BETWEEN
FOUR WORLDS: CHINA, RUSSIA, JAPAN AND AUSTRALIA;
BETWEEN FOUR CAREERS: DIPLOMAT, ECONOMIST, JOURNALIST AND
JAPANOLOGIST;
BETWEEN FOUR LANGUAGES: ENGLISH, CHINESE, RUSSIAN AND
JAPANESE
Chapter
23
BATTLING JAPAN’S MISTAKES
1. The Hashimoto Debacle
2. The Koizumi-Takenaka Debacle
3. The Koizumi Opposition
4. Keynesian and other Solutions Ignored
5. The Population Crisis
6. Conclusion
By now readers may have the impression of a latter-day Don
Quixote wandering across a waste land of global foreign and
economic policy, pointing his pen indignantly and
impotently at all and every mistake or atrocity that comes
his way.
It is an image with some truth.
And if anything the image gets stronger with time.
For while nothing can compare with the atrocity of the
Vietnam in the sixties, when he arrives in the nineties he
seems buffeted on every side by mistakes and atrocities.
In foreign policy, it was the gloating talk about Cold War
victory which led to the cruelties in the breakup of
Yugoslavia, the Kosovo affair and the brutal bombing of
Serbia (of which more later). This was soon to be
compounded by the Iraq and Afghanistan interventions,
followed by the anti-Moscow fuss stirred up by Georgia over
South Ossetia.
In economic policy our Quixote tilted at two unstoppable
windmills. One was the economic rationalists bent on
destroying Australia’s manufacturing economy (of
which more later). The other was with the supply-side
rationalists bent on destroying Japan’s fine economy,
beginning in the mid-nineties under prime minister
Hashimoto.
The
Hashimoto Debacle
By 1996, in the year before the Hashimoto
administration’s foolish embrace of supply-side
economics, Japan’s annual growth rate had recovered
to four percent - the highest among the OECD nations.
Thanks to that recovery many of the bad debts created by
Bubble collapse were being resolved.
‘A rising tide floats many stranded boats’ was
a common theme at the time.
And if the tide had continued to rise Japan’s economy
could well have been up and running five years after Bubble
collapse – somewhat longer than what is usually
needed for most economies to recover from serious
downturns, but still quite creditable.
But it was not to be given that time.
As mentioned in the previous chapter, the ideologues, the
‘peasants’ and the Hooverites were to get to
work. Recovery was to be nipped firmly in the bud.
.......
In the wake of Bubble collapse, tax revenues had continued
to lag, naturally enough. The government had resorted to
traditional Keynesian-style pump priming spending to help
recovery, wisely enough. Official debt continued to climb,
as was to be expected.
None of this was sinful, though a more efficient tax could
have curbed some of the increase in public debt. But while
the figures for the debt were high – around 500
trillion yen, it was still low compared with personal
financial assets at 1500 trillion yen. And it was debt to
Japanese, not to foreigners.
More importantly much of those financial assets were held
in cash or short-term deposits by rich, elderly,
miserly-minded Japanese seemingly determined to take the
money with them to the grave.
In effect the government had been borrowing and using for
public purposes dead money - the liquid funds that Japanese
citizens were unwilling or unable to use for productive or
private purposes. That is a very appropriate thing for a
government to be doing, especially if the funds are used
wisely.
Even if used unwisely that is still better than leaving the
funds unused. Even unwise spending will eventually end up
putting money into the hands of consumers who will use it
to buy the things they need and so keep the funds in
circulation.
Money alive is better than money dead.
But for the ideologues and the Keidanren conservatives,
high levels of government debt were a sin. Repayment would
be a burden for future generations.
(But since much of the money had been spent for road and
rail constructions that would be used by future
generations, why shouldn’t future generations bear
some of the burden?))
Already much of the budget was going in interest payments,
they said
(But this burden was bound to decline as Japan’s
abnormally low interest rates continued, as was almost
certain under Japan’s mistaken economic policies).
The deficit would get worse in the future if government
spending was not immediately checked, they said.
(Few realized that there is a strong school of economic
thought, in the US especially, that says governments are
entitled to create money for spending in deflationary
situations. In other words, borrowing is not needed, but
more on that later.)
