ABSTRACT
This chapter aims to consider what the future may hold for the Japanese economy in the early part of the 21st century. It reviews four key structural features of the contemporary Japanese economy that are likely to grow in prominence in the early part of the 21st century: debt, deflation, default, and demography. The chapter considers Japan's long-range prospects for growth in light of a fifth "D," deregulation. It argues that increasing Japan's productivity, economic growth potential, and standard of living will depend greatly on the removal of structural impediments in Japan's labor, land, and capital markets and the deregulation of the service sector. As with the price of land, Japan's beleaguered equity markets remain remarkably overvalued and liable to a further collapse. Many analysts seem infatuated with the view that, after so many bad years, Japanese stocks must somehow be a "buy." The combination of losses and poor cash flow makes the weaker life insurers extremely vulnerable.
