INSOLVENT REPUBLIC OF JAPAN WATCH: Ed Driscoll directs you, and me, over to this Bruce Bartlett thing in the Washington Times. He (Bruce) reads a few books and gives us the lowdown on why Japan appears screwed for the foreseeable future; MITI means Ministry of International Trade and Industry:

In his book "Embracing Defeat" (1999), historian John Dower notes that many of Japan's largest and most profitable companies in the postwar era probably never would have emerged under the prewar constraints. Harvard Business School Professor Michael Porter's book "Can Japan Compete?" (2000) recently concluded that Japan succeeded despite MITI, not because of it. Unfortunately, MacArthur failed to reform one key element of the prewar system — banking. In Japan, businesses were encouraged to get most of their financing from banks, and they were allowed to own equity in such businesses. In the United States, banks were prohibited from owning equity and businesses got most of their financing from bonds and stock. The result was a heavy concentration of business ownership in Japan, vs. the much more decentralized ownership in America.
Eventually, Japanese businesses and banks became deeply interlocked. In the 1980s, liberals like former Labor Secretary Robert Reich saw this as a source of strength — Japanese businesses, he said, could manage for the long-term without pressure from shareholders for profits or fear of hostile takeovers. But the result was that Japanese businesses had no pressure to perform and eventually became complacent.
When the 1990-91 recession came along, American businesses restructured; Japanese companies just rode it out without making significant reforms. When the savings-and-loan problem hit the United States, banks were closed, assets sold and the issue put behind us. When similar banking problems hit Japan, however, no similar liquidation occurred. Banks were reluctant to write off bad corporate loans because they also owned the companies, so they continued throwing good money after bad.
Today, the Japanese banking system is paralyzed. It has so many bad loans on its books, it cannot make loans to new businesses or existing ones needing capital for expansion. The Japanese money supply is exploding, but none of the money is getting where it is needed. Yet, rather than bite the bullet and liquidate the bad loans, as we did with our S&Ls, the Japanese government just keeps hoping the problem will take care of itself.