If a frog is placed in a bucket of hot water, it will immediately sense the danger and jump out. If the same frog is placed in a bucket of cold water that is gradually heated, it will not realize the danger until it is too late. Today, a group of financial journalists from Britain agreed, Japan is that frog and the water in the bucket has been close to economic boiling point for some time. And if concerted and coordinated action is not taken quickly, Japan is going to be too weak to claw its way out of the hot water.

The six journalists, from some of the most respected print and broadcast media in the world, were taking part in a recent Keizai Koho Center symposium, titled “Where is Japan heading?” at the Tokyo Kaikan building in Chiyoda Ward.

The session was opened by Michael Binyon, chief foreign leader writer of The Times of London, whose previous visit to Japan was in 1990. His overwhelming impression on this visit, he said, is one of deep pessimism among the Japanese.

“The changes since my last visit are very obvious,” he said. “There are more buildings and more people speak English, but the most obvious difference is that there is a lot more pessimism, which is a pity, because this country has tremendous strengths.”

He suggested that coverage of the country’s economic problems has effectively “talked Japan into a crisis,” which is misleading to people in the West who do not recognize its underlying strengths.

Perhaps most dramatic, he suggested, is the change in attitudes among young people. There has been a growth in individualism among youngsters, who think more of themselves rather than “the group” and fully expect to change jobs two or three times in their working lives. They have money and think about the world in a different way.

“It is these people who will change the way that industry and society work,” he said. “The group working together is a strength of this country, but individualism will exacerbate this strength.”

What Japan really needs, he said, is “a little bit more self-confidence.”

Quoting the famous Franklin D. Roosevelt line of more than half a century ago — “We have nothing to fear but fear itself” — Binyon underlined that the same applies to Japan today.

Part of the problem, he suggested, is that Japan has measured all of its worth in terms of its economic achievements, which can be dangerous when the country is not faring so well economically.

The greater problem, however, is that Japan is experiencing “a crisis in decision-making.”

“Since we have been here, we have heard of the impossibility of taking decisions that need to be taken,” he said. “The younger generation find this perfectly obvious: if a decision needs to be taken, let’s do it.”

But this attitude has not permeated all of society yet, he said, adding that he does not expect it to do so in the near future, leaving Japan with a crisis of leadership.

“Change is coming, but it is coming slowly,” Binyon pointed out. “There need to be bold decisions in the next year or two, and if we can see a little more courage in Japan’s leadership, then that would be welcomed at home and abroad.”

Drawing on the economic and political commentary that is the subplot of the 1900 book that was eventually made into “The Wizard of Oz” for the big screen, Liam Halligan compared the belief among certain politicians of the time that deflation was a positive, beneficial thing with the apparent inability to deal with the same problem here.

Halligan, economics correspondent for Britain’s Channel 4 television news, emphasized, “Deflation is the biggest economic problem facing Japan today, by a long way indeed.

“Nonperforming loans and the increase in the public debt are made out to be bigger, but none of that can be changed until deflation is brought under control,” he said.

Pointing out that prices in Japan have been in a deflationary spiral for three years, that bank lending has just fallen for the 57th consecutive month and that the slump is the deepest in any developed nation since that experienced by the United States in the 1930s, Halligan said, “Deflation creeps up on you, but very slowly and very definitely drags you down.”

What is surprising, he said, is that “some people are still kidding themselves that it’s a good thing. They simply misunderstand the problem.”

To escape, he said, Japan first has to realize the problem. And with some monetary authorities and the political community, for example, not being serious enough to tackle deflation, “I’m not sure that’s the situation here in Japan. Perhaps the pain is not yet great enough.

“To be taken seriously by the money markets, the action has to be coordinated,” Halligan said, dismissing the suggestion that a tax rise would solve the problem as “counterproductive.”

“Generally, I’m upbeat on Japan,” he said, underlining that output is up, interest rates have risen and there has been a marginal reduction in deflation — but he concluded these are “not reasons to be complacent.”

Turning to the question of the impact that an aging population will have on Japan’s employment situation in the next 25 years, BBC World Service correspondent Duncan Bartlett said the inevitable changes will have an impact on both industry and society.