But Japan had made up its mind. The debt had to be cut. The
all-important mood or kuuki (atmosphere) for severe fiscal
cutbacks had been created.
The idea that it would lead to a 1929 Hooverite-style
deflation of the economy was put in the
too-hard-to-think-about basket
Besides, to oppose mood-based conventional wisdoms was, as
always in Japan, to commit political and journalistic
hara-kiri, as I was soon to discover.
.......
The Hashimoto
administration (1996-98) began the debacle by setting for
itself the absurd goal of akaji kokusai hakko zero –
zero issuance of deficit government bonds.
To do that, of course, the cuts in government spending
would not only have to be drastic.
Since they focused on public works, the economy would
suffer even greater cuts in demand (cuts in public works
have strong negative ripple effects across the entire
economy).
This in turn would reduce tax revenues, which meant
government borrowing would have to remain high to offset
the fall in tax revenue. Deficits would continue. The zero
issue of deficit bonds goal would be impossible to
reach.
But akaji kokusai hakko zero was one of those nice-sounding
slogans. The mood was set. So akaji kokusai hakko zero it
was, regardless of reality.
Students of Japan’s war-end kamikaze attacks will see
the similarities.
The Nihon
Keizai Shimbun (Nikkei) Role
The Nikkei people were key players in all this. Their
writers had become addicted to hard-line US supply-sider
ideology. They even managed an editorial contemptuously
denouncing Keynesian economics as jidai okure – out
of date.
Then as the economy went into a highly predictable coma,
the ideologues turned once again to US economic supply-side
dogma for an answer.
This said that a weak economy could and should be rescued
by tax cuts rather than increased government spending.
True, in the US such cuts might have a stimulatory effect.
Indeed there was even a school of optimistic US
supply-sider thought that said the economic stimulation
from tax cuts would produce the tax revenue increases
needed to offset the loss of revenue from the tax cuts.
But as anyone could have predicted (and as I did, mainly in
Japan Times articles), in consumption-weak Japan tax cuts
would tend to be saved rather than spent. They would have
little stimulus effect.
Nevertheless cuts were tried, and sure enough, they had
little stimulus effect.
But they did manage to reduce government tax revenue even
more, which increased calls for reduced government
spending, which reduced tax revenue even more, which
increased government debt, which …
The downward spiral I had feared and written about was well
underway.
.......
In trying to make my warnings, a particular problem had
been the national, mood-based aversion to public works
spending.
One reason for the aversion, I once suggested frivolously,
could be the irritation the academics and commentators felt
when coming home late at night they found their roads
blocked by construction.
Another reason could be the curious Japanese lack of
interest in large construction projects.
The opening of a new shinkansen line, a 10-20 kilometer
tunnel under volcanic ranges, or a major cross-country toll
road would be a cause for national pride and joy in most
nations, China especially. But in Japan it often hardly
rates as news.
Maybe there was a cultural bias in favor of the small and
detailed rather than the big and over-whelming, bonsai and
bento-boxs rather than dams and tunnels. I once suggested.
But the main reason, for progressives at least, was that
public works were seen as a source of the flagrant waste
and corruption that had helped keep the LDP in power for so
long.
That was understandable enough. But it was typical Japanese
‘baby/bathwater’ logic.
Rather than attack the wasters and the corrupt, you solve
the entire problem by getting rid of all public works, both
good and bad.
That way you do not have to go through the messy business
of digging out and punishing the individuals responsible.
Several times on the TV programs of the progressive Asahi
stable – its influential Channel 10 Sunday AM program
especially – I tried to warn of the harm to the
economy from cutting needed public works with good flow-on
effects in Japan’s deflationary environment.
For my pains I was seen as some kind of achronistic dodo.
Or worse, as favoring the LDP corrupters.
Further invitations ceased, abruptly.
Meanwhile the cuts in spending, combined with the
continuing weakness of consumer demand, were already
working to sink the good ship Japan Inc.
But that did little to revive my already sunken reputation,
especially among those anti-waste progressives.
A Sinking
Ship
But even as the ship was sinking the band played on.
The brass trumpet continued to be the influential Nikkei
which was turning ever more rightwing and anti- Keynesian
by the day.
The conductor, unfortunately, was the influential but
certainly not rightwing LDP secretary general, Kato Koichi.
