Japan has nothing to fear but fearlessness


The accepted wisdom seems to be that Japan is being less affected than most by the ongoing banking crisis. I wouldn’t bank on it.

True, for the moment we are not having it as bad as the Americans or the Europeans. Yet there is no room for complacency in this financial meltdown saga. Indeed, the very speed with which the Europeans are suddenly finding themselves at the heart of the turmoil should give us the strongest warning yet of how abruptly and violently this kind of thing can become contagious.

Just because Japanese commercial banks are now in the position to supply funding to American investment banks, there is no reason to gloat. Far from it. This could be the route through which the virus spreads, if people are not careful. The hope is that the Japanese banks know what they are buying into. It is not always easy, to say the least, to get a clear picture of the gains and losses involved in a distress sale.

There can be no question that a lot of Japanese people have lost a lot of money as a result of the crisis. All of the major banks suffered damage from the original subprime losses. They have also lost through their stakes in the ailing and failing financial giants, such as Lehman Brothers and AIG, to name but two. Investors both large and small have seen their investment portfolios ravaged by the demise of these and other financial institutions.

If Japan does actually manage to stay relatively immune to the crisis, that can only mean that Japan is so cut off from the rest of the human race that we will forever remain the Rip van Winkles of the modern-day world. That may not look like such a bad thing at the moment. Yet it is a sad day when we have to congratulate ourselves on being isolationist and inward-looking.

It is never a bad idea to be prepared for the worst. Those who think of the worst are more likely to be more successful at coming out of this crisis in better shape than the rest.

“The only thing we have to fear is fear itself.” These words of Franklin D. Roosevelt are invariably brought out for duty in times like these. Wise words indeed. Yet on closer inspection, they are actually rather rash. Heaven protect us from the fearless. The instinct of fear can be the one that saves us from final destruction. Those who have no sense of fear walk into disaster with eyes wide open. Fearlessness is recklessness. And it is outrageously excessive recklessness that got us here in the first place.

Members of Japan’s newly selected Cabinet keep saying that the impact of the crisis on Japan will be minimal. That is the kind of fearlessness we could do without. It is whistling in the wind at best and sheer ignorance at the worst. Moreover there is an inherent contradiction in what they are saying and what they are doing.

If they consider the effects to be so minimal, why do they keep demanding that the opposition cooperate and shut up about early elections? If they consider the situation to be really serious, there is something to be said (although not much, really) about suspending electioneering and getting on with the job.

But if there isn’t all that much to worry about, surely the best thing to do at this point is to ask the country for a vote. One cannot bury one’s head in the sand and warn of dangers on the horizon at the same time.

Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.