Re-Orienting Japan

Japan is a nation like no other. Isolated on an island for centuries, Japan’s underlying cultural anchor is xenophobic, a system that places Japan as the elevated center of mankind and generally rejects the notion that the rules that apply to everyone else are applicable to them. These deeply-held underpinnings of social belief make it hard for Japanese economists to convince both the leadership and the people that sound economic principles must be understood and applied to the Japanese economy.

As US Naval Commodore Matthew Perry pulled into Tokyo Bay in 1853, flashing the power of a modern navy to a society mired in feudalism, it took Japan a decade and a half to figure out how backward they were and to begin to modernize. Huh? The legendary Meiji period began in 1868, sending the scions of nobility out into the world to “discover” what Japan was missing. Their subsequent education and experience built Japan into a twentieth century powerhouse, a nation that felt, wrongly obviously, that by 1941 it could take on that same United States Navy that had so intimidated the Japanese with Commodore Perry’s entre into Japan.

After World War II, with a very strong push from the economic rebuilding support from the United States and the cultural propensity of the Japanese to save versus spend, Japan invested in itself. It became a manufacturer to the world, benefiting greatly from being able to supply UN forces in the nearby Korean War. Under the direction of and with financial support (primarily loans) from the legendary Ministry of International Trade and Industry (MITI), Chinese industry rose from cheap to cherished, from electronics to automobiles to steel, ships and textiles.

Quality is now the hallmark of Japanese goods, but pricing is being blown away by regional competitors, notably the People’s Republic of China, Taiwan and South Korea. Japan’s carefully disguised “closed loop” corporate welfare system – tiers of distribution allowing many layers of Japanese society to extract their livings from the dissemination of products within Japan – combines with its xenophobic proclivities to create an ironic combination of a global economy with a highly insular indigenous marketplace. Japan’s labor costs undermined her ability to compete with these new manufacturing giants, and even MITI could not mitigate the issues. National debt began to rise.

Japan has been mired in one level of economic chaos or another continuously since 1991. Unwilling to import workers from overseas and having created an economy where raising more than one child is too expensive for most Japanese, Japan has begun to experience a population decline that is also pulling that nation away from internal growth possibilities. By 2060, it is estimated that 40% of Japan’s population will be senior citizens, putting even great strains on those young enough to still be working to support these elderly.

With staggering national debt and facing the same lethargic economics that still plague the rest of the world, conservative Prime Minister Shinzo Abe (pictured above) ran his campaigns on what has become to be known as “Abenomics,” and ill-defined set of programs intended to reduce national debt (in the form of increased national sales taxes, for example) while providing various forms of stimuli to grow the moribund economy. Instead, his new sales tax scheme seems to have pushed the nation back into technical recession. This push-pull of conflicting vectors has created a sense of confusion across the land. This confusion resulted in a call for new parliamentary elections.

“The policies appear to be losing steam recently after initially lifting the long-stagnant nation when Mr. Abe took office two years ago… During the elections, however, he remained vague on what he would do to breathe new life into Abenomics — policies that have so far amounted to little more than pressing the central bank to flood the economy with cash.

“Economists have called on Mr. Abe to follow through with promised changes to open Japan’s still-protected markets to greater competition — such as by making it easier for young Japanese to create start-ups — and to more trade and foreign investment.

“The promised changes, however, will require Mr. Abe to challenge many of the vested interest groups that supported him during this election, like the powerful national farming cooperatives.” New York Times, December 14^th. Huge tariffs, for example, protect local rice farmers from foreign completion.

A staunchly conservative patriot, Abe seems to have captured the hearts and minds of a sufficient number of his compatriots, searching for a recapture of Japanese pride and stature in the world (a complexity seen in Japan’s battle with China over neighboring islands while trying to generate a new entente with that massive nation). Abe’s party swept the elections on December 14^th, clearly placing him back into a clear national leadership position.

But was Abe’s message and patriotism the real reason for his victory in an election with a very low voter turnout? “‘Abenomics is still unfinished,’ Mr. Abe said on live television. ‘We have ended the dark stagnation of two or three years ago, but there are still many people who haven’t felt the benefits yet. We need to make sure that the benefits reach them.’

“Indeed, despite the size of the apparent victory on Sunday, analysts like [Naoto Nonaka, a political expert at Gakushuin University in Tokyo] said the results did not represent an enthusiastic embrace of Mr. Abe and his party by voters. Rather, they said, the biggest reason for the victory may have been the fact that opposition parties remain in disarray after their last crushing defeat at the polls, two years ago.

“In street interviews, Japanese voters said that with the opposition offering no appealing alternatives, they felt no choice but to support the Liberal Democrats. In Chofu, a suburb of Tokyo, voters said that they had not felt any benefits from Abenomics, but said that they were still better than the policies of the opposition Democratic Party, which was widely seen here as mismanaging the country during a stint in power a few years ago.” NY Times.

It is extremely unlikely that Mr. Abe is going to be able to make much of a difference as long as the Japanese people (and its leaders) truly believe that economic and political principles that apply to everyone else just don’t work for Japan. But America needs Japan in its corner in this contentious world.

I’m Peter Dekom, and in a world of scarce alliances and deteriorating stability, having a strong regional partner like Japan is critically important to American foreign policy.