Kato knew little about economics. But he was keen to show
himself as open to US economic wisdom, and in those days
the dominant US wisdom was supply-sider doctrine.
Even Clintonite liberals were sold on the doctrine, as I
discovered when a group of them visited me in Tokyo.
Kato
Koichi
I had known Kato for some time. His career had been similar
to mine.
He too had been a foreign service official trained in
Chinese (which he continued to speak well). He had then
resigned to go into LDP politics; he came from a wealthy
Yamagata political family in northern Honshu.
Within the LDP he had been branded as a pro-China
progressive.
But partly because he also spoke good English, he had also
cultivated ties with the US elite (he had spent time at
Harvard) , who had then introduced him to supply-side
economics.
By the mid-nineties he was a powerful light in the LDP,
with his own faction and predictions of being a future
prime minister.
And so it might have eventuated.
But with Nikkei pushing and Kato at the helm, and with the
Keidanren conservatives blowing constantly in the sails,
the good ship Japan was being steered firmly into the path
of the looming iceberg of inadequate demand.
Nikkei and Keidanren were able to shake off the blame. But
not Kato. And even less Hashimoto.
Disaster
Strikes
In 1999 the ship was in real trouble.
Everything except the mistaken economic policies was blamed
– the Asian financial crisis, SARs, lack of political
will etc.
But the fact remained that the economy which three years
earlier had been on the point of being refloated was again
sinking.
It was a disaster of Titanic proportions, and should have
been recognized as such.
And Kato had to share some of the blame.
The
Yamaichi Collapse
Crucial to the disaster was the forced collapse of Yamaichi
Securities in November 1997.
I have no brief for Yamaichi. It was no more reputable than
any of Japan’s other Big Four bloated security
companies seeking to survive partly by constantly luring
investors into stockmarket manipulations.
But it did not deserve to be collapsed for the
‘sin’ of tobashi – organising the account
books so that clients facing heavy book losses in
securities could shift the securities to other accounts to
postpone settlement, hopefully when markets had recovered.
After all, if the tide was to resume rising, as it had till
1996 and as the Hashimoto people were promising in the
future, their boats could well start to float and their
paper losses might well disappear in the future.
True, all that may have been somewhat illegal. But the
alternative was far worse – make the investors suffer
their losses today, which would add to the downward spiral
and push other investments into danger territory.
When that happened there would be no future to wait for.
Tobashi, to the extent that it prevented or slowed that
downward spiral, could even be seen as virtuous. Indeed, it
was later to be justified by the realization that US-style
the ‘mark to market’ accounting dogma was a
major cause of the troubles both for the Japanese economy
and the US economy a decade or so later.
But for our Hooverite purists looking for stables to clean,
tobashi was evil.
Yamaichi was told to clean up its books, immediately.
Inevitably it, and many of its clients, were forced into
premature bankruptcy.
The shock to the economy, both real and psychological, was
enormous.
It set the stage for the subsequent economic collapse.
Chain
Reactions
Something the Hooverites and anti-Keynesians never seem to
realise is the flow-on effects of their various
purification moves.
Their thinking is simple and static. The dynamic effects of
policy changes lie outside their narrow range of vision.
This is especially so in Japan where so much thinking is
what someone has called phenomenalistic.
You focus only on the phenomenon in front of you without
regard for causes and effects.
The idea that if you push one bank or company out of
business, immediately dozens of other economic actors are
affected, never seemed to register on their narrow seismic
scale.
Something you thought would cause only mild harm can easily
have seismic effects causing much greater harm and damage.
It is called the multiplier effect, and economists usually
estimate at two or three. In other words a minus effect of
10 ends up causing a total minus of 20 or 30.
But in my own thinking the minus effect of a blow delivered
when an economy is weak can be much larger, fatal even.
This is especially true in Japan where the influence of
mood and monomane ( copy cat) factors can be crucial.
If newspaper A is waxing pessimistic over some economic
setback you can be sure that all other media will also be
waxing pessimistic.
If A is selling out or refusing to buy for some pessimistic
reason, then everyone else within range of A will want to
sell out or refuse to buy.
Contrarians are a rare species in Japan.
