Japanese shun the gift voucher solution to economic woes

"JAPANESE POLITICS has sunk very low," said Hirokazu Mizuguchi, vice president of the Japan Association of Corporate Executives last week. "It is complete nonsense," agreed his colleague Yoshihiko Miyauchi, "and we should desist immediately from something so cartoon-like." Leading politicians have called it "idiotic", and it makes shopkeepers frown. It is the latest hope for saving Japan's shrinking economy: the gift voucher.

The idea, under serious consideration by the Japanese government, is to tackle head-on one of the biggest problems facing the country as it slides into its worst recession since the war - the reluctance of its once confident consumers to spend their considerable wealth. Despite the shocks which have befallen their once mighty banks and the near collapse of some of their Asian neighbours, Japanese are still among the world's richest people. But, fearful of redundancy and unemployment, Japanese families are holding on to their money in banks, savings accounts and - sometimes literally - under the bed.

In the first six months of this year, spending decreased by six per cent and those cathedrals of conspicuous consumption, Japan's department stores, have become sepulchres as spending has slowed by 15 per cent. All this creates a vicious circle: with so little demand from consumers, manufacturers and retailers have been hit hard, increasing the likelihood of lay offs and bankruptcies and creating an atmosphere of even greater caution and trepidation.

The government has tried repeatedly to part people from their yen, but with negligible effect. Bank interest rates have been reduced to nearly zero to discourage saving - but last week some treasury bill yields actually fell below zero for a while, which meant investors were prepared to pay the authorities to keep their money.

The government has passed the so-called "Happy Monday" bill, intended to encourage spending by creating new three-day Bank Holiday weekends. Tax breaks have been announced, and trillions of yen have been spent on the construction of unneeded roads, bridges and dams in the hope that money will trickle down through local communities and refresh the national economy. But the money liberated by these exercises remains unspent. In August, the disposable income of Japanese households actually went up by three per cent, but consumption went down by two per cent, the 10th consecutive monthly decline.

In his "General Theory of Employment, Interest and Money", J M Keynes pointed out that the way to encourage spending is to create a form of money which "goes bad ... like green cheese" - and this is the idea behind the voucher scheme. Instead of tax breaks, the idea goes, Japanese will be presented with shopping coupons worth, for example, 30,000 yen (pounds 154). They will not be redeemable for cash and, like Stilton on the shelf at Sainsbury's, they will have an expiry date, thus catapulting families back into the stores and setting the tills ringing.

The vouchers are expected to be unveiled in a week's time as part of a new spending package currently being worked out by the ruling Liberal Democratic Party (LDP). But since the idea was floated last month no one seems to have had a good word for it. Detractors point out the administrative effort and security problems involved in creating what is, in effect, a new kind of legal tender. Vouchers could be forged and a black market might spring up. Even more likely is that people will take the vouchers and spend them, but save the money which they would otherwise have spent as cash, thus neutralising any benefit to the economy. The Japan Chamber of Commerce found that fewer than a third of companies surveyed thought the voucher scheme was a good idea and 16 per cent believed that it would have negative effects in the long run.

The scheme's ultimate doom may lie in an amendment being favoured by the LDP. Komeito, the opposition party which originally proposed it, intended that the vouchers shuld be given to everyone; the LDP prefers to target only low-income families. But even - or perhaps especially - in the present recessionary times, that is a label that few Japanese would willingly attach to themselves. "So people won't want to use it," said a spokesperson for the Japan Consumers' Association. "They don't want the stigma of being associated with poverty."