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Sunday, March 8, 2009
As prospects darken, Japan's voters need that vision thing again
When James Carville, a political consultant to Bill Clinton, coined the phrase "It's the economy, stupid" for the candidate's 1992 presidential campaign, little did he know that he was speaking for the general election in Japan in 2009 as well.
The closest Japanese equivalent to "doom and gloom" is kurai mitoshi, literally "dark prospects." Well, you don't have to be stupid to realize that the prospects for the Japanese economy in 2009 are very dark indeed.
Economics is often called "the dismal science." Dismal it definitely is. But a science, no. Were it a science, its precepts and paradigms would be relevant to and applicable in every society in the world. In fact, people's behavior, attitudes and the solutions they opt for to deal with problems depend more on their culture — with its traditions, values and constraints — than on anything else.
If Japan is going to get the economy moving again, and revive the postwar dynamic that propelled it to becoming the world's second economic power, it will do it within the framework of its culture.
Let's go back to the boom years of the 1980s to see how this operates.
During that decade, the economy of the United States, hit hard by the severe recession of 1982, was reeling from a ballooning rate of bankruptcies. To make matters much worse, hundreds of savings-and-loan associations had approved wildly inappropriate home loans, which caused them to fail. (More than 700 eventually went to the wall.)
Meanwhile, Japan was riding a Hiroshige-like great wave of giddy good times, and Japanese investors were cherry-picking prime real estate and cultural assets in America, Australia and Europe as if there was no tomorrow. (As it turned out, there wasn't, as a lot of those cherry-picked assets were the pits.)
It was a time when Japanese people should have realized that their export- driven economic model was not an everlasting one; that investment in education and ecologically sound projects should be taking precedence over dam construction, much of it unnecessary, and road building to nowhere.
Now, nearly 20 years since Japan's bubble burst, the American market has well and truly imploded, and the strong yen has negated much of the advantage that Japanese exports enjoyed. Exports for December 2008, for instance, dropped a whopping 35 percent on a year-on-year basis. Japanese steel production is as low as it was more than 40 years ago. Japan's economic prospects today are the darkest they have been since 1945.
Here's where the culture part comes in.
What drove and sustained the postwar growth of the Japanese economy for 45 years? It was certainly the "buckle down" culture of the Japanese worker and consumer. Japanese workers were derided as gray-suited samurai, company robots and economic animals, but they brushed those caricatures off like dust on a sleeve. Their traditions and culture had taught them to be industrious in their work, austere in their wants and modest in what they craved. Personal savings were the highest in the world. The philosophy was to "save for a rainy decade."
Those virtues of thrift and economy are admirable. They are precisely what was — and is — needed in the United States, where the philosophy has been "The only thrift I know is the thrift in spendthrift."
But money put away for a rainy decade remains out of circulation as far as the demand for goods is concerned.
Nippon Yusei Kosha, or Japan Post Co., Ltd., was a public corporation up until October 2007. To Japanese people it was the most trustworthy place to put money. Depending on the exchange rate, the equivalent of nearly $4 trillion was kept in its savings and insurance accounts. This gave the nation a certain amount of comfort; but, in effect, it has been a very cold variety of comfort.
Was their educational system being upgraded and invested in to plan for the future with this money? No, why should it be? On the crest of its wave, Japan looked down, its people thinking, "We have the best educational system in the world. Don't other countries say so?" Yes, perhaps, if you are educating young people to be loyal to the company and austere in their cravings. But what happens when those companies start forsaking their loyalty to their workers and the economy is crying out for expanded domestic demand for domestically produced goods?
Was the environment being considered in the 1980s as a vital national resource to be invested in? Not in the least. So-called public-works projects, like the dam and road construction mentioned above, dominated pork- barrel public investment and kept the eternally ruling Liberal Democratic Party's ties with their client companies all around Japan cosy and tight.
It was the '80s (not the postbubble '90s) that was the lost decade: The Decade of Lost Opportunities. This is when Japan could have changed direction.
While on the subject of culture, it's often pointed out that it is not as easy for Japanese people to consume as it is for people in the West. They may not be living exactly in usagigoya (rabbit hutches), as they were widely and deprecatingly called; but the average size of an owned home in Tokyo, for example, is about 90 sq. meters — less than 1,000 sq. feet. In the West, much homeowner investment goes into renovating and upgrading the home. This is not a major practice in Japan. There's not enough home to renovate.
In addition, many people in Japan are compelled to rent a place to keep their car. Certainly very few have space for more than one car at home. The car culture of the young that took Japan by storm in the 1980s has shifted into low. Sales of vehicles reached a booming 6 million in 1990. On Jan. 5 this year, the Japan Automobile Dealers Association reported the figure for 2008 to be nearly half that, at 3.1 million. Worse news for the car industry is that young people, who now more than ever suffer from financial insecurity and low wages, are turning away from their products in droves.
Japanese people's traditional cultural values served them well in their era of annual growth, and they can continue to do so. Now, though, what is necessary is a huge turnaround in investment, concentrating on broad imaginative education, not exam-oriented nose-to- the-grindstone fact absorption, and on revitalizing Japanese ingenuity to make this country a leader in combating climate change and establishing new green industries.
Western societies can only be envious of a people who put a premium on thrift and the shunning of covetousness. Japanese people don't have to be told to work hard and save. What they do need is a vision from their leaders to gain inspiration that would help them link personal goals with those of the nation.
In that sense, the fundamentals of the Japanese economy are solid, in so far as all economic fundamentals depend on the confident will of a people.
The prospects for 2009 may, indeed, be dark. But there is a light at the end of the tunnel. Whether it is up at the future end of the tunnel, or back at the past end, depends on how that confident will is acted upon this election year.