Japan must outgrow its catch-up mind-set Asahi News
2009-07-08
BY YOICHI FUNABASHI, ASAHI SHIMBUN EDITOR IN CHIEF
Japan now finds itself wallowing in the abyss of a crisis that has been around for 20 years.
This era of crisis began in 1989 when the Cold War ended.
In that year, the nation's fertility rate dropped to 1.57, triggering alarmist warnings about the future. The trend of a falling population has continued ever since.
With the collapse of the asset-inflated economy, the early 1990s recorded an economic downturn. Over the next decade, Japan could only manage an annual average growth rate of about 1 percent.
That "lost decade" was followed in what now appears seamless fashion by another "lost decade."
Over that time, Japan's ranking in per capita gross domestic product has fallen from fourth to 19th, the latter figure being chalked up in 2007.
In 2008, Japan's international competitiveness dropped to ninth place from its No. 1 ranking.
During the past 20 years, successive administrations have unveiled numerous economic stimulus packages. Funds flowed into public works projects as if from a bottomless pit.
That was only achieved by issuing more government bonds. The rate to GDP of the outstanding balance of government bonds has ballooned from 71 percent to 174 percent.
From the late 1990s, the energy of our society has weakened in tandem with the decline in the nation's economic power.
In 1998, the number of annual suicides exceeded 30,000 for the first time--and the figure has remained above that level ever since.
Calculated as a rate for every 100,000 people, the figure for Japan is twice that of the United States and three times that of Britain.
Academic achievement has fallen, too.
Between 2000 and 2006, Japan's ranking fell from second to sixth in scientific literacy, from first to 10th in mathematic literacy and from eighth to 15th in reading comprehension.
The way the world views Japan has also changed.
If there exists a mirror that reflects the figure and shape of one's nation, that would likely be observations made by foreigners.
In the case of Japan, Singapore provides a useful hand mirror. Even in its compact format, its perception and recognition is dry of emotion.
What is reflected in that mirror is a figure of Japan that has lost its sense of direction, has turned inward and has withered.
I recently met with a number of high-ranking government officials in Singapore who I have known for many years.
Officials of the city-state's foreign and finance ministries made penetrating comments about Japan.
A senior Foreign Ministry official said: "Japan always wants in some way to catch up with some country. How long does it intend to continue this? Japan should be more confident. When Japanese leaders have visited Singapore in recent years, they always want to explain what they call their vision for Japan. One of them has been in the form of 'an arc of freedom and prosperity' or something. What emerges from such talk is a passive aggressiveness of not wanting to fall behind China. We are not interested in such matters. That is one example of the ad-hoc nature of recent Japanese diplomacy."
A high-ranking Finance Ministry official said: "With the emergence of a de facto G-2 (Group of Two) involving the United States and China, Japan has begun to cede leadership in Asia to China. That is because China is proactive but Japan is reactive when something happens. China's Asian policy is organized and effective. Although China wants to turn Hong Kong and Shanghai into the financial centers of Asia, it goes about it in a way that is not flashy. It is oriented toward soft power. On the other hand, Japan does not act in a systematic or strategic manner. In economic negotiations, the various central government ministries are more interested in fighting allies (other ministries) rather than the enemy (foreign nations). That is due to weak political leadership."
The root of the 20 years of crisis lies in the failure by the government, even by the 1980s, to present a new outline for the nation following the strategy of growth implemented after World War II that took on the notion of Japan catching up with and finally overtaking the West.
The asset-inflated economy was both the cause of this failure as well as the result of that failure.
During the period of catching up with and overtaking the West, the growth model had a number of main elements. These included a lifetime employment and pension system provided by companies, dependence on women to handle household chores and care of the elderly, and the creation of jobs in local regions through public works projects.
That model held down economic disparity, fostered energy for economic growth and brought about social stability.
However, during the 1990s, an age of low growth and globalization, this model was shaken from its foundations. Companies were forced to downsize, more women have joined the labor market and government faced the twin pressures of fiscal and market discipline.
Politicians during this period argued for different versions of reform. This entailed electoral reform by the Hosokawa Cabinet, administrative reform by the Hashimoto Cabinet and structural reforms by the Koizumi Cabinet.
However, even as the public failed to experience the fruits of such reform efforts, "the word reform became exhausted," in the words of former Prime Minister Yasuhiro Nakasone.
In the wake of the global financial crisis that started in the fall of 2008, the Koizumi reform effort has been vilified as the main cause of expanding economic disparity since it was seen as an offshoot of capitalism gone wild in the United States.
Still, globalization has been further stimulated with China and India joining the United States in promoting its advantages. Japan, meantime, still faces many challenges posed by globalization.
What has to be done is selectively utilize certain aspects of globalization, heighten the international competitiveness of personnel and industry, create national wealth and jobs and improve people's standard of living.
Faced with such tasks, Japan does not have the luxury of being exhausted from reform.
In particular, the following reforms must be attended to immediately.
・Social justice must be more deeply tied into the free market economy;
・The workplace and the labor market must be changed into a market and system that allow people to work in a secure manner, foster needed personnel and respond flexibly to changing needs; and
・Environment and energy policy must be converted to a low-carbon one that is also based on a solar economy.
This means nothing less that a renovation of the globalizing market, including Japan, and capitalism itself.
