How does one say "dithering" in Japanese? Or Korean or Thai, for that matter. The financial crisis in Asia gets worse by the day, while politicians play games. In Korea, they vie for position before elections that are just weeks away. In Thailand, they stall for months--for fear of hurting close allies in the banking community. In Japan, the paralysis has extended for more than seven years. Even now, with the financial system facing meltdown and the economy on the brink of recession, there are mixed signals from the government about what it will or will not do.
Time has run out for vacillating. The growth and prosperity of recent years are threatened by Asian leaders' inability to make choices necessary to reform their economies. Waiting has turned a small problem in Thailand into a major economic crisis for the entire world. Even as the International Monetary Fund races to prepare a new program--in case it needs to bail out Korea or other nations in Asia--competitive devaluations, joblessness, and stagnation are turning the smooth-running global economy into an unstable arena.
Nowhere is the inertia more destructive than in Japan. When troubled Hokkaido Takushoku Bank Ltd., the country's 10th-largest, went under, it appeared as though Tokyo, after years of denial, was finally getting serious about reforming its financial system. First, it seemed that the authorities were going to let market forces winnow out weak and overextended banks. Then, there were hints that public money would finally be spent to clean up the banking mess that has been festering since the 1980s bubble economy burst.
But then came backtracking and denials from the Ministry of Finance and the office of Prime Minister Ryutaro Hashimoto. To be sure, there is good reason not to use taxpayers' money to save the banks. The public doesn't want to rescue the banks--because it holds politicians, bankers, and gangsters responsible for the crisis in the first place.
Having waited so long, politicians now have no alternative. The Hashimoto government has two choices: It can establish a U.S.-style Resolution Trust Corp. to absorb tens of billions of dollars worth of nonperforming loans from ailing Japanese banks, or it can bail them out by buying preferred stock in troubled financial institutions. Allowing more banks to fail would speed up the process immeasurably.
Dithering is not a policy.