Japan votes for economic change

Scott Tong Aug 31, 2009
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Japan votes for economic change

Scott Tong Aug 31, 2009
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TEXT OF INTERVIEW

Steve Chiotakis: It’s a new day in Japan, with a new majority for its parliament.
In elections yesterday, the party that’s led the country for five straight decades got trounced. The Liberal Democratic Party lost almost 200 seats in parliament. And almost all of those gains went to the upstart Democratic Party of Japan.

For what it means to its economy, we check out Marketplace’s Scott Tong, he’s joining us live from our bureau in Shanghai. Good morning, Scott.

Scott Tong: Good morning, Steve.

Chiotakis: So what did the ruling party do to deserve this big defeat?

Tong: Well, we’ve talked a lot about the Japanese economy’s lost decade, right? Well, if you go back to the stock market crash in Japan in 1989 and start counting from there, that means Japan has actually had two lost decades in a row. And the incumbent party, the Liberal Democratic Party, has been running politics the whole time. Now in their defense, they also oversaw the glory days of the rise of Sony and Toyota back in the 50’s and 60’s. But now, a low of people in Japan feel like you know, maybe the country’s best days are behind it. You know whether that’s true or not is a debate, obviously, but this seems to be a vote for change.

Chiotakis: So how does a new party, Scott, plan to turn the page here?

Tong: Well, they have a lot to deal with. Japan is one of the most indebted countries in the world. It’s also one of the oldest, so the new party — which is going to name a prime minister before long — it wants to encourage people to reproduce. They’re promising subsidies to families, they’re promising free tuition in school. Exactly how they’re going to pay for all this is still a “we don’t know,” and this new party also has to take on entrenched business lobbies and bureaucrats. So it has a lot of challenges ahead of it, and don’t look now but China’s GDP threatens to overtake Japan in the next one or two years.

Chiotakis: And speaking of which, Scott, Shanghai stocks fell like, what, almost 7 percent today? Any connection with that?

Tong: Uh no, at least not according to the market analysts here in China. Late last year, the Chinese leadership rolled out this great big stimulus package — you can think of it as a great big fire engine shooting water at the fire, liquidity is what the folks in the markets call it — and in China, it comes in the form of banks lending a lot quickly. Now the word on the street now is the economy has been resuscitated and the spicket’s being squeezed quickly, and investors think that’s going to hurt profits and their companies’ stock prices. I do have to tell you, Steve, that most American investors are not allowed into the Chinese stock markets, or there may be no direct connection, but they certainly could be influenced by the mood here.

Chiotakis: All right. Marketplace’s Scott Tong, joining us from our bureau in Shanghai, live. Good morning, Scott, thank you so much. We appreciate it.

Tong: OK, no problem.

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