Commentary / Japan

Can Japan get out of its downward spiral?

by Takamitsu Sawa

Contributing writer

Since the mid-1990s, Japan appears to have fallen into a continuous negative spiral in every respect. The past decade alone has ample examples of how the nation has been trapped into the vicious downward cycle.

On March 11, 2011, the disaster at the Fukushima No. 1 nuclear power plant forced the government to fundamentally rethink its energy policy which, at one point before the disaster, sought to rely on nuclear power for more than 50 percent of the nation’s electricity supply. The Basic Energy Plan revamped in July 2018 said renewables will be a primary source of energy, but a steep gap remains between the targets of the energy policy and the reality of the nation’s energy landscape.

The Abe administration’s Abenomics policy — which is, after all, little more than an aggressive monetary stimulus program — is nearing an end, along with the administration itself, without ever achieving its deflation-busting target of a 2 percent annual inflation.

If economics is a branch of science, reflationary economic theories have now been refuted by the large-scale social “experiments” that Japan has gone through. What have been touted as the achievements of Abenomics, including the upsurge in share prices and the weak yen, remain at the mercy of external shocks such as the trade dispute between the United States and China, turbulence in U.S. stock markets and the COVID-19 pandemic.

The improvement in the job market in recent years is not so much the fruit of monetary easing as an outcome of the collapse of Japanese-style labor practices based on lifetime employment, as shown in the increase of people with irregular jobs. In short, it became easier for businesses to increase or reduce people on payroll, and the employment cost per worker has declined. The average annual growth of Japan’s economy from 2012 to 2019 stands at a meager 1 percent. It doesn’t seem that a strong economy drove job creation.

On the political front, Japan was ruled by the Democratic Party of Japan-led governments of Prime Ministers Naoto Kan and Yoshihiko Noda in the first two years of the past decade, and by the Liberal Democratic Party under Prime Minister Shinzo Abe since December 2012. The one thing common to all three administrations is the absence of a solid political philosophy.

For good or bad, Yukio Hatoyama (prime minister from 2009 to 2010) was leaning strongly toward liberalism, while Junichiro Koizumi (2001 to 2006) was a genuine new conservative who admired British Prime Minister Margaret Thatcher. On the other hand, Kan and Noda were nothing other than realists, while Abe follows the path of state capitalism and populism.

When the DPJ came to power in 2009, I rejoiced because I thought that Japanese politics had at long last matured, with conservative and liberal forces competing for power. But I soon realized my joy was unfounded as politicians and bureaucrats continued to tell lies and flock to where they could benefit from vested interests and privileges. I might be asking for too much if I want politicians and bureaucrats to have solid political philosophies, but at least I can hope for them to have a strong will to serve the nation.

Once an undisputed global power in science and technology, Japan now lags far behind the United States and China in research. In the 2020 World University Rankings announced by the Times Higher Education, only two Japanese universities — the University of Tokyo and Kyoto University — ranked among the global top 100 institutions, with no other Japanese school placing within the top 300.

An international comparison of research papers in advanced fields such as information and communications, artificial intelligence and autonomous driving that have been published in top journals shows that the U.S. and China are far ahead of other countries in virtually all areas. The share of such papers originating from Europe has not changed much, while Japan’s share has been waning.

Even in the field of electronics, where Japan once held a dominant position, the nation has suffered a miserable decline in the production and sale of electronic equipment, although it still maintains a paper-thin lead in electronic components.

Japanese automakers, a key pillar of the nation’s economy, no longer lead their foreign competitors in technological innovations as represented by “CASE” (connected, autonomous driving, sharing and electric). Indeed, major Japanese automakers have been forced to collaborate with their overseas rivals for survival.

Looking back on the past decade alone, there is no denying that Japan is trapped in a downward spiral. What are the factors that have led to this decline? The first is that between the late 1980s and the early 1990s, the entire country was so exhilarated by its economic bubble that it lost its long tradition of esteeming effort and diligence. Second, both the government and industry were so arrogant that they did not foresee China and South Korea catching up with Japan in manufacturing technologies.

The third factor is that many outstanding young men and women chose the medical profession instead of becoming scientists or engineers. Moreover, many university students who majored in engineering landed jobs at general trading firms and think tanks. In short, engineers in Japan were seen as not receiving the level of social status and income that they deserved.

Fourth, Japan’s elementary and secondary education systems were not suited for nurturing engineers for the information and communications sectors. Many of the attempts by the education ministry to reform the university education system turned out to be anachronistic.

Is there, then, an effective means of rescuing this country from its negative spiral? Unfortunately, no, because each of the four factors that brought about Japan’s decline is either irreversible or will require decades to change course.

That does not mean pessimism is warranted, however. Thatcher, with her new conservative reforms aimed at small government and deregulation, brilliantly saved Britain from the economic stagnation that prevailed from the 1960s to 1970s and was attributed to the “British malaise.”

Thatcher’s reforms had adverse effects such as the expansion of income disparity and a deterioration of public education and healthcare, but those shortcomings were rectified under the leadership of Prime Minister Tony Blair, whose Third Way philosophy was aimed at combining efficiency and social justice, and was different from the social democracy of the old Labour Party and Thatcherism.

Similarly, for this country is recover from its malaise, it is essential to have a political leadership that is prudent, fair and active, and is founded on a solid political philosophy. If this is asking for too much, there may likely be no alternative for Japan but to keep declining.

Takamitsu Sawa is vice director of the International Institute for Advanced Studies in Kizugawa, Kyoto Prefecture.

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