Is Japan’s disease curable?

by Shinji Fukukawa

Since the 1990s, often called Japan’s “lost 10 years,” many parts of Japanese society have been disintegrating. Japan’s influence has been in decline in the international community and on the global economic scene.

Its share of the world’s gross domestic product dropped from 14.3 percent in 1990 to 8.9 percent in 2008, and could drop to around 5 percent in 2015 should this situation continue.

Japan now faces serious problems arising from persistent deflation, the yen’s rise, employment uncertainty, weak state finances and a declining and aging population. It had the world’s largest external net assets worth ¥266.2 trillion (about $3.1 trillion) at the end of 2009, but its economy might eventually start eating away at its inherited assets.

My deep concern is that Japanese society has fallen into a syndrome that should be called “the Japanese disease.” Consider the following four points:

(1) The nation’s reaction to domestic and external change is paralyzed.

While the IT revolution proceeded rapidly around the world amid globalization after the late 1980s, Japan was deeply intoxicated by its bubble economy and slow in coping with the bubble’s aftermath. It thus failed to keep pace with change. While other major countries have stepped up their efforts to develop globalization-capable and intelligent human resources, the Japanese government’s education policies and Japan’s institutions of higher education have remained unchanged.

Consequently, many young Japanese have not paid attention to what is happening outside Japan. Furthermore, Japan lacks a sense of crisis about the economic effects that a declining population will bring.

While the world becomes multipolar, conflicts are getting more complicated and the system to manage international order is undergoing profound transformation. Japan fails to view these changes with an eye toward finding a new way to make international contributions.

(2) Governance is in confusion.

Although there was a change of government in the 2009 Lower House election, the Democratic Party of Japan administration has failed to present appropriate economic policies due to its self-righteous judgments and has deepened people’s distrust of its policies.

As a result, the DPJ was defeated in the July 2010 Upper House election and a divided Diet emerged, with the opposition controlling the Upper House. The governing capability of Prime Minister Naoto Kan’s second Cabinet, inaugurated Sept. 17, will be tested.

In the meantime, the Liberal Democratic Party also remains unable to present effective policy proposals and has failed to regain people’s confidence. The two-party system is supposed to vitalize politics, but it may lead to political stagnation unless a real leader emerges.

Mutual distrust between politicians and public servants is also weakening the governing capacity of the nation. Public servants have lost their self-confidence because of bureaucracy-bashing. Few bureaucrats devote themselves to painstaking efforts to formulate policy as before. The DPJ government wants elected lawmakers to take the lead in developing policy, but their meddling discourages public servants’ enthusiasm for policymaking and damages administrative efficiency.

It is unthinkable, in today’s complicated domestic and external environments, that holistically optimum policy decisions can be made only by lawmakers’ judgments.

What is now important in improving the nation’s governance capability is creating a system to collect and utilize information and wisdom from bureaucracy and the private sector and getting politicians to develop a humble attitude and to make optimal judgments.

(3) The innovative capacity of enterprises is on the decline.

Japan’s industries were proud of their strong competitive power in the 1980s. Conceit spread so widely among corporate managers that some of them boasted that “there is no longer anything to learn from managers abroad.” After the burst of the economic bubble, Japan’s business managers forgot the value of an “offensive” strategy for innovation and instead holed up, relying on “defensive” strategy.

Meanwhile, South Korean enterprises, learning lessons from the Asian currency crisis of 1997, have strengthened their international competitiveness through tieups and mergers. Chinese companies also have intensified their overseas competitiveness by boosting their management power. Some Japanese enterprises have endeavored to improve their profit-earning potential by enhancing business partnerships through mergers as well as overseas investments. But many other Japanese enterprises still depend heavily on conservative management policies. This is reflected in their low-earning capacity.

In addition, the government is lagging behind in its efforts to create an economic environment that helps enterprises launch vigorous business activities.

(4) Japanese society’s sense of values generally lacks dynamism and its sense of solidarity is weakening.

Such factors as political paralysis, administrative rigidity and enterprises’ conservative nature have sapped people’s enthusiasm to pursue new values. Generally speaking, they bang down “the nail that sticks out” and are reluctant to praise successful people in a frank manner.

Japanese people, long accustomed to populism in politics, have amplified the their tendency to eschew individual effort and have relied on the government and society to pay the bills. As a result, they have ignored the changes, avoided risk and dampened enthusiasm for solidarity.

Although the annual number of suicides has exceeded 30,000 for years and schools have become dilapidated, society’s efforts to solve these problems remain poor. With cases of child abuse on the rise and family bonds weakening, no social momentum exists to help build new family values.

Is this Japanese disease incurable? I remember the case of Britain, which suffered from the so-called British disease in the 1970s but made a spectacular recovery under Thatcherism. Japanese themselves should become aware of the current pathological condition of Japanese society. In this respect, the role of journalists and intellectuals is important.

Japanese society harbors a traditional dynamism of which many Japanese are no longer aware. It is the ethos or spirit that creates new knowledge by mixing domestic and external knowledge, attaches importance to trustful people-to-people relationships and seeks the right way, with individuals making incessant voluntary efforts to study. I consider these features the source of the strength that Japanese society needs to build up “Japan as No. 1,” as professor Ezra Vogel put it.

I believe that if Japanese people restore their dynamic “Japanability” and make strenuous efforts to strengthen their capacity without relying on the helping hands of politics, they will surely overcome the prevailing Japanese disease.

Shinji Fukukawa, former vice minister of the Ministry of International Trade and Industry and president of Dentsu Research Institute, is now chairman of the Machine Industry Memorial Foundation.