The Politics of Inflation and Economic Stagnation: Theoretical Approaches and International Case Studies

By Leon N. Lindberg; Charles S. Maier | Go to book overview

14
The Cost of Rapid Growth and Capitalist Democracy in Japan

Kozo Yamamura

From 1981 through 1983, Japan's price levels were largely stable. The wholesale price index remained virtually unchanged and the consumer price index rose only 10 points. The Japanese must continue, however, to be concerned, as they were in the 1970s, with persistent inflation or with the threat of rapid inflation in their economy.

In assessing the future risks of inflation what is crucial is not the short- term price stability resulting from the sluggishness of economic performance in the early 1980s and the net annual capital export of almost $20 billion, part of which was induced by high interest rates in the United States. Instead what is crucial is the politicoeconomic vulnerability of the Japanese capitalist democracy, which as this chapter seeks to demonstrate, continues to face serious long-term risks of rapid inflation that for political reasons will be extremely difficult to avoid. 1 These risks are not of recent origin but were inherent in the very process of rapid growth.

____________________
1
Serious political analysis of the Japanese economy is a very recent undertaking. Thus, Takafusa Nakamura and others, "Nihon keizai wa antei kido ni noreruka?" Ekonomisuto, August 18, 1975, p. 68, observed that "economists not only acknowledge they are ignorant of politics but are almost proud of that ignorance." In Nihon keizai shimbun, September 19, 1978, Moto'o Kaji, an economist, strongly advocated the necessity of political economic studies which "yet remain untouched" in Japan. And Komiya, whose able analysis of postwar inflation in Japan focused on the "economic causes," had only the following to say on strong political pressure exerted for deficit spending in the 1970s: "The government was then under strong pressure from various political groups demanding increased expenditures as well as the tax reduction. Investment in social overhead capital and housing, expansion of public welfare programs, improvement of the national social security system, and reduction in the personal income tax were considered as urgent tasks for the government. The fear that the yen revaluation would cause a prolonged recession helped to loosen the government's purse strings." Ryutaro Komiya and YoshioSusuki

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