This is another attempt by Tokyo to channel credit to productive activity and generate growth in the stagnant national economy. Under this approach, the banks would pay borrowers to take loans—a move that would in theory provide an incentive to capitalist corporations and other investors to take out new loans.

Prospective depositors, on the other hand, would have to pay banks to keep their savings—a possible incentive to many to invest their money in productive activity rather than putting it into a savings account.

In the last three decades interest rates charged by the Bank of Japan have plummeted from 6.25 percent in 1970 to just about zero now—the rate officially adopted in March 2001.

A deflationary crisis—characterized above all by a contraction in credit and accompanied by falling prices and a decline in productive activity—has seized Japanese capitalism in a tightening noose over the past decade. It is tied to the state of near-collapse of the country’s major banks, which carry a crippling load of unpayable loans. The four largest banks reported a combined loss of $25 billion for the year that ended March 31.

Between 1998 and the year 2000, Japan had a net decline in the rate of growth of its gross domestic product. GDP growth hovered between -2.5 percent and zero. During the same period unemployment shot up to levels unprecedented in the last half century. In March joblessness stood at 5.4 percent, according to official figures. It rose even higher among young people—for those between the ages of 15 and 24 it exceeded 13 percent.

On June 10 Tokyo formally approved a plan to inject more than $16 billion into the country’s fifth largest bank, the latest in a series of patch-up measures. For its money, Tokyo will gain 70 percent of Resona Holdings, effectively nationalizing it. The bank’s managers have announced that they will cut employees’ pay by 30 percent and close a number of branches.

While Japanese capitalism is in worse shape than its imperialist competitors in Europe, let alone the United States, deflationary pressures are making themselves felt throughout the imperialist world. Attempting to spur increased loans and investment, the U.S. Federal Reserve Board has slashed interest rates on federal funds to nearly zero, while the European Central Bank cut rates by half a percentage point to 2 percent June 5.

Speaking in early May, U.S. Federal Reserve Board chairman Alan Greenspan drew a distinction between this type of “corrosive deflation,” which he sees as a threat on the horizon of the U.S. economy, and the more usual tendency of prices to fall as a result of rising productivity. “Corrosive deflation,” he said in early May, “feeds on itself, creat[ing] falling asset prices, which in turn brings down levels of economic activity.”  
 
 
Front page (for this issue) | Home | Text-version home