In the wake of Bubble collapse people were refusing to buy
cheap property promising 8-10 percent annual income returns
even though interest rates were minimal.
Why? Because everyone else had been spooked by earlier
property disasters and were still refusing to buy.
It was years before buyers began to realise the good
returns from property relative to interest rates.
And when they did realize, they did so once again en
‘monomane’ masse, creating yet another property
bubble in CBD areas where rentals were still quite high.
This copycat factor means that in Japan, even more than
elsewhere, stimulatory action in the depth of recessions is
crucial, as is restraining action at the height of booms.
Fortunately temporary relief was to arrive with the
Keynesian policies of Hashimoto’s successors, Obuchi
and Mori (2000-2001).
But it was only a matter of time before the supply-siders
were back in the saddle.
2. The
Koizumi-Takenaka Debacle
I have already hinted at Koizumi’s personality
eccentricities, especially in his family affairs.
It was not for nothing that Tanaka Mariko (Tanaka
Kakuei’s daughter, also a politician) made her famous
description of him as ‘henjin’ (weirdo).
Ignorant of economics, henjin left the management of the
economy almost entirely to this young, immature, acolytic
and originally little-known economics professor from Keio
University.
Takenaka had few credentials other than endless appearances
on TV talkshows and lecture platforms where he was usually
either bland or wrong (I have already mentioned how on a
platform I had shared with him in Nagoya he had got the US
dot-com boom completely wrong).
One of his more memorable moments in the Koizumi years was
a TV performance saying how lifting restrictions on
baby-sitting would be a valuable boost to employment and
stimulant to the economy.
(Years later we were still waiting for Japan’s
cultural bias against baby-sitting to disappear.)
Like Kato, and possibly because of his own academic
weaknesses, Takenaka had developed strong connections with
US economists – a route favored by many other young
Japanese would-be economists, Keio University economists
especially.
There they inevitably fell under the spell of the
supply-sider, market fundamentalists then dominating US
economic thinking.
Indeed, Takenaka seems to have felt so much under their
spell that it was later claimed he shifted his address to
New York each year so he could avoid paying resident taxes
in Japan – charming behavior by someone responsible
for the fate of the Japanese economy.
Japan was soon to be hit with the full blast of US
supply-sider dogmatism.
(It was also to be rumored later that his strong US
connections made him less than unhappy to see US financiers
use sophisticated short-selling techniques to profit
greatly from the collapse of the Japanese banking system
over which he was about to preside).
Supply-Sider
Logic
Supply-side economic theories had their origins in
Thatcherite UK and Reaganite US.
At the time they made a kind of sense. Both economies
suffered from low household savings and excessive demand
relative to domestic supply.
Chronic inflationary pressures and balance of trade
deficits were the natural result.
To solve both problems interest rates would have to be
increased and government spending cut.
This would then throw the economies into stagnation or
recessions. Low interest rates and more government spending
would then be needed for recovery.
But recovery meant that before long the latent strong
domestic demand would re-emerge and revive the twin
inflation and trade deficit problems of the past.
Once again interest rates would have to rise and government
spending would have to be cut.
It was to be called the stagflation or stop-start economy.
.........
Gradually a solution dawned on the planners.
If domestic demand was inherently strong, they said, the
answer was to make domestic supply inherently strong.
And to do that, it was argued, governments had to go out of
their way to liberalise, privatize, deregulate, cut taxes
and cut public spending.
Small government became the order of the day.
In theory the formula seemed reasonable enough, if applied
to a demand-rich economy.
But we will never know whether it would have worked in
practice, because the all-important ‘small
government’ never happened.
Governments could always find reasons –wars,
elections, political ambitions– to expand spending.
Some privatisations and some deregulations may have been of
benefit.
But the all-important ‘small government’ slogan
ended up as big government.
Budgets were increasing rather than decreasing, though the
tax revenue increases from expansionist programs did help
keep budgets in balance.
And as it turned out this expanded government spending did
not worsen the crucial inflation and trade deficit problems
since they were being cured by other means.
Inflation was cured largely by cheaper imports and by
crushing trade unions (unreasonable trade union wage
increase demands can be a major inflationary factor in
demand-strong economies).
Cheap imports from Asia together with strong capital
inflows from around the world also helped cure or
ameliorate the trade deficit problem.
