In the 1978 movie, Animal House, an unruly fraternity runs afoul of its school's dean and gets placed on probation. At the end of his rope with Delta House's antics, Dean Wormer puts the frat on "double-secret probation," a punishment that doesn't exist.
It's all happening again here in Tokyo. Japan's insubordinate economy refuses to play by the rules and perk up. It's getting failing grades and becoming a global troublemaker, spooking overseas officials and investors. Earlier this year, Tokyo cooked up an extra budget to get the economy in line. It didn't work and now they're considering a second extra budget. Japan's economy, too, is now on double-secret probation.
The correlation between Japan and Animal House isn't as fanciful as you'd think. Just like the Faber College in John Belushi's movie, Japan is being overrun by its own unruly fraternity -- the Liberal Democratic Party. It is also an exclusive club with secret handshakes, codes of silence and a well-deserved reputation for underachievement.
After being expelled, Animal House character John "Bluto" Blutarsky -- played by the late Belushi -- said: "Seven years of college, down the drain." It's a thought more and more Japanese voters are having these days, and for good reason.
Japan's been taking up space in the global classroom for 11 years now, offering little in the way of economic output or ideas.
On the surface, LDP bigwigs seem to be working hard to end the malaise. Mostly, they've thrown wads of cash at the problem, most of which is raised via government bond sales. To show for their efforts, Japan has a national debt that's about 130 percent of gross domestic product -- the highest among the 30 countries in the Organization for Economic Development and Cooperation. Quite an achievement, as Animal House's Dean Wormer might say.
At this point, the LDP seems like the defeated student returning home with dismal grades. They're about to face the wrath of the folks who pay their tuition -- Japanese voters, in this case. Yet rather than admitting failure, apologizing and changing their ways, Tokyo has a game plan: Let's promise an extra special effort for the next semester. That'll fool them.
That's essentially what Prime Minister Junichiro Koizumi's Cabinet is cooking up with its second extra budget. It's akin to saying: "Oh, please Mom and Dad, one more chance! I'll be good! I'll work hard!"
Even Koizumi's finance minister, Masajuro Shiokawa, couldn't help but admit this week that extra spending won't do a thing.
Unfortunately, the LDP's one-more-chance strategy is working. The local media is still whipping itself into a frenzy over whether Koizumi can maintain his pledge to cap new bond sales at ?30 trillion this year.
Hello! He will break the cap, if he hasn't already. And just because Tokyo can point to statistics showing it didn't technically sell more government bonds than it promised means little. The money will merely come from elsewhere. Isn't government spending, well, spending?
Markets don't always get it right, but this week's volatility in Japanese bond prices is telling. Fixed-income investors are getting wise to Tokyo's desire to have it both ways: Spending more money, without breaking its pledge not to. Meanwhile, press reports suggest Koizumi will ask parliament for a ?2 trillion (US$16.3 billion) spending boost.
Tokyo may not realize it's no longer working in a vacuum.
Moody's Investors Service and Standard & Poor's have both warned they may lower Japan's credit rating if the debt keeps rising.
Some politicians here think more debt sales are inevitable.
Shiokawa did little to change their minds this week. Asked how the government could fund further spending, he said: "I don't know." Here's what we do know. Japan's little year-end spending binge is counterproductive. It's akin to the college student who slacks off all year -- in Tokyo's case, 11 years -- and then crams to pass an exam at the last minute.
Days later, he or she may be happy to skim by and get the class credits, but what about the damage to your grade-point average? Japan's GPA is at grave risk from the judgment of Moody's and S&P.
The party's over in Japan. Someone should tell the frat boys over at the LDP.
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