Japan's high-spending legacy
- 10 October 2012
- From the section Asia
Twenty years ago Japan suffered a huge banking collapse almost identical to the one that Europe and America are trying to drag themselves out of now. But unlike in Europe, Japan did not suffer the pain of austerity.
There were no angry demonstrators taking to the streets. Unemployment stayed low, and the economy continued to grow, albeit slowly. How did Japan do it?
Put simply: the Japanese government decided to spend its way out of trouble.
On a narrow back street in southern Tokyo, a group of young men are unloading shiny new solar panels from a van and hauling them up on to a roof.
The roof belongs to Mrs Motoyoshi, a young housewife with a one-year-old baby, Ko Chan. The panels should be costing Mrs Motoyoshi $25,000 (£16,000). But in Tokyo up to half that cost is covered by government subsidies.
"I wanted to get solar power, so when I heard the government subsidies may be coming to an end I decided I must get the panels now," she says.
This is all part of the Japanese government's latest plan to get people here to spend, and it works.
Hideharu Terasawa is an affable salesman who runs his own small electrical goods store in northern Tokyo. The last few years have been tough for him. The one bright spot is solar panels.
"It's the difference between zero and 10," he says. "With no subsidies there would be no business. I don't know how I'll sell any when the subsidies end."
So it is good for Mrs Motoyoshi and for Mr Terasawa. But perhaps not so good for Mrs Motoyoshi's baby son Ko Chan. A one-year-old, he already owes $100,000 - his share of Japan's national debt.
The amount of money the Japanese government has spent over the last 20 years to boost the economy is staggering.
In the 1990s alone, it spent around $2tn on building new infrastructure, highways, roads, bridges and tunnels. That is a ''two'' with twelve ''zeros'' behind it. And it is still spending.
The city's latest and grandest ring-road is an hour's drive from downtown Tokyo. The highway plunges through green mountains in a series of tunnels, some more than 2km (1.25 miles) long. These tunnels are reported to have cost nearly $1m per metre to build.
Yoshihiro Hashimoto lives in a once-beautiful little valley that is now straddled by not one but two huge motorway viaducts.
The new road is not only an eyesore, he says, it is a huge waste of money. It was supposed to carry 50,000 vehicles a day, but Mr Hashimoto says it is only carrying 10,000.
"The government is building roads like this all over Japan," he says. "We are trillions of yen in debt, but we keep building more and more roads. I'm really worried about what we're leaving for the next generation."
Japan has become famous for its addiction to pouring concrete. There are bridges to nowhere, and 70% of Japan's coastline has been covered in concrete.
One of the most infamous examples of government waste was a modern art museum in the city of Nagoya, which cost so much to build that there was no money left over to buy any art.
The upside of all this government spending is that Japan does not look like a country in crisis. It is the first thing foreigners notice when they arrive in Tokyo. The cars are new, the trains shiny, the buildings glitter.
At 4.2%, Japanese unemployment is low compared to most OECD countries. Its economy is growing - this year by 2.2%. That is a figure most European countries only dream about.
But the cost is astronomic. By avoiding one problem, the Japanese government has created another - the world's largest public debt at $13tn and counting.
That could end up creating another crisis. And even if it doesn't, the bill being left for the next generation is frightening.