Economic bailout without structural changes will be ineffective because the economy's balance sheet remains impaired by numerous non-viable corporates and rising bad debts. All this creates a disincentive to spend, invest and lend. And do not be fooled by Japan's low unemployment rate, which gives an illusion that the bailout packages so far have worked.
It in fact reflects reform inertia, as resistance to change has combined with expansionary demand management policy to keep unemployment artificially low. Japan's average 3.3% unemployment rate in the past decade would be consistent with a booming economy, but yet its GDP growth averaged only 1.6% a year
What follows from this ineffective bailout seems clear. The yen's decline will...
