In posh offices across Japan, thousands of state employees are overseeing housing loans at absurdly low interest rates or leading a hopeless dig for oil. Others are helping build bridges to nowhere.
Government-funded operations -- "special corporations" -- and dozens like them are bleeding more than ?5 trillion (US$41 billion) from taxpayers.
Free from standards of profitability or openness, the 77 special corporations employing 440,000 people have been an astonishing drain on resources.
They are proof of the extremes of waste, senselessness and inertia that plague this nation that has been fighting an economic slowdown for 10 years, mostly with empty promises for change. But time may be running out for the world's second-largest economy.
Long dependent on exports to keep its economy going, Japan must fight a global slump that is worsening after the Sept. 11 terrorist attacks in the US.
Production is lagging, consumer spending is weakening, big-name companies are reporting losses and the unemployment rate is at a record high.
Special corporations are at the center of the reforms proposed by Prime Minister Junichiro Koizumi, who is winning support with his vows to tackle the fortresses of old-style government.
Koizumi wants to either abolish or privatize them, reducing by ?1 trillion (US$8 billion) the public funds getting pumped into them over the next fiscal year. An outline of his plan is expected before the end of the year.
How far Koizumi will get is a true test for Japan's future.
The Government Housing Loan Corp, which offers mortgages at unrealistically low interest rates compared to private lenders, is popular with some consumers but it's causing heavy losses in taxpayer money -- bad news for the Japanese economy.
If the operation is shut down, consumers who want to buy housing will have to get regular mortgages from the private sector that will weigh the risks of the loan and charge reasonable interest.
The special corporations are suspected of breeding corruption.
Japan Highway Public Corp is notorious for awarding contracts to construction companies that have become favorites of the ministry bureaucrats and politicians over the years. Critics point out some of the roads and bridges aren't attracting very many users.
At Japan National Oil Corp, which oversees the nation's oil supply and is behind an unfruitful oil search in Niigata Prefecture, half of the 10 board members retired from ministry jobs.
Retiring from ministries to plush special corporations posts is so common Japanese call it amakudari, meaning "descent from heaven."
"They do represent in a sense the old deal with the bureaucracy that they will be taken care of for life," said Robert Grondine, president of the American Chamber of Commerce in Japan and one of the few foreigners appointed to a government economic advisory group.
The same kind of wacky logic that dominates special corporations is rampant in Japan's private sector as well.
Japan's banks have racked up a towering amount of problem loans by continuing to lend to money-losing businesses. Dubious loans at Japan's banks are estimated by the government at ?32 trillion (US$263 billion). Private analysts suspect the real figure may be much higher. Koizumi has promised to fix the bad debt crisis in the next two or three years. If he makes good on his promise, corporate bankruptcies could rise.
Earlier this month, the government said the economy will contract 0.9 percent in the fiscal year ending in March. No one has taken the initial target of 1.7 percent growth seriously for months.
The Bank of Japan, which has already lowered interest rates to zero, warns the economy probably won't start growing until 2003.
"Every economic measure you can look at has been going in the wrong direction," said Mark Fields, president of automaker Mazda Motor Corp.
Japan is having a hard time switching gears from a successful model of government-orchestrated modernization that guided policy during the last half-century. As a maturely industrialized nation, it now needs a new vision.
No longer able to compete in costs with modernizing Asian nations such as China, NEC Corp, Matsushita Electric Industrial Co, Hitachi and other electronics giants are sinking into losses.
Japan's education system and corporate culture are still caught in an outdated mindset based on simple mass production
There are no simple solutions, the Nihon Keizai business daily said. "There is no cure-all."
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
SLOW-MOVING STORM: The typhoon has started moving north, but at a very slow pace, adding uncertainty to the extent of its impact on the nation Work and classes have been canceled across the nation today because of Typhoon Krathon, with residents in the south advised to brace for winds that could reach force 17 on the Beaufort scale as the Central Weather Administration (CWA) forecast that the storm would make landfall there. Force 17 wind with speeds of 56.1 to 61.2 meters per second, the highest number on the Beaufort scale, rarely occur and could cause serious damage. Krathon could be the second typhoon to land in southwestern Taiwan, following typhoon Elsie in 1996, CWA records showed. As of 8pm yesterday, the typhoon’s center was 180km
TYPHOON DAY: Taitung, Pingtung, Tainan, Chiayi, Hualien and Kaohsiung canceled work and classes today. The storm is to start moving north this afternoon The outer rim of Typhoon Krathon made landfall in Taitung County and the Hengchun Peninsula (恆春半島) at about noon yesterday, the Central Weather Administration (CWA) said, adding that the eye of the storm was expected to hit land tomorrow. The CWA at 2:30pm yesterday issued a land alert for Krathon after issuing a sea alert on Sunday. It also expanded the scope of the sea alert to include waters north of Taiwan Strait, in addition to its south, from the Bashi Channel to the Pratas Islands (Dongsha Islands, 東沙群島). As of 6pm yesterday, the typhoon’s center was 160km south of
The Central Weather Administration (CWA) is set to issue sea and land warnings for Tropical Storm Krathon as projections showed that the tropical storm could strengthen into a typhoon as it approaches Taiwan proper, the CWA said yesterday. The sea warning is scheduled to take effect this morning and the land warning this evening, it said. The storm formed yesterday morning and in the evening reached a point 620 nautical miles (1,148km) southeast of Oluanpi (鵝鑾鼻), Taiwan proper’s southernmost point, moving west-southwest at 4 kph as it strengthened, the CWA said. Its radius measured between 220km and 250km, it added. Krathon is projected
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