Enormous systematic risk of no confidence in the government should be avoided
Seen from such a viewpoint, economic policy in the latter half of the year must avoid systematic risk originating in Japan and be prepared for systematic risk originating in the U.S. The biggest systematic risk in Japan is the lack of confidence in the Japanese government arising from the continued public deficit. What is urgently needed is the announcement of a feasible plan to reduce the public deficit and a commitment to that plan. Attention must not be diverted from the fact that public expenditure prolongs the life of departments where, properly speaking, structural change is needed, checks the flow of resources to growth departments, and as a result dampens the economy, delays real recovery, and increases the enormous systematic risk of no confidence in the government.
That is not to say that public expenditure is not necessary. Risk taking in the private sector is concentrated in a few areas, and when many departments are groaning under the legacy of past debts, the public sector is required to support attempts to create a "mechanism" for the success needed for recovery, and to give the first push linked to the cycle of "one success leads to another."
At the present time when systematic risks originating in the U.S. are on the increase, the recovery of the Japanese economy must be achieved not by "a divine wind from outside," but by "reforms instigated from within." If the private sector cannot take the initiative, then the public sector must do so instead. Otherwise the Japanese economy will face "ten years without the possibility of recovery."
Looking at the content of public expenditure, the lack of a sense of crisis is spine-chilling
If you look at economic policy in the latter half of the year, and especially at public expenditure, the lack of a sense of crisis is chilling.