Within the next quarter-century, two people will be in work to support one person over the age of 65, due to the aging of Japan’s population and a dramatically declining birthrate. At the same time, employers will experience increasing difficulties finding sufficient staff.

Executives of NEC Corp., Bartlett said, have already opted to start employing foreigners, primarily South Americans whose families emigrated from Japan a century or more ago.

What had “saddened” him, Bartlett said, was the expectation among Japanese employers that “there are going to be difficulties accepting foreigners working alongside Japanese,” particularly at the blue-collar level.

The second change in attitude needs to be in employers’ flexibility, he said.

“It is very different in the West and in Japan when employers take on staff,” he said. “British employers put a lot of emphasis on enthusiasm . . . but in Japan, the most important part is the interview.”

Echoing Liam Halligan’s belief that Japan’s most overwhelming concern at the moment is deflation, Charlotte Denny, economics correspondent for The Guardian newspaper, was perhaps the least optimistic of the panelists for Japan’s future.

“The idea here seems to be that economic success is a race with winners and losers, which is profoundly mistaken,” she said. Japan believes it is “losing” because while per capita income is up one-third in Japan over the last 10 years, it has quadrupled in China in the same period.

“There has been a sense here, and it has been very obvious to us, that a lot of people are very worried about China,” she said. “But the idea that it’s a race is quite wrong, because economic success is not a zero-sum game. Some countries don’t win at the expense of other countries.

“At the moment, the most overwhelming concern is deflation, and the demand-side problem must be solved before anything else can be achieved.

“I wish I could say with confidence that I thought the deflationary problem is going to be solved soon, but I’m pessimistic after my week here,” she said. “We have seen fighting among the very people who should be cooperating to get Japan out of its difficulties.”

Denny suggested that further opening up Japan’s “highly protected” domestic markets might cause painful change, but that any decision on change should be reached democratically.

“What worries me is that politicians hide these trade-offs and lots of vested interests have a particular way of hiding who will bear the pain and not being honest with the public about who will bear that pain,” she said

“I find this the most worrying thing in Japan,” she added. “I’m not sure if the democratic process is capable of solving the economic challenges that you face.”

John Thornhill, Asia editor of The Financial Times, focused more closely on Japan’s role in Asia, in particular regarding China, suggesting there are two views in Japan of its giant neighbor.

The first is alarmist and sees economic might being transformed into military muscle, that China is an old civilization but an immature power and there is a danger that it could become increasingly assertive. The conclusion of adherents to this theory is that Japan should forge even closer ties with the U.S. to contain China.

The alternative view is more popular among younger people, Thornhill said. It recognizes that China is changing rapidly but there are signs that it is keen to abide by international norms, borne out by its accession to the World Trade Organization and the role it has played in the Association of Southeast Asian Nations plus three forum.

China, he pointed out, faces enormous problems of its own, including an economy that is still only a quarter that of Japan, question over its political legitimacy, a vast wealth divide and environmental degradation.

And while it would be possible for Japan to utilize both approaches, Thornhill indicated that the better path might be through increased contact and argued engagement.

The wider Asian market, however, is simply “a wonderful opportunity for Japan,” he said.

“Economic growth in the world is moving East,” he said. “It is inevitable that trade in Asia will grow and Asia will look to Tokyo for greater leadership.

“That is not to ignore the difficulties — clearly it is fraught with historical problems — but Japan need to engage, which Prime Minister Junichiro Koizumi has been doing,” he said.

He concluded with the belief that, for its own sake, “Japan must move from being a U.S. outpost to being at the heart of the fastest-growing region of the world.”

Beginning by pointing out that “we in Britain are experts in economic decline,” Anatole Kaletsky expressed the belief there might be some value in learning from the recovery that Britain has experienced in the last 10 years.

Kaletsky, associate editor at The Times, began by emphasizing that Japan can no longer rely on export-led growth, partly because there has been some weakening in activity in key markets, particularly the U.S., but more so because the U.S. economy appears to be stable and is unlikely to go into a double dip and the rest of the world is unlikely to allow Japan to try to export its way out of trouble, preferring instead a consumption-led recovery.

“A consumption-led recovery must be possible,” Kaletsky said. “it is very hard for us to understand why Japan cannot be led to consume.”

