There has also been a marked deterioration in the

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Unformatted text preview: ates levels for the first time since the war. There has also been a marked deterioration in the country’s public finances. OECD estimates put this year’s (structural) budget deficit at some 6 per cent of GDP. More importantly, the level of (gross) public debt has risen well above 100 per cent of output, a worrying development in the light of evolving demographic trends. Indeed, if one took into account the balance sheets of other public financial and nonfinancial institutions, the debt ratio would rise to over 170 per cent of GDP (OECD, 1999), and allowance for unfunded pension liabilities would almost certainly push it well above 200 per cent.3 Even Japan’s legendary manufacturing competitiveness seems to have greatly weakened. Since 1995, for instance, the shortfall between the growth of the country’s exports and the growth of its markets has been of 4½ percentage points per annum and not all of this can be attributed to an overvalued currency. Symbolically, perhaps, some 50 per cent of Japanese car Table 1 GDP Growth Rates (average annual trend rates of change) 1950–73 Japan...
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