IT'S been 40 years since Japan has experienced such a double-whammy: stagnant markets and unstable politics.
It is as if the country were hanging in a void.
"The Japanese economy has not reached bottom yet," says Minoru Murofushi, president of Itochu Corp., one of Japan's giant trading companies. "The recession may be in a double-dip, or even a triple dip."
Consumers have money but they do not want to spend it, he adds. And industry leaders are holding off on capital investments. Land and stock prices, too, are floating with little direction. Mr. Murofushi's great hope is that Japan's new leaders "will do anything to boost the economy."
That is not likely soon. Political reform, not an economic stimulus, is at the top of the agenda for the new coalition expected to take over soon. The pro-business Liberal Democratic Party (LDP), after 38 years in power, is out in the cold, at least for now.
What is more, the coalition's biggest party is the socialists, which Japanese big business has tried to isolate since the party's hey-day just after the war. Business is concerned that the socialists will block government deregulation and a reduction of subsidies that would help make the economy more efficient. "The socialist party has never supported any liberalization in the past 40 years," says Kazuo Nukazawa, managing director of the Federation of Economic Organizations.
With the economy in a rut, business wants the incoming prime minister, Morihiro Hosokawa, to refocus his sights on such measures as an income-tax cut, more fiscal spending, and deregulation. But Mr. Hosokawa's rise to fame and power in just the past year as head of the Japan New Party is based on his crusade to clean up and reshape Japanese politics, not to fix the economy.
"The focus of the political reform is the voters, not the consumers," Mr. Nukazawa says.
Issues such as a tax cut or government deregulation might split the shaky coalition apart, says Tsutomo Hata who, as head of the Japan Renewal Party, is likely to become finance minister. "There may be a clash," he says.
To get out of recession, Japan is trying to boost its exports to Asia, says Yoh Kurosawa, president of the Industrial Bank of Japan. Trade between Japan and China, for instance, will probably exceed $30 billion in 1993, the largest amount ever, according to the Japan External Trade Organization. So far this year, trade is up 29.7 percent from a year earlier. "Cooperation between Japan and Asian countries is going very well," Mr. Kurosawa says.
And unlike the boom years of the late 1980s, when Japanese companies expanded into too many products, "now most are thinking mainly of making money," Kurosawa says.
That restructuring, he says, is having a depressing effect on the economy. Banks are also burdened with restructuring bad loans from the bust of a property boom. The rise in the value of the yen, which has hit a record of 104 to the dollar, has hurt corporate profits.
Japan's gross national product (GNP) in fiscal 1992 (ending March) grew 0.9 percent, in real terms, posting the second lowest postwar growth, according to the Japan Center for Economic Research. But GNP for the April-June quarter fell 0.4 percent in real terms from the previous quarter.
The LDP, both last fall and this spring, approved massive new spending programs for construction projects to help boost the economy. But little of that money has been spent.
"The vital macroeconomic factor that is key to the solution to the long-term task of the Japanese economy is the productivity increase," according to the annual economic survey of the Economic Planning Agency.
A recovery from the recession, which started in mid-1991, will begin by early 1994, forecasts the Bank of Japan.