While the Tokyo stock market meanders at its lowest levels in six years, Wall Street punctured the 3300-mark for the first time yesterday. Does this mean that the Japanese economy is in worse shape than the American? Don't believe it. The U.S. recession is for real, reflecting structural defects that signal declining influence worldwide; the Japanese recession is primarily a healthy, deliberate, government-induced puncturing of a speculative bubble.
Indeed, the Japanese recession in many ways is the kind of recovery the U.S. would dearly like to have. Japan's trade surplus is spurting again, its growth rate by year's end may be above 3 percent, unemployment and inflation are under 2 percent, the government budget is slightly in the black and private investment is still running at 22 percent of gross domestic product (twice the U.S. rate.)
So why has the Nikkei average plunged? Because Japan's biggest investors -- its banks and giant corporations -- are in the process of liquidating wildly unwise investments at home and abroad in skyscrapers, hotels, golf courses, shopping malls, art works and businesses now plunging into bankruptcy. Banks, which own 10 percent of all the equity shares traded, are especially hard-put to meet reserve requirements because they are stuck with assets of vastly shrunken value. Corporations that used to buy one another's stock are also unloading to protect their capital base.