary president of Tama University, has an interesting take on the current mood in Japan today, which he aptly calls "hyogen dekinai fuan," -- inexpressible uneasiness. He tells me that what we call the "Lost Decade" of the 1990s is also known in Japan as "The Second Defeat" -- the first being Japan's loss in World War II. Mr. Noda lived through Japan's bitter struggle to rebuild itself after the war. And even as we sip our expensive drinks in the luxurious lobby of one of Tokyo's finer hotels, he argues that the second defeat was worse.

"The first defeat was clear," he explains, "In the second defeat there was no enemy -- we lost to ourselves. When you've lost to yourself, it's very hard to rebuild."

At least among some, there is a palpable sense of regret here about "what could have been." Redemption might be found if there is recognition that an aversion to strong action can just inflate costs down the line, and second, that all mistakes have consequences. The next step is to take these lessons and apply them to the challenges Japan will face as it struggles for recovery.

Ms. Parker is an editorial page writer at The Asian Wall Street Journal.