Japan Needs More Than a Devalued Yen

The last time Masao Namiki bought machinery for his business, Emperor Hirohito had just died and Japanese investors were congratulating themselves on snapping up New York’s Rockefeller Center. That was 1989, a year before Japan’s overheated economy began to unravel. The $1 million that Namiki borrowed to buy computerized lathes and drills for his industrial molds company almost bankrupted him when orders from customers including Canon and Panasonic evaporated amid a stock market and real estate crash that erased $15 trillion in wealth.

The bubble, and the five recessions that followed, help explain why many executives are less confident than investors that Prime Minister Shinzo Abe’s economic program, with its mix of monetary and fiscal stimulus, can succeed in pulling Japan out of its decades-long slump. Namiki says there isn’t enough demand to justify expansion—even if a five-month slide has pushed the yen to a four-year low. “The work’s just not there,” the 72-year-old says from his small factory in Tokyo’s Ota industrial district, where he and a handful of employees have crafted thousands of steel molds used to make phones, stereos, and keyboards.