Introduction

The financial and economic distress that characterized Japan's economy for fifteen years has been largely resolved; however, Japan has not yet returned to stable, broad-based growth and price stability as of late 2007. Although the majority of observers both inside and outside of Japan regard Japan to be growing at a “moderate” rate, there continue to remain problems with the reliance on the export sector, weak balance sheets of the large number of small financial institutions, weak consumption spending by the household sector, and the low levels of measured inflation. Hence, to conclude that Japan has achieved sustainable economic stability and growth is premature as of late 2007. But, at the same time, it appears that Japan's economy will continue to grow moderately, and a return to the economic and financial distress of the 1990s is unlikely.

Many changes have taken place in Japan in the past two decades. But Japan is not finished with change. Change and reform are still ongoing, and Japan will continue to change until it reaches a new equilibrium where its political-economic regime stabilizes. It is not a straightforward task to project how Japan will change and how it will affect its politics and economy in the coming future. Nonetheless, some projections can be offered with a reasonable degree of confidence. This last chapter reviews the direction in which Japan's politics, liberalization policies, and economy are likely to go in the next several years and beyond.