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Saturday, Jan. 1, 2000

Japan looks for a purpose


The 1990s is said to have been a "lost decade" for Japan. That may be true. In May 1991, Japan's economy plunged into a slump that would be called the "Heisei Recession." In October 1993, the economy "bottomed out," but ever since then it has remained in the doldrums. The protracted slump has had extensive effects on Japanese society, bringing turmoil in politics and stagnation in other fields, such as science, sports and culture.

If there is one word that best describes the present state of Japanese society, it is "paralysis." Why is it that the sense of paralysis -- a general perception of a nation adrift -- grips the Japanese at the end of the 20th century?

First, Japan's economy has stagnated for more than nine years. By contrast, the United States -- which economists often cite as a model for Japan -- has enjoyed prosperity for as many years. The comparison makes Japan's economic slump all the more conspicuous.

In the late 1980s, the Japanese media praised the economy as "first-rate," but denounced the nation's politics as "third-rate." Yet the "first-rate" economy has been mired in a slump for more than nine years. No wonder a sense of paralysis permeates Japanese society.

Second, prospects for political realignment remain uncertain, six and a half years after the Liberal Democratic Party lost its 38-year-long monopoly on power. When the reformer Morihiro Hosokawa set up a non-LDP coalition government in August 1993, most Japanese must have expected that Japanese politics would get a little better. It was not to be.

Instead, Japan has had five prime ministers in just six years. During this period of shifting political alliances, politics has lost all sense of direction, creating a pervasive sense of uncertainty over the political future of this nation.

Third, Japan became the world's richest nation in terms of per capita GDP in 1987, exceeding that of the U.S. Thus Japan attained its long-cherished goal of "overtaking" advanced Western nations. What contributed to that was the yen's continuing rise, which increased the dollar value of Japan's GDP. But the Japanese, having achieved their "catchup" goal, also lost their sense of direction. That is the biggest reason why the nation is gripped by a vague sense of helplessness.

This needs a little explaining. Japan has long been considered an "irreligious" nation. In fact, most Japanese are so flexible that they practice Buddhism, Shintoism and Christianity as they see fit. Perhaps no other nation is as "indifferent" to religion as Japan. Yet this nation is somehow united in its own way. In other words, the Japanese share a common sense of identity. According to the late Masao Maruyama, the noted political scientist, during and before World War II, the Emperor system played a quasi-religious role. After the end of the war, however, that system was stripped of its "religious" trappings as the Emperor became "the symbol of the state and of the unity of the people."

The "catchup" slogan replaced the Emperor system as Japan's "nonreligious religion." Having suffered defeat in the world war, the Japanese pursued economic growth with a devotion akin to religious fervor. Hard work bore fruit: In 1969 Japan surpassed Britain and West Germany in terms of GDP, becoming the world's second-largest economy after the U.S. That was a remarkable feat, considering that Japan's GDP at the time was calculated at the exchange rate of 360 yen to the dollar. In terms of per capita GDP, however, this nation ranked as low as 20th. The Japanese thought they had to work harder still.The oil shock that hit the world in 1973 put an end to Japan's high-growth era. Still, the economy kept growing faster than major Western economies. In 1987 Japan overtook the U.S. in per capita GDP, placing fourth behind Switzerland, Luxembourg and Iceland. Thus the postwar goal of outracing Western economic powers had been achieved.People feel tension and have a sense of purpose when going all out to achieve a goal, whatever it is. But once the goal is achieved, they can have a sense of emptiness. So it was with Japan. Thirteen years ago, the Japanese "caught up" and then, having failed to find a new national goal, spent the next decade drifting aimlessly.

What should be done to get rid of this sense of national paralysis? The first order of business is to get the economy back on a solid recovery course. In my view, there is now a growing possibility of an upturn. But, to achieve a full-fledged recovery, Japan must move smoothly from being an industrial society to a postindustrial society, as the U.S. did in the early 1990s.

Second, it must be shown clearly where the political world will go. For the time being, the political situation will likely remain murky. Perhaps it will take a few general elections before a new political map is drawn. At each election, politicians and political parties would meet and part, breaking old alliances and forming new ones along the great divide between conservatism and liberalism. In my view, such realignments will be virtually completed around 2005.

