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Unmaking the Japanese Miracle: Macroeconomic Politics, 1985-2000 by William W. Grimes. Ithaca, NY: Cornell University Press, 2001, 288 pp., $39.95.
Unmaking the Japanese Miracle adds to a growing literature that attempts to explain why, since the mid-1980s, Japan's economy has gone from being a model of success to being an object lesson in failure. As the subtitle suggests, William W Grimes focuses on the macroeconomic policymaking structure in order to understand the successive failures of Japanese policy. He advances a compelling model for understanding the sweep of Japanese macroeconomic policy since 1985, particularly as it relates to the expansion and eventual bursting of Japan's so-called bubble economy of the late 1980s. But, since the collapse of the bubble economy, Japan has been beset by economic malaise that derives from diverse sources, and the book is less successful at explaining the persistence of recession in Japan since the early 199Os.
Scholars and journalists alike have long heralded the unique qualities of Japan's postwar economy in attempting to explain how Japan caught up with the West. In his comprehensive survey, The Enigma of Japanese Power, for example, the Dutch journalist Karel van Wolferen proposed that Japan's many institutions intertwined to form a "system" that delivered high-speed economic growth. As Japan's economy roared in the late 1980s, he attributed Japan's ability to keep a stock market crash at bay to a certain "faith in the ability of the economic managers in the bureaucracy, the banks and the business federations to keep everyone's trust in the economic apparatus going" (van Wolferen, 1989, p. 400).
The extent of the crash, when it did occur, shattered such faith. More recent observers have accordingly turned the unique-qualities approach on its head, emphasizing in various ways how Japan's model of catch-up capitalism is the source of today's problems (Armacost, 1996; Katz, 1998; Mabuchi, 1997; McKinnon and Ohno, 1997). Grimes makes a significant contribution to this emerging literature by focusing particularly on why the Japanese government's policy responses to the economic challenges facing it since 1985 have consistently failed.
The time frame is appropriate. The September 1985 Plaza Agreement to revalue the yen vis-a-vis the dollar and other major currencies set the stage for the tumultuous events that followed. It precipitated the Japanese policies...