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Japan's Next Move

No politician in Tokyo needs to borrow one of the Clinton administration's leftover "It's the economy, stupid" placards. Sunday's upper house elections writ those words large in the political sky.

But what do the words mean?

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After all, departing Prime Minister Hashimoto was hardly oblivious to the economy's sinking performance. Since last October he had launched one economic rescue package after another to no avail.

His successor will have to act more boldly - and more consistently - if he is to get the economy moving and restore confidence to both the average Japanese and to global markets.

What the words on the placard mean in this case is growth. That calls for emphatic action to (1) stimulate household buying power and (2) strengthen the banking system. To accomplish the former, a substantial tax cut is in order. For the latter, Mr. Hashimoto's promised "bridge bank" must be quickly created to close problem banks, write off their bad loans, protect depositors, and make way for stronger banks to lend to solid customers.

Japan has been woefully slow to act. Its slow-motion slide into recession hampers recovery efforts among its Asian neighbors. They need to sell goods to still-wealthy Japanese. They need capital infusions from Japan.

The US should issue advice with a degree of humility. After all, America went through its own slow-motion sequence of recession, tax cut waffling, a real estate bubble, and massive S&L bad loans. Happily, the latter stages of American travail came as the real economy was churning out growth and jobs.

Growth is what the world's second largest economy needs today. Tokyo's new leader must not yield to fear that tax cuts will swell national debt just before a retirees surge in the next century. The answer to both today's problem and tomorrow's retiree needs is economic growth. That's also an answer to Asian neighbors' needs.

The world's second largest economy must push growth. That will also help its Asian neighbors.

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