Third, we must find new goals to replace the catch-all objective of economic expansion. We do not have to seek a single national goal anymore, for our values are diversifying. Many people give top priority to protecting the environment, while many others set store by culture and art. One thing is certain: The current worship of the market economy is headed for a major setback. Those who oppose sacrificing economic efficiency for the cause of environmental protection will be relegated to the fringes of public opinion.

In Japan there is a strong inclination toward unity of values. This makes it likely that the Japanese will seek a new national goal, whatever it is, that would be similar in its singularity to the catch-up slogan of the past. That will be like asking for the moon, for such a goal does not and cannot exist in an age of diversifying values. We must be liberal enough to allow for "value diversification" of the kind that is taken for granted in Europe.

A smooth shift to a postindustrial society is an essential condition for reinvigorating the Japanese economy and eliminating the prevailing sense of paralysis. One may ask, what kind of society is a postindustrial society? My answer is: Look at the present-day U.S.

The U.S. economy, which is a postindustrial one, has two major features. One is the revival of manufacturing, in which management and production processes have been overhauled through the introduction of advanced information technology. In the 1980s, U.S. manufacturing industries were said to be doomed, but in the 1990s they have made a dramatic comeback.

The other feature is the centrality of software industries, such as finance, communications, information, broadcasting and film. The U.S. has long held an unrivaled position in most software industries. This, combined with the revival of hardware industries, enabled the U.S., around 1991, to become the first postindustrial society.

Will Japan be able to shift to this type of society? My answer to the question is negative, for Japanese-style systems and customs, such as Japanese-style management, administration and education, are suited to industrial society, but unsuited to postindustrial society.More than a decade ago, when Japan's economy was booming and the U.S. economy was slumping, Japanese economists, executives, bureaucrats and politicians all praised the Japanese system, saying that U.S. businesses should learn humbly from Japanese ways of management. In hindsight, that was the height of arrogance. Now, those same people heap praise on the U.S. system. Why?

The reason is, to borrow from Shakespeare, "All's well that ends well." Japan's economic fortunes reversed at the beginning of the 1990s, setting off a prolonged slump -- the Heisei recession -- that is now in its ninth year. In contrast, the U.S. economic boom has continued for nine years since 1991. That is why Japanese economists and others are now praising the U.S. system. To put it another way, the Japanese system adapted well to the final stages of industrial society in the late 1980s, while the U.S. system adapted successfully to the advent of postindustrial society in the 1990s.

What kind of system will best adapt to the first decade of the 21st century? Nobody knows. It is no easy task, to say the least, to predict how things will develop in the next decade. About a decade ago, in the late 1980s, quite a few people here said matter-of-factly that the age of Pax Americana would end in the 1990s, making way for the age of Pax Japonica.

In my view, there is little or no possibility that the Japanese system will adapt to the coming decade. This is not to say, however, that the U.S. system will continue to rule. A new age demands a new system. A new system is not something that can be designed by smart people. It develops itself through step-by-step efforts to adapt to the changes of the times.

In order to gain a position of advantage in the first decade of the 21st century, it is essential, therefore, to take pre-emptive steps to adapt to the changes that are anticipated in the next 10 years. How will the environment surrounding Japan change in this period? Some of the anticipated changes are: progress in globalization, advances in information technology, a shift by industrialized nations to postindustrial society, further industrialization of developing nations, a worsening of global environmental problems, an increase in elderly populations and a fall in birthrates, a rise in unemployment, market upheavals, and a quest for compatibility between efficiency and fairness.

If the Japanese and U.S. systems represent two opposite ends of the scale, a system that can adapt to the coming changes must be one that improves on both systems, not one that represents merely a halfway compromise between the two.

The U.S. system is based on the belief that the market is the final arbiter, whereas the Japanese system is founded on a belief that shuns the free forces of the market. If the two systems remain as they are, they will not be able to meet the changes described above. Any new system, if it is to adapt to those changes, must seek compatibility between efficiency and fairness. It is no use sticking to the empirical notion that efficiency and fairness are incompatible. After all, it is the will to make the impossible possible that keeps science and technology moving forward.

Takamitsu Sawa, professor of economics at Kyoto University, is also the director of the university's Economic Research Institute.


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