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ITALY, which only last year seemed to be on the brink of collapse, is haltingly making its way back. Its output this year will probably show a decline of 3%. Industrial production is running 10% or more below a year ago, and the country's factories are operating at less than 70% of capacity. Unemployment now stands at 1.1 million and could go as high as 1.7 million next year. That is the price the country has had to pay to get down its ruinous rate of inflation —which has fallen from 24% last year to 9.8% in September—and repay its foreign debt. With prices moving more slowly, Prime Minister Moro's government has recently enacted a $6 billion recovery program, and there is a good chance that the Italian economy will begin to climb slowly in mid-1976. The pace of any economic risorgimento will depend on two things: whether the often inefficient bureaucracy can get the expansionary program moving quickly enough, and the level of wage increases that will emerge from the current round of national labor-union contract negotiations for 4.5 million workers.
JAPAN is on the road back to prosperity, though no one would think so after listening to the hand-wringing comments of its government and business leaders. Prime Minister Miki laments that "never before have we experienced so complex and difficult an economic situation as this one." Nonetheless, output is expected to rise 2.2% this year and 5.7% in 1976. That follows Japan's first genuine postwar recession, which was brought on by a government clampdown on demand and credit last year after the explosion in world oil prices sent Japanese inflation soaring to a frightening annual rate of 25%. As domestic demand fell, Japan's aggressive businessmen swiftly expanded foreign sales, helping to right their economy but annoying such hard-pressed trading partners as the U.S., Britain and France. Last year alone Japan increased its exports over the year before by 50%, to $58 billion. And this year, despite the slack in global trade, it expects to export another $57 billion.
With the inflation rate cut to less than half, the government has started a program to stimulate home demand: it has authorized $6 billion in additional spending for public works and housing, and lowered the central-bank interest rate from 9% last year to 6.5%. Businessmen insist that that is not enough, and they do have some problems. An expert at the Fuji Bank estimates that one out of every four of Japan's debt-laden companies is operating in the red, and in a nation where unemployment has been almost unknown, some university seniors face trouble getting a job. One survey of 1,586 corporations found 511 planning not to hire new graduates next year.