Japan, he pointed out, leads the world in new technology — from flat-screen TVs to the Bowlingual gadget that translates dogs’ feelings into words — and luxury goods, yet there are still difficulties for people in securing consumer credit, the mortgage market is limited and tied to the company bonus system, all of which force people to save more.

“The main lesson from Britain is that the solutions to economic decline are very difficult, but they can also be surprisingly easy,” he said. “There are some tough decisions that need to be taken, but they are necessary.

“To turn progress into revival is an easy decision,” he said. “Loosening the belt after it was tightened will allow austerity to go to growth.”

Using the austere years of the government of Margaret Thatcher as an example, Kaletsky underlined how the subsequent administration of John Major was forced to accept changes.

In Japan, the will to implement real change is still not present, he indicated.

“The paralysis in Japan is not economic, it is political,” he said. “The blame is being shifted between institutions, which are fighting viciously for their own interests, and it is the nation that is suffering.

“Maybe it is time to accept that Japan needs to have an adversarial approach to politics,” as opposed to a consensual system, he said.

“It is time to get a government that is willing to have a clear policy and for the nation to unite behind it,” he said. “Above all, it is time to stop talking and get on with it.”

Akira Kojima, managing director and editor in chief of the Nihon Keizai Shimbun and moderator of the symposium, concurred with the panelists’ belief that Japan’s “political leadership is adrift,” pointing out that the average duration of a prime minister since 1993 has been a mere 12 months.

“After the Meiji Era, Japan was trying to play catchup with the West, which we did,” Kojima said. “But what were our goals then?

“Catchup was easy because we had set goals, but since 1980, the train has been at the terminal,” he said. “We had nothing to learn from the outside, so where was the next target? The years of the bubble economy made people happy, but that was followed by depression as we lost our way.

“Previously, we had all worked together. But now we have become factionalized and vested interests are working hard to save themselves,” he added. “This has led to misery for Japan.”

Picking up on this, Halligan identified the five-month “winter of discontent” of 1978 and 1979 that brought down the Labour government of James Callaghan as the period of such pain that change became inevitable.

With unions on strike — leading to trash not being collected and, allegedly, the dead not being buried — “Britain changed because the people were suffering and the pain couldn’t be hidden any more,” he said.

The crisis was the culmination of the decline from imperial splendor and economic prominence in which the gradual decline became much more acute.

“It was no longer possible to hide the mess we were in and that set us out on the path to change,” Halligan said.

Binyon underlined how Britain’s “consensus politics” were more akin to the situation here in Japan today, with avoiding the pain of change of paramount importance, until Thatcher was elected in 1979.

“Thatcher shook the country, but it needed to be shaken,” he said. “She broke the consensus politics and didn’t care about the pain. There is a lesson in that for this country.”

Responding to Kojima’s suggestion that there is still no real sense of crisis in Japan, Kaletsky added that Thatcher took power at a time of crisis, but was helped significantly by the arrival of someone who could be portrayed as an enemy.

For Thatcher, that person came in the form of radical mine union leader Arthur Scargill, who led Britain’s miners into a strike that was easily defeated by Thatcher. Then U.S. President Ronald Reagan was able to conjure up something similar with the Ayatollah Khomeini in Iran.

The challenge for Japan, Kaletsky said, is to find that enemy. But he suggested one that might not be too far away.

“It seems to me that you have an enemy within,” he said. “Your bureaucratic system — the Ministry of Finance, the Bank of Japan, all the other ministries — have taken it upon themselves to undermine and sabotage the elected government for their own ends.

“The media here should focus less on politicians’ bribery and sex scandals and focus on the bureaucrats,” he added. “That would be the enemy.”

In response to a question from the floor concerning the lack of a sense of crisis, Halligan agreed, reiterating that deflation will strangle an economy slowly when it appears as if the problem is under control.

“The view in the markets here is that Japan is already recovering, but I don’t think that’s true,” he said. “You need concerted action. People are living on their savings at the moment and they’re shielded by the state. But savings are diminishing and your competitors are gaining on you.”

Kojima concluded the symposium by stating that Japan is reluctant to let go of its past successes and that the problems the country faces today throw questions over previous economic models that worked well, but welcomed the panelists’ criticisms because “the worst thing is to be ignored.”

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