Japan Needs More Than A Bailout

Japan's financial sector is a basket case. The Nikkei has plummeted 62% from its airy 1989 high, while prices of commercial property have tumbled more than 50%. There have been runs on credit co-ops, and housing loan corporations are virtually insolvent. The upshot: Japan's financial lenders, from commercial banks to agricultural banks, have nearly $1 trillion in bad loans on their books--about 20% of the country's annual economic output. Even at the height of the savings and loan crisis in the U.S., sour loans never amounted to more than 9% of America's gross national product. The Japanese economy, and with it the global trading system, is skating on very thin financial ice.

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