Outlook: Turning Japanese

THE TOKYO stock market reacted glumly yesterday to details of the latest in a long line of Budget packages from the Japanese government. This was odd, because on top of the now customary fiscal stimulus, the authorities genuinely seem to have discovered the merits of enterprise and the structural reform needed to make it blossom.

Many commentators have drawn a parallel between Britain in the 1970s and Japan in the 1990s. The symptoms might have been somewhat different, for Britain had inflation with its rising unemployment while Japan has deflated, but in both cases the problem was an over-rigid, inflexible economic structure.

When a dismal economic performance lasts as long as a decade, it creates a political appetite for change. In Japan this is taking a far more diffuse form than Thatcherism. This is partly due to the fact that there is a coalition government and there is certainly no shortage of sceptics who cannot believe that the policy environment has really changed for the better.

But even if the mixed bag of modest new tax measures and loan guarantees prove insufficient to light the blue touchpaper under a fizzing, dynamic new business sector, yesterday's government announcement did at least adopt the rhetoric of enterprise and deregulation. It could even have been modelled on Gordon Brown's Pre-Budget Report.

And for real evidence of change look no further than last night's announcement that Masayoshi Son's Softbank is recruiting a team to bid for the failed Nippon Credit Bank. If Mr Son manages to take Japanese banking online, it will be one of the clearest possible signals that the troubled economy really is on the verge - finally - of significant structural change. Mr Son is hugely optimistic about Japan, which he compares to a burnt out field after a war, all ready to bloom and flourish again. So far he's been proved right about the Internet, so maybe....