Japan? Ouch. Gimme a beer.

While they’re tallying up the financial bruises from 1998, a lot of folks are looking nervously to the north and asking me what 1999 is going to bring for Japan.

Answer: more of the same.

Japan’s economy, folks, is wheezing like a malnourished boonie dog.

Remember Japan’s status as a sober and responsible economy? And remember, by contrast, Uncle Sam’s reputation as an irresponsible nitwit who spent and borrowed money like a drunken sailor? Well, the United States is looking at a zero-deficit situation right now (for the time being, at least). Meanwhile, how the formerly mighty have fallen! Japan’s government has reportedly hit the fiscal panic button and the deficit will soon balloon past 6 percent of GDP (Gross Domestic Product, the total economic production of the economy).

Economists can argue all they want about the advisability of this turbo-charged borrowing and spending spree, but nobody can argue this: It doesn’t appear to be helping out the economy. The Big Idea is that deficit spending will “stimulate” the economy by getting money flowing through the system. But consumer spending is down, not up. Ditto with business confidence. Ditto, as well, with economic output, which is going to enter its third consecutive year of decline.

The important factor for us in the CNMI is Japanese consumer spending. When we consider that Japanese wages are actually forecast to fall, and that consumer spending has already been slipping, it’s not a pretty sight.

We can’t bring up this issue without addressing the inevitable questions about exchange rates. Okay, so here’s my take on it, in one breath (whew!): Japan’s ballooning deficit should put upwards pressure on interest rates, which should strengthen the yen, which should, in turn, reduce the apparent price of vacationing on our fair shores. That’s good news for us here, but don’t pop the champagne cork yet: A lot of other factors in the global economy can easily offset the forces I’ve just mentioned.

Even in this potential good news (a stronger yen) lurks some theoretical bad news: A stronger yen would put downwards pressure on Japanese export activity, which, ultimately, would dampen consumer spending as businesses and employees felt the pinch. Cazart! Isn’t economics a tangled mess?

In fact, let’s follow this tangled mess a step further. If Japan wants to deficit spend but not put upwards pressure on the yen’s value, it can resort to an old American friend, inflation. Inflation is linked to money supply, and I, for one, am keeping an eye on Japan’s money supply. The inflation option will be a mighty tempting idea. In fact, it looks to me like the only option in the short-term, and if they take that option (by cranking up the money supply), you can safely disregard everything I said about a stronger yen. If the Japanese were to ask me what to do, I hate to admit it, but I’d probably advise them to resort to inflation right now.

And there, in a nutshell (an appropriate receptacle), is Japan’s situation.

As you lay your business plans for next year, you’d be well-advised to expect a further contraction in any economic sector here that’s linked to Japanese consumer spending. In plain English, that means that tourism is going to be an even tougher proposition next year.

Maybe for this New Year it’s time to forget the champaign and switch to beer.