JAPAN'S FAILING POLICIES

Japan's latest economic stimulus package, announced yesterday, was characteristically vague and confusing. Combined with the Bank of Japan's moves to pump liquidity into the economy, it may just be enough to keep the economy out of deep recession. But it is likely to make Japan's structural problems even worse. Part of the reason for the severity of Japan's recession is overcapacity in both the banking sector and in industry. The keiretsu system and extensive crossshareholdings provided a shield from market pressures. And the close relationship, between companies and banks meant that companies could borrow for projects with little assessment of their viability, even as their profitability declined.