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Contents Introduction

This paper analyzes changes in Japan's economy and the implications of these changes for the Hawaii's economic policymakers. The paper first overviews Japan's economic situation paying close attention to the consequences of the collapse of the bubble economy and related phenomena. Japan's fiscal policies are then detailed with a focus on the anticipated effects of the recent fiscal stimulus package. The paper then turns to structural reforms and other emerging trends in Japan and concludes with a summary of the implications of the trends in Japan for the Hawaiian economy. The major conclusion is that Hawaii may find itself in a more favorable external environment over the next couple years but there are risks in the global economy that remain with us and that will require careful economic management.