From devastation in 1945 through vigorous growth and increasing riches to stagnation, is that the story of Japan over the last 70 years? Doubts about Japan’s future seem inevitable. A recent collection of 15 essays by Japanese and foreign experts, “Examining Japan’s Lost Decades,” edited by Yoichi Funabashi and Barak Kushner, led me to review the changes I have witnessed over some 70 years.
In 1946, when I first reached Japan in the small British Commonwealth contingent of the Allied Occupation force, Japanese cities lay in ruins and Japanese people were suffering deprivation and hunger. By the 1960s, Japan had achieved an astonishing turnaround.
As commercial counselor in the British embassy between 1966 and 1970, I spent much time and effort in explaining Japanese achievements to British businessmen. We had much to learn, and if we did not improve our own performance much to fear, from Japanese competition. Japan Inc. was not a miracle but it worked. Japan was producing an educated elite and a plethora of engineers. The quality of Japanese products was outstanding and we needed to study Japanese methods. The lifetime employment system acted as a substitute for Western-style social security systems. Management and workers generally cooperated and gross examples of inequality were rare.
The close interrelationship between government and business was an important factor in ensuring sustained economic growth. Japan’s consensus system ironed out differences in a smoother way than could be achieved under Anglo-Saxon confrontational methods. Japan was a safe and honest place in which to do business.
There were obvious weaknesses in the system. The construction industry was corrupt and the yakuza troublesome. The Ministry of International Trade and Industry (the fore-runner of the Ministry of Economy, Trade and Industry) was dominated by an old-fashioned mercantilist philosophy. Some Japanese companies did not always comply with international best practice; latent nationalism was a potential threat. Pollution was a major problem. The overall message was, however, positive.
I returned as British ambassador in 1980 to a Japan growing in confidence and seen by many observers such as Hermann Kahn and Ezra Vogel not just as a major power but as potentially number one in the world. Mercantilism, which might have been justified in the 1950s and early ’60s, was, however, still dominant and Japanese economic arrogance was growing. Japanese ministers doubted whether Japan needed foreign products. Trade friction, which began in the 1960s, was the biggest issue.
Japan needed to open up to the world and employ some of its excess savings abroad. Britain welcomed Japanese capital investments, which indeed regenerated the British automobile industry. Entrepreneurs like Akio Morita of Sony and Soichiro Honda seized the opportunities. As the 1980s wore on Japanese became ubiquitous in the City of London and in world markets. Japan’s future prosperity seemed assured.
Japanese asset prices, which had reached absurd levels, could not, however, go on rising forever. Inevitably, to the consternation of some Japanese, the bubble burst. Japanese banks had to be rescued and deflation set in.
Japan’s aging and now declining population added to the pressures. Japan’s education system failed to adapt to the demand for more entrepreneurial individuals with open minds. The rigidities of the lifetime employment system prevented the introduction of the flexibility that the economy needed. Government business consensus came under strain. Confidence in politicians and bureaucrats was lost as more and more resources were spent in concreting over the countryside and building roads, tunnels and bridges to nowhere.
The devastating earthquake in Kobe and the far worse Tohoku earthquake and tsunami revealed the complacency of Japan’s bureaucracy and business. It also exposed the village mentality of the Japanese establishment, which led the attempts to cover up what had gone wrong and why.
Japanese companies, which once seemed impregnable, began to face fierce competition from South Korea. China once seen as a major destination for Japanese investment and source of supply was increasingly viewed as a threat. The response of Japanese companies focused on the home market was slow and inadequate. The traditional Japanese system of consensus building meant that decisions were taken on the basis of the lowest common denominator (not the highest common factor). The totally inadequate response and cover up by the Japanese establishment to the Olympus scandal was shameful.
Inequalities grew. Japanese who could not find permanent jobs became social drop-outs, threatening the social harmony that had so long kept Japanese society stable.
“Abenomics,” the latest and perhaps most wide-ranging set of policies devised by Japanese politicians in recent years, are an inadequate response to the challenges posed especially by Japan’s demographics. Prime Minister Shinzo Abe’s “third arrow” is aimed at solving some of the fundamental issues. While much is made about the role of women in revitalizing the economy, Japan still seems a male chauvinist society. Japan’s need for immigrants is noted, but the gap remains huge and no real attempt seems to have been made to alter popular prejudices against immigrants.
The U.S. alliance is, of course, vital to Japan, and Japan should be able to play a bigger part in international peace-keeping. But the time and effort spent trying to get a consensus in favor of constitutional change would be better spent in promoting the huge changes needed to globalize and modernize Japanese society and attitudes.
Abe’s apparent antipathy to any media criticism and his attempts to bully the media do real harm to Japan’s world image. Revisionist efforts to obscure or alter historical facts are counterproductive. They merely draw further attention to the crimes of the Japanese military during the last war and remind foreign audiences not only of ‘sex slaves’ but also of the slavery imposed on allied prisoners of war and on the indigenous peoples of countries and territories occupied by Japanese forces during the Pacific War.
Inevitably observers of modern Japan are disappointed and disillusioned when they see that Japanese leaders in politics and business are failing to confront the demographic threat and promote the changes needed to achieve a positive future for Japan. “Examining Japan’s Lost Decades” has much to say on what has gone wrong and should be studied by all who want to understand the history of Japan in the last quarter century.
Hugh Cortazzi served as Britain’s ambassador to Japan from 1980-1984.