In the past, when analysts spoke about Japan's economic future, all pointed to a continually rising sun. The only could that could possibly darken that horizon, they said, was another, but very unlikely, oil crisis.
Yet, when Iraqi rolled into Kuwait on August 2, many Japanese consumers and corporations, while shocked by the news, did not seem to be worried about Japan's ability to cope with higher oil prices. And, wile Tokyo's stock and bond prices were plummeting at the beginning of September, along with other world markets, many observers and economists maintained that Japan could weather higher oil prices much more comfortably than it had the two oil shocks of 1973 and 1979.
How could this be so? The increased resilience they attributed to energy-conservation measures and industrial restructuring during the past decade. Like other nations in the Asia-Pacific region, Japan has used the low oil prices of the past several years to build up its stockpile of oil and oil products. Currently, Japan maintains a cushion of around 145 days in its stockpile, almost as much as the rest of the region combined, and 46 days more than the surplus maintained by the combined industrialized members of the Paris based International Energy Agency.
There remains, of course, much concern about the longterm effect of the "Persian Gulf crisis on the Japanese economy. First of all, Japan not only imports about 12 percent of its oil from Iraq and Kuwait, but it also has more than $1 billion in loans outstanding to Iraq. These loans continue to be at risk. Second, Japan is more dependent on Middle Eastern oil than is any other industrialized nation, getting slightly more than 70 percent of its crude from the region. More specifically, Japan receives 37.5 percent of its oil from Saudi Arabia and the United Arab Emirates, both countries that could be directly involved if the United States went to war with Iraq. Third, because Japan depends on imported oil for most of its energy needs, a supply disruption, as opposed to simple price increases, could be crippling. Japan still depends on oil for about 58 percent of its power supplies, compared to over 77 percent during the first oil crisis of 1973 and 72 percent at the outbreak of the 1979 crisis.
Because of the rise in oil prices through the end of August the Long-term Credit Bank of Japan has lowered its projection for Japan's rate of economic growth in the current fiscal year, ending March 31, 1991, from its original 4.9 percent of 4.4 or 4.5 percent. Another Japanese securities company recently projected real economic growth of 3.5 percent for the fiscal year beginning April 1, 1991, considerably lower than its original projection. This estimate assumed that oil prices would average about $25 a barrel, utility rates would edge up, and as took place at the end of August, the Bank of Japan (BOJ) would raise the discount rate from 5.25 to 6 percent. The discount rate is the rate the central BOJ charges commercial banks for certain short-term loans; it acts as a benchmark for other interest rats, especially in capital and money markets. This was the fifth discount-rate increase in Japan in a little over a year.
Despite such pessimism, and given the resiliency that Japanese industry developed during previous oil crises and during the dramatic rise of the yen in the 1980s, most observers believe that Japanese companies stand to recover more quickly than their international
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