Wednesday, September 2, 2009

Aso, Ah Zo!

Japan has been a pretty conservative place for a long time; change has always required massive precipitating events. A feudalistic Bushido Code society – thinking that its society and structures were the pinnacle of the best of the best – was slammed into culture shock on July 8, 1853. It was on that day that four black ships led by USS Powhatan and commanded by Commodore Matthew Perry, their smokestacks emitting strange black smoke, steamed into Tokyo Bay. The locals were terrified thinking at first that these US Naval vessels were “giant dragons puffing fire and smoke.” Japan’s leaders understood the magnitude of their backwardness and signed a “peace and friendship” treaty that opened Japan to trade in less than a year.

It took Japan two more decades and a new Emperor (Meiji) to build the determination to enter a period of hyper-modernization. An internal struggle of traditional conservative forces left over from the Tokugawa Shoganate finally left the reformists in charge. Japan sent its brightest young men overseas to study at foreign universities, to learn about Western industrialization and to create new military and industrial power that would move Japan into a position of global relevance. By 1905, in one of the shortest spans of time imaginable, Japan had indeed become that industrialized military powerhouse.

World War II was the next culture shock that stunned Japan into a sense of its own misalignment with modernity. The thoughts of Asian hegemony, that Japan could rule her sector of the world with impunity over her inferior “yellow little brothers,” push the West aside (particularly the US, which had opposed Japan’s expansionism and helped deny her access to regional oil – the precipitating events that led to Japan’s bombing of Pearl Harbor)… died in the fireballs of nuclear holocaust at Hiroshima and Nagasaki. Again, Japan’s assumptions of her regional superiority were decimated at the hands of outside intervention.

In the 1990s and into this millennium, Japan’s standard of living soared, even as its economy began to stagnate and as her population began to shrink, conservative central economic planning kept jobs plentiful (the notion of lifetime corporate employment still endured) despite the competition of cheaper production in nearby Korea and China. Japanese products were clearly superior, and her automotive industry, led by Toyota, was second only to US production. But the quality of the competitive products began to rise steadily, rivaling if not exceeding Japanese standards, and global financial instability was drawing Japanese banks and institutional investors into the same quagmire that would soon envelop the rest of the world.

When the Big Recession hit with tsunami force, Japan found itself selling precisely the kind of high-end durable goods that consumers were postponing buying as global economies were crushed by the collapse of over-leveraged governments, institution and individuals. What’s worse, especially in consumer electronics, even where consumers were willing to buy, they found the quality and price of Korean and Chinese imports vastly more attractive that Japanese counterparts, manufactured with much higher labor costs.

At first, Japan focused on cutting back her manufacturing facilities outside of Japan (the US has seen some significant cutbacks in Japanese-supported domestic manufacturing, particularly in the automotive sector). But as time passed, it seemed very clear that mainstay Japanese corporations like Sony and Toyota would have to reduce their Japanese work force as well. Unemployment pushed upwards – lifetime employment assumptions were severely challenged. Subcontractors and vendors to these large Japanese companies felt the initial brunt of cutbacks, but layoffs finally entered the core of the main companies themselves. Terrified Japanese voters knew that this was another event of culture shock that required a drastic change.

Despite their name, the more conservative (and pro-business) Liberal Democratic Party (LDP) has ruled Japan without interruption for 54 years. With Parliamentary elections setting a new tone, on August 30th, the left-of-center Democratic Party (yes, it’s a different party) crushed the LDP in a landslide victory and change the course of Japanese politics. Outgoing LDP Prime Minister, Taro Aso, conceded defeat saying, “These results are very severe… There has been a deep dissatisfaction with our party.” Effectively, there is an entirely new government in Japan, one with which we have absolutely no familiarity.

But exactly what does this new ruling party mean for Japan and, particularly, its relationship with the United States? Eric Talmadge, writing for the Associated Press on August 30th, reports: “The Democrats have embraced a more populist platform, promising handouts for families with children and farmers and a higher minimum wage… The Democrats have also said they will seek a more independent relationship with Washington, while forging closer ties with Japan's Asian neighbors, including China. But [party leader Yukio] Hatoyama, who holds a doctorate in engineering from Stanford University, insists he will not seek dramatic change in Japan's foreign policy, saying the U.S.-Japan alliance would ‘continue to be the cornerstone of Japanese diplomatic policy.’”

Hatoyama knows that Japan’s meager defense budget necessitates a U.S. military umbrella, but he has already blamed U.S.-style free-market fundamentalism for Japan’s economic woes, begun to emphasize the necessity of improving relations with China, and there are hints that Japan’s involvement in our Afghan war – mostly providing refueling and resupplying vessels – may soon end. Is Hatoyama Japan’s Obama equivalent? Will this new direction endure? How will this new party deal with “every country for itself” vs. “finding a globally acceptable” balance? Time will tell.

I’m Peter Dekom, and I approve this message.

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