JAPAN

A London-based investment advisor's unsparing analysis of Japan's prospects for continuing to play a leading role in the global marketplace. Reading concludes that Japan is riding for a fall. The island nation's vaunted socioeconomic system, he asserts, has more in common with dictatorial communism than democratic capitalism. It is organized along corporatist lines, Reading maintains, with big business run for the benefit of producer interests that abhor competition, rather than for shareholders or consumers. Politically, he notes, Japan remains a one-party state in which corruption, factionalism, nepotism, tax evasion, and allied ills have taken a heavy toll on hard-working urban families who, for all their nation's wealth, don't live very well. Applying cyclical theory to Japanese history, Reading reckons the country is approaching a period of convulsive change after nearly five decades of recovery/expansion. He argues, for example, that the malign effects of an excessive savings rate can no longer be contained. While cheap credit absorbed some of the surplus between 1985-89, that monetary ease touched off a boom in securities and property prices. The speculative bubble burst in 1990, leaving losses amounting to three years' worth of national income. On a bookkeeping basis, moreover, Japan's depository institutions are at grave risk, thanks to nonperforming real-estate loans. Meanwhile, demographic trends have turned unfavorable, and an aging population has begun to demand more in the way of social services than Tokyo's cash-strapped leaders can deliver. Having outlined a worst-case scenario, Reading doesn't shrink from predicting a radical, redistributionist resolution of Japan's economic problems, preceded by electoral reforms that ensure more representative governance. The likely losers in this struggle, he contends, won't go quietly, meaning there could be civil strife and instability before the land of the rising sun gets back on track. A provocative reality check on a commercial/industrial powerhouse that soon may be obliged to pay the piper something on account. (Charts.)