TOKYO, DEC. 21 -- Now it is official: The time has come to say sayonara to Japan's supercharged economic growth of the late 1980s.
In its annual forecast, the government's Economic Planning Agency today projected that Japan's economic growth rate will slow to 3.8 percent in the fiscal year starting April 1, after four straight years in which growth has been above or close to 5 percent.
Many forecasters are more pessimistic. A number of private economists believe that the Japanese economy, which is currently growing at about a 5.5 percent pace, will decelerate to a growth rate of about 3 percent in fiscal 1991.
But whatever the precise amounts, Japan's economy is clearly on the verge of weakening as high interest rates, a bank-lending squeeze and this year's stock-market plunge take their toll. Today's government projection puts officialdom's stamp on that widespread expectation.
Until now, Japan's recent economic performance has been spectacular. Corporations have increased their spending for plant and equipment at double-digit rates for three straight years. Jobs are so plentiful that during the current Christmas season, department stores have experienced difficulty hiring enough part-time workers to wrap and deliver presents.
But during the past year, Japan's financial environment has undergone a fundamental change. The easy-money days of the late 1980s are gone.
Since mid-1989, interest rates have risen by between two and four percentage points. The stock market has fallen by about 40 percent this year. Japan's mighty banks, shaken by stock-market losses and worried about softening real estate prices, have ceased shoveling out loans as they once did and are scrutinizing prospective borrowers much more closely.
The result: Signs of an imminent slowdown are emerging. Companies are trimming their sails -- a recent survey by the Ministry of International Trade and Industry showed that businesses are planning to increase capital spending by just 2.5 percent next year. Corporate profits edged lower in the six months ended Sept. 30, the first time that has happened since 1986.
Bankruptcies have started rising this autumn after declining for years. On Nov. 27, Japan's third-largest bankruptcy in history occurred when Kyowa Co., which had borrowed about $1.5 billion to speculate in property, filed for court protection from its creditors.
For Japan, the slowdown may prove beneficial. Indeed, many policy makers and private economists contend that the economy ought to be purged of the excesses of the 1980s, when stocks and land prices skyrocketed. The Bank of Japan has deliberately sought to cool the economy to below a 4 percent growth rate by driving up interest rates, to prevent a rekindling of inflation.
The impact on the United States and the rest of the world is unlikely to be nearly so favorable.
The United States in particular has depended on a steady stream of Japanese capital to help sustain growth. Now, not only are Japanese banks much less willing to expand in the American market, but other sources of Japanese capital, such as life insurance companies, are pulling back from overseas investments, bringing their money back to Japan to earn high interest rates. Recently released government figures show that Japanese investors were net sellers of foreign bonds to the tune of $1.9 billion in October.
The changes underway in the Japanese economy mean that "it is just going to be a lot harder for the U.S. to raise money from Japan," said Robert Feldman, an economist at Salomon Brothers's Tokyo office. That, in turn, means that any U.S. recession will be "all the longer," Feldman said.
The outcome for both Japan and other countries could, of course, be significantly worse. Some analysts fear that the Japanese economy could be destined for a crash rather than a mere slowdown.
The danger most often cited is the possibility that land prices could plunge as steeply as stock prices did, and that this would cause serious problems -- perhaps even failures -- at major banks that have lent heavily, using real estate as collateral.
Top Japanese officials dismiss such scenarios as remote, saying the more likely outcome is a gradual decline in real estate prices of perhaps 20 percent.
"I don't see the systemic risk," Makato Utsumi, vice minister at the powerful Finance Ministry, told reporters recently. Utsumi said panic selling of real estate is unlikely here in part because "Japanese don't usually like to sell land," especially land they have inherited from parents or grandparents.
Most private economists seem to agree that the odds of a major collapse are low.
In a recent report, the Japan Center for Economic Research (JCER) assessed what would happen if land prices fell by 30 percent in a year. The result, the center said, would be virtual bankruptcy for the weakest 10 percent of the real estate industry, a group of companies saddled with about $26 billion in debt. Since big banks have almost that much set aside in loan-loss reserves, "the Japanese economy can likely withstand the effects" of such a land-price decline, the report said.
But lack of a disaster does not mean that the Japanese economy will avoid rough times in the months ahead. The JCER report said that a substantial land-price decline would certainly mean that "problems at individual institutions will occur."