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Look away now 

Other than those that are paid to do so (economists and fund managers), not many people are paying attention to the continuing train wreck of the Japanese economy. Japan is, after all, the second largest economy in the world and its travails have a global impact.

The latest act in the long-running drama was yesterday’s announcement by the Bank of Japan that it would buy shares owned by commercial banks. Here’s a sampling of the milder reactions:

“Yesterday, Japan sailed into the zone marked: here be dragons.” David Pilling in the Financial Times.

“The bank has never done anything like this in its 120-year history. Today, it has decided of its own free will to cross the Rubicon.” Nobuyuki Nakahara, until March a member of the BoJ’s policy board.

Remember that just last week, Glenn Hubbard, chairman of the US council of economic advisers, said, “When I say this [the bad assets in Japan’s financial system] is a large problem, this is a very large problem.”

When I was editor of World Link, in 1998 we ran a cover story of which I was rather proud on Japan’s crash and rebirth. The thesis was that the economy needed the drama of a true crash to spur the necessary reforms for a renaissance. I think it still looks true today. The slow motion failure of the Japanese economy hasn’t, against many observers’ judgements, produced the necessary impetus for reform. I can’t say the day for change is any closer now.

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