2009-07-08
BY YOICHI FUNABASHI, ASAHI SHIMBUN EDITOR IN CHIEF
Japan now finds itself wallowing in the abyss of a crisis that has been around for 20 years.
This era of crisis began in 1989 when the Cold War ended.
In that year, the nation's fertility rate dropped to 1.57, triggering alarmist warnings about the future. The trend of a falling population has continued ever since.
With the collapse of the asset-inflated economy, the early 1990s recorded an economic downturn. Over the next decade, Japan could only manage an annual average growth rate of about 1 percent.
That "lost decade" was followed in what now appears seamless fashion by another "lost decade."
Over that time, Japan's ranking in per capita gross domestic product has fallen from fourth to 19th, the latter figure being chalked up in 2007.
In 2008, Japan's international competitiveness dropped to ninth place from its No. 1 ranking.
During the past 20 years, successive administrations have unveiled numerous economic stimulus packages. Funds flowed into public works projects as if from a bottomless pit.
That was only achieved by issuing more government bonds. The rate to GDP of the outstanding balance of government bonds has ballooned from 71 percent to 174 percent.
From the late 1990s, the energy of our society has weakened in tandem with the decline in the nation's economic power.
In 1998, the number of annual suicides exceeded 30,000 for the first time--and the figure has remained above that level ever since.
Calculated as a rate for every 100,000 people, the figure for Japan is twice that of the United States and three times that of Britain.
Academic achievement has fallen, too.
Between 2000 and 2006, Japan's ranking fell from second to sixth in scientific literacy, from first to 10th in mathematic literacy and from eighth to 15th in reading comprehension.
The way the world views Japan has also changed.
If there exists a mirror that reflects the figure and shape of one's nation, that would likely be observations made by foreigners.
In the case of Japan, Singapore provides a useful hand mirror. Even in its compact format, its perception and recognition is dry of emotion.
What is reflected in that mirror is a figure of Japan that has lost its sense of direction, has turned inward and has withered.
I recently met with a number of high-ranking government officials in Singapore who I have known for many years.
Officials of the city-state's foreign and finance ministries made penetrating comments about Japan.
A senior Foreign Ministry official said: "Japan always wants in some way to catch up with some country. How long does it intend to continue this? Japan should be more confident. When Japanese leaders have visited Singapore in recent years, they always want to explain what they call their vision for Japan. One of them has been in the form of 'an arc of freedom and prosperity' or something. What emerges from such talk is a passive aggressiveness of not wanting to fall behind China. We are not interested in such matters. That is one example of the ad-hoc nature of recent Japanese diplomacy."
A high-ranking Finance Ministry official said: "With the emergence of a de facto G-2 (Group of Two) involving the United States and China, Japan has begun to cede leadership in Asia to China. That is because China is proactive but Japan is reactive when something happens. China's Asian policy is organized and effective. Although China wants to turn Hong Kong and Shanghai into the financial centers of Asia, it goes about it in a way that is not flashy. It is oriented toward soft power. On the other hand, Japan does not act in a systematic or strategic manner. In economic negotiations, the various central government ministries are more interested in fighting allies (other ministries) rather than the enemy (foreign nations). That is due to weak political leadership."
The root of the 20 years of crisis lies in the failure by the government, even by the 1980s, to present a new outline for the nation following the strategy of growth implemented after World War II that took on the notion of Japan catching up with and finally overtaking the West.
The asset-inflated economy was both the cause of this failure as well as the result of that failure.
During the period of catching up with and overtaking the West, the growth model had a number of main elements. These included a lifetime employment and pension system provided by companies, dependence on women to handle household chores and care of the elderly, and the creation of jobs in local regions through public works projects.
That model held down economic disparity, fostered energy for economic growth and brought about social stability.
However, during the 1990s, an age of low growth and globalization, this model was shaken from its foundations. Companies were forced to downsize, more women have joined the labor market and government faced the twin pressures of fiscal and market discipline.
Politicians during this period argued for different versions of reform. This entailed electoral reform by the Hosokawa Cabinet, administrative reform by the Hashimoto Cabinet and structural reforms by the Koizumi Cabinet.
However, even as the public failed to experience the fruits of such reform efforts, "the word reform became exhausted," in the words of former Prime Minister Yasuhiro Nakasone.
In the wake of the global financial crisis that started in the fall of 2008, the Koizumi reform effort has been vilified as the main cause of expanding economic disparity since it was seen as an offshoot of capitalism gone wild in the United States.
Still, globalization has been further stimulated with China and India joining the United States in promoting its advantages. Japan, meantime, still faces many challenges posed by globalization.
What has to be done is selectively utilize certain aspects of globalization, heighten the international competitiveness of personnel and industry, create national wealth and jobs and improve people's standard of living.
Faced with such tasks, Japan does not have the luxury of being exhausted from reform.
In particular, the following reforms must be attended to immediately.
・Social justice must be more deeply tied into the free market economy;
・The workplace and the labor market must be changed into a market and system that allow people to work in a secure manner, foster needed personnel and respond flexibly to changing needs; and
・Environment and energy policy must be converted to a low-carbon one that is also based on a solar economy.
This means nothing less that a renovation of the globalizing market, including Japan, and capitalism itself.
