• Kyodo


Two academics specializing in Japanese affairs forecast disparate futures for Japan in the latest edition of the journal Foreign Affairs, predicting either 21st-century prosperity or continued economic stagnation.

In two articles — “Japan: A Rising Sun?” by U.S. scholar Diana Helweg, of Southern Methodist University, and “Japan: A Setting Sun?” by Aurelia George Mulgan, of Australia’s University of New South Wales — that appear in the July-August issue, the two see either prosperity driven by an economic revolution or continued blockage of crucial reforms by conservative bureaucrats and politicians. The magazine hits newsstands July 3.

On Monday, Foreign Affairs issued a press release about its latest issue on its Web site.

Helweg wrote that today’s structural reforms of the Japanese financial system are “quietly setting the stage for an economic revolution” and that present changes are “more fundamental than anything the country has ever seen.”

“Japan’s revolutionary path will utterly transform it from the state-run industrial powerhouse of the 20th century toward an innovation-driven, globalized economy of the 21st,” she wrote, adding that the most important force for change is small, creative, high-tech companies that have built “Bit Valley,” Japan’s equivalent to Silicon Valley.

Helweg also lauded the restructuring of Japanese banks, corporate willingness to put profits before personal loyalties and the increase in foreign direct investment in the country.

Mulgan, however, argued that Japan lost the momentum for change as the sense of urgency eased with the alleviation of the banking crisis and the emergence of economic recovery signs.

He attacked bureaucrats for mounting a “last-ditch defense against deregulation.”

and criticized politicians for being chronically unable to “come up with tough solutions when they are most needed,” as they give themselves over to political power games and engage in “irrelevant reforms” such as reducing the number of Diet seats.

“Despite the fact that the Japanese economy has repeatedly shown that old methods and policies do not work, the push for reform has been vetoed by bureaucrats and (Liberal Democratic Party) politicians,” Mulgan stated.

A “modest injection of dynamism into the economy” by such factors as corporate restructuring, the information-technology boom and the explosion in e-commerce is “not enough to offset the drag of vested interests and myopic, self-serving bureaucrats and politicians,” he wrote.

Helweg and Mulgan, who indicated that the Japanese government is “backpedaling” on reform, both said the government was responsible for “lackluster economic stewardship.”

Helweg argued that political reforms lag behind economic changes in Japan, but that matters little, as today’s economic reforms do not hinge on political change. “The government is not driving the current revolution; business is,” she wrote.

Mulgan maintained that members of the LDP such as Michio Ochi, former head of the Financial Reconstruction Commission, and the party’s policy chief, Shizuka Kamei, block reforms for the sake of pork-barrel policies that protect small businesses — the LDP’s traditional support base.