Then when both economies began to recover due to those
extraneous (and unpredicted) factors, the supply-siders
were quick to claim the credit.
Worse, it was assumed that policies based on the same
doctrines would work in Japan, where the problems were in
fact the exact opposite.
Instead of inadequate demand and excessive supply, Japan
suffered from excessive supply and inadequate demand .
But no matter. Included together in a package called
‘structural reform’ together with promises to
attack Japan’s ever-present problems of bureaucracy
and waste, cuts in government spending were sold easily to
the Japanese pundits, who then sold it to a Japanese
public.
The Hashimoto debacle was to be repeated on a grand scale.
But first some background.
The
Obuchi-Mori Recovery
Hashimoto had been replaced by Obuchi Keizo, whom the
foreign media with great delight had described as
‘cold pizza. ’
In fact he was a man of some principle, warmth, commonsense
and humanity. He had for example over-ridden objections
from Japan’s wretchedly hawkish Foreign Ministry in
order to force Japan to sign the landmine abolition treaty.
Obuchi also shifted economic policies back in a more
Keynesian direction (I may have been slightly involved
through membership of the advisory Hosomi committee I
mentioned earlier).
Predictably, Japan’s economy began to recover.
But Obuchi was to die from heart failure, the result, I
believe, of constant badgering from rightwing alarmists
demanding he waste time and energy on something called
‘crisis control’ – their excuse for
having Japan and its military constantly looking out for
potential threats to national security.
Shortly before his death he had to spend hours in a
‘crisis control’ bunker fretting over a minor
train accident that had nothing to do with national
security.
Fortunately recovery continued under his successor, Mori
Yoshiro, who also favored the Keynesian approach.
By year 2000-01 the economy had moved out of the Hashimoto
recession to regist slightly under two percent annual
growth. The stockmarket had recovered to the Nikkei 20,000
level.
But the Mori regime also was to be short-lived, ironically
as a result of Mori ignoring the crisis control fanatics
who had insisted he abandon a Sunday golf game to join them
in the crisis control bunker to fret over the accidental
sinking of a Japanese training vessel thousands of miles
away in Hawaii.
Mori had already antagonized the media by failing to give
them the attention and sound-bites they craved. They were
quick to use the golf game affair to push him out.
In fact I saw him as one of Japan’s better prime
ministers. I had seen him close up in the Obuchi education
reform commission and was impressed by his sharpness.
He had also made some intelligent moves to resolve disputes
with North Korea and Moscow.
But Japan’s giddy media had decided they did not like
him. Because he made no secret of his gut conservatism he
was portrayed as some kind of blundering buffoon.
In his place we were to have Koizumi Junichiro, a far
greater buffoon and determined seemingly to push
Japan’s economy over the edge with the slogan of
‘structural reform’ (kozo kaikaku).
The Kozo
Kaikaku (Structural Reform) Disaster
Koizumi had come to power with little record of reform.
He had been minister in charge of health and pensions back
in the eighties when some of the worst heath and pensions
scandals to hit Japan were brewing under his carefree
command.
But in the LDP leadership elections to replace the
unfortunate Mori Yoshiro, he came out strongly demanding
fiscal reforms.
In particular, I recall a pre-election meeting where waving
hands and hair he passionately pledged that he would cap
annual deficit budget financing at 30 trillion yen and then
reduce it.
(In fact under his watch the cap was to be broken
repeatedly, reaching over 35 trillion yen at one stage).
He also promised to cut drastically the 500 trillion of
public debt.
(In fact it was to increase by 200 trillion yen during his
five year regime).
But few were to notice this abject failure to achieve
promises.
He had the media in his pocket. Standing almost daily
before the TV crews hungry for sound-bites, all he had to
do was repeat with glinty eyes and firm determination those
magic words: Structural Reform.
Anyone who disagreed was quickly thrown into exile at
worst, or silence at best.
I was to be one of the victims.
Media
Guilt
By themselves Koizumi and Takenaka could not have wrecked
Japan’s fundamentally strong economy.
Media-based PR played a key role.
The public loved the idea that a mere slogan –
Structural Reform – would rescue Japan from its
self-imposed economic woes.
