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Tuesday, Nov. 16, 2010

Japan's narrowing lead


For quite some time now the mass media has been reporting pessimistic views of Japan's future. March 1991 marked the end of an economic bubble and the start of economic stagnation. From then until 2009, Japan's economy grew by an average 0.8 percent per year, an extremely low figure compared with other countries.

Japan was once applauded as the "treasure house" of high technologies. Today, however, it is being caught by China and South Korea. They could even surpass Japan in the not-to-distant future.

A few decades ago, Japan worked hard to "catch up with and surpass" the advanced countries of the West. It did so just a quarter of a century after the end of World War II. Today the Chinese and the South Koreans are about to achieve what Japan has achieved.

Since human capabilities don't vary from one ethnicity or nationality to another, it is quite easy for any nation that has put itself on a path of high economic growth to acquire and utilize technologies not protected by patent rights.

As the expression of "reverse engineering" suggests, it is never difficult to dismantle and analyze industrial products in order to copy them. This was why Japanese manufacturers were able to catch up with their American and European counterparts and this is why South Korean and Chinese makers are likely to catch up with Japan's counterparts.

At first, late-starting countries try to catch up with advanced countries on the strength of cheaper labor costs. At a later stage, with the help of research and development investment by private corporations that have accumulated profits, they surpass advanced nations almost without fail. This is a natural historical process.

Advanced countries that have been caught by less industrialized nations in the manufacturing sector have no choice but to stay ahead through the development of state-of-the-art technologies or to achieve economic growth by focusing on the software industry.

In the United States, for example, Microsoft Corp. has established a global monopoly with its Windows operating systems, and Apple Inc. has done the same with its iPad tablet personal computers.

Students from throughout the world flood American universities and graduate schools; this how the U.S. exports educational services. And the U.S. holds a nearly 40 percent share of the world's movies, books, animation and content.

Japan's competitive power is in the field of high-tech manufacturing, but that's eroding fast as the country is pursued by South Korea. Japan once boasted a 90 percent share of the global market for photographic equipment such as digital cameras and video recorders. This share is dwindling mainly because of competition from South Korea's Samsung Group. Japanese-content products account for only 1 percent to 2 percent of the world market. Japan is losing its dominance in animation and game software, over which it once had a virtual monopoly.

Until around 2000, Japan was the most powerful in the production and sale of photovoltaic panels for solar power generation. But that share, too, is decreasing as Germany, China and the U.S. close in. It is inevitable that today's high technology will become low technology within a matter of years.

Japan's position is weakening in international politics as well. Today, as in the past, the Japanese prime minister seems inconspicuous at an arena such as the summit meeting of the Group of Eight industrialized countries.

Probably taking advantage of Japan's weakening position, China and Russia are launching offensives over territorial disputes involving the Northern Territories and the Senkaku Islands.

The only thing Japan can fall back on with regard to its territorial disputes with China and Russia is its security treaty with the U.S. It is unthinkable, however, that Washington would go so far as to mediate by talking to Beijing and Moscow. Perhaps the gut feeling of the U.S. government with regard to Japan is: "Handle your own affairs on your own."

Meanwhile, opinions are divided within the government and the ruling Democratic Party of Japan (DPJ) on whether Japan should be a party to the Trans-Pacific Partnership (TPP) agreement. The TPP framework went into force in 2006 as a free trade agreement among Brunei, Chile, New Zealand and Singapore. Today other countries along the Pacific rim show interest in joining.

The TPP is aimed mainly at abolishing tariffs on all imports, including agricultural and fishery products, from member countries either immediately or gradually within 10 years.

Australia, Malaysia, Peru, the U.S. and Vietnam have expressed the desire to join the TPP and have started negotiations on the participation. Washington apparently finds this arrangement a handy tool for attaining President Barack Obama's goal of doubling U.S. exports. It is quite conceivable that China and South Korea will also become parties to the TPP.

If Japan remains opposed to joining the TPP agreement, it will continue heading on a course of isolation in the region.

Japan's manufacturing industries will benefit from Japan's participation in the TPP to varying degrees as exports grow. It is feared, however, that TPP membership will deal a devastating blow to Japanese agriculture, which is protected by high import duties. The Ministry of Agriculture, Forestry and Fisheries estimates that participation in the agreement will lead to a drop in the self-sufficiency rate for the nation's food supplies from 40 percent to 14 percent.

Since the change of government in September 2009, Japan has faced serious diplomatic problems as well as economic aggravation due to the recession and the rapid appreciation of the yen. Territorial disputes and the TPP issue will be difficult regardless of which major political party — the DPJ or the Liberal Democratic Party — runs the government.

Neither party is good at expeditious strategic responses to economic and diplomatic problems, because neither possesses a solid philosophy for making decisions on important matters.

Takamitsu Sawa is president of Shiga University, Japan.


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