Realism is finally impinging on the economic debate here. The "structural reform" ideologues may remain blind to the contradiction between urging privatization and liberalization even as they are being forced effectively to nationalize a banking system suffering from past liberalization excesses. But they do at least realize something has gone wrong with the economy, and are beginning to focus in on low consumer demand as a key problem.

But why the lack of demand? And what can be done about it?

Obviously people cut back on spending in hard times. But even in good times the Japanese save an abnormally high share of disposable income. In the past, firms, speculators and the government borrowed and used these savings. Demand remained healthy. But today both firms and government are cutting back, partly due to structural reforms. The speculators are on the sidelines. Funds are not circulating. The economy stagnates.