Japan’s economy for 2003 poses inevitable questions. Will deflation get worse or better? How far will banks go to shed their dud loans? If the United States goes to war with Iraq, how will it affect the economy? In these increasingly uncertain times, forecasting is a tricky business. Offering stock answers won’t help much.

So let us take a broad look and consider where Japan stands in the global economy. By doing so we can perhaps figure out where the nation should go from here. In difficult times such as these, it is useful to set aside immediate issues, for once, and ponder long-term questions.

One such question concerns the plight of local communities, which continue to languish in the shadow of large cities. The long-term need is to revive the countryside as a way of rejuvenating the national economy, not the other way around.

Economists say industrialized nations are entering a “postindustrial age.” The industrial age, which dates to the Industrial Revolution of the late 1700s, was the age of the machine, its main feature in the later stages being the mass production and mass consumption of consumer durables, such as automobiles and home appliances. Industrialization, which involves the mass processing of raw materials, has also led to the large-scale exploitation and destruction of the environment.

By contrast, the postindustrial age is a period in which brains, not brawn, determine the value of goods. In this sense, a postindustrial society is a knowledge-based one. Information technology is a good example. It produces wealth not through the mass processing of natural resources but by enhancing product value and improving productivity.

Japan, too, is moving into the postindustrial age. This transition is of crucial importance to a nation that, paradoxically, has driven itself into a corner because it did so well in the industrial age. It is particularly important in light of the negative legacies left by the rapid modernization that began in the mid-19th century. For example, the centralized system of government carried on since the beginning of the Meiji Era has created distortions in national development.

Industrialization has accelerated urbanization, particularly since the end of World War II. As a result, more than 10 megacities, each with a population of at least 1 million, have sprung up in a country the size of California. On the other hand, rural populations have continued to drop amid the steady decline of agriculture. Food self-sufficiency today stands at about 40 percent.

The industrial society has also destroyed traditional industries in the provinces, turning many self-employed people into wage earners. Uniformity has engulfed the country, as symbolized by the ubiquitous convenience stores. Now these and negative aspects of industrial Japan are coming to a head at the very time that the nation is trying to move on to a higher stage of development.

What is more, the economic globalization that began in the 1980s is driving many companies to set up shop in China and other emerging-market countries. It is not just capital and merchandise that are subject to international competition, but also nontradables such as land and labor.

Increasingly, Japan is fighting an uphill battle against low-cost competitors abroad. While cities across the country show signs of decline, Tokyo is becoming ever more crowded as the nation moves toward becoming a knowledge-intensive society. As a result, the countryside is falling into ruin. Stores remain shuttered at many shopping malls.

To revive the economy it is necessary to re-create vibrant communities throughout the country. One way to do so is to promote decentralization and give local governments more authority to raise their own revenues. Another way is to set up “structural reform” districts — special economic zones free of certain regulations. This plan, expected to take off next spring, will help to revitalize the regional economy.

Relocating some government offices from Tokyo — but not the capital itself — is also a good idea that should be thrashed out from the viewpoint of resuscitating rural regions. Raising food self-sufficiency is also important, not only to promote agriculture but also to save local food cultures from extinction.

Community development is receiving great attention in other countries, such as in member states of the European Union. A nation cannot be truly prosperous unless its provinces as well as its cities are thriving. In this sense, Prime Minister Junichiro Koizumi’s structural reform agenda leaves much to be desired. He should give greater attention to problems facing local communities.

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