BySteve Forbes,
Forbes Staff.
Can Japan’s new—and first woman—prime minister save her country from a severe economic crisis that would also hurt the U.S. and the rest of the Free World?
Sanae Takaichi, who just took office, is a big admirer of Margaret Thatcher. In 11 years as Britain’s leader, from 1979 to 1990, the Iron Lady turned her country, called the sick man of Europe, from an inflation-ridden, overtaxed and economically weak nation into an economic dynamo. She slashed taxes, broke the destructive power of the UK’s trade unions, curbed inflation and pursued a strong foreign policy that helped win the Cold War against the Soviet Union.
In the same vein, Takaichi has advocated a major boost in defense spending to counter China’s growing aggressiveness. She wants a stronger military and economic ties with the U.S. Unfortunately, her economic policies, largely more of what’s gone before, won’t pull her country out of its dangerous economic rut. For years Japan has engaged in massive government spending and ever-higher taxes. Government debt, proportionately, is almost twice that of the U.S. From 1999 to 2024 the Bank of Japan engaged in a destructive policy of zero-interest rates. Financial institutions, under heavy government pressure, loaded up with government bonds whose market value is sharply under book value.