The OL (office ladies), moms and grandmoms loved his long
hair and lion-hearted image.
‘Exciting’ was a word to be launched into the
political lexicon, with sad consequences for the future.
Later as the phoniness of it all became apparent some were
to begin to talk about Koizumi’s gekijo (theatre)
politics and his ability to mezmerise audiences.
But by that time it was too late.
Punditry
Unleashed
The TV pundits were crucial in creating the Koizumi myth.
By definition, these people are not blessed with any
economic wisdom.
But with Koizumi and his sound-bites and flowing hair in
psychological control it was inevitable they would want to
go along with the ‘structural reform’ wisdom.
On TV program after program they would stand before the
cameras reciting those magic words - Kozo Kaikaku –
as if it was inconceivable that anyone could possibly
disagree.
The result was that all Koizumi had to do was dub some
hare-brained reform as kozo kaikaku, and some serious
critic as a reactionary opposed to kozo kaikaku,
immediately they would weigh in with deep-throated
approval.
The all-powerful kuuki, or atmosphere, by which consensual
Japan likes to decide things, was put firmly in place.
And as with previous kuuki in Japan’s history –
the rush to miliatarism in the thirties for example –
once established it is impossible to oppose, no matter how
wrong or evil.
Kozo Kaikaku became a mantra carved in stone.
(But the punsters had fun with the word
‘kaikaku.’ Changed to ‘kaiaku’ it
means ‘change for the worse.’)
.....
Particular damage I suspect was to flow from the Nikkei
Channel 12 daily late-night one hour program on the
economy.
There Takenaka Heizo, with his supply-sider dogmatism,
would appear night after night repeating the Structural
Reform mantra.
I suspect also that for the quirky, bachelorized,
economics-ignorant Koizumi, with little else to do in the
late evenings other than sip wine, listen to music and
watch TV (he was notorious for his lack of close friends),
this program was crucial to his selection of Takenaka as
economics guru.
Between them they performed well – bringing the
wrecking ball to the glimmerings of economic progress
achieved by the Obuchi and Mori administrations.
The stockmarket was to collapse within a year to around the
11,000 mark. Dozens of sound companies were to be forced
into bankruptcy. Fiscal deficits and public debt were to
balloon.
Yet with Teflon skill, Koizumi could still avoid criticism
from his mezmerised audience.
When finally the economy was rescued by the export boom to
China - the nation Koizumi had done so much to antagonise
– the pair of them were quick to claim the credit.
Wrecking
the Economy
In many ways the economy mistakes of the Koizumi-Takenaka
era were a magnified version of the mistakes during the
Hashimoto era.
Cuts in government spending quickly threw an economy
already weakened by the dot-com bust into a downspin.
As more firms went bankrupt, bank bad debts increased.
Takenaka then chose just that moment to impose the US fad
for the market value accounting, which simply managed to
exaggerate losses and add to the general gloom.
This combined with compelling banks to declare the full
extent of their bad debts further added to the gloom, and
automatically postponed the “rising tide”
recovery which would automatically have cut those bad
debts.
But the public were quite unable to realize any of this.
To them, and Japan’s light-headed media, Takenaka
marching into the banks and forcing them to disclose the
full extent of possible bad loans looked like brave moves
to expose and exorcise the harmful diseases in the banking
system.
No longer could the banks cower behind tobashi-style
thinking to postpone that much-deserved day of punishment.
In fact all that those ‘brave moves’ were doing
was doing forcing the collapse of the banks that otherwise
could have survived if and when the economy recovered, as
it surely would have under normal polices.
It was a repeat of the mistaken policies that had forced
the US into recession in 1929.
Then as the banks did in fact begin to collapse the bankers
had to depend on injections of government money, and accept
government control, to survive.
In effect a regime that had said it was going to push
privatization was going in the opposite direction of
effective nationalization.
But once again the mesmerized public and media failed to
notice.
Then to help the banks recover and repay funds they had
received, special favors were made, including zero interest
rates, allowing them to continue with their excessive
customer fees while demanding privatization of their
efficient post office rivals.
(For a simple transfer of a small amount of funds a bank
would charge a service fee of up to 600 yen; the post
offices 200 yen.)
........
Meanwhile confidence in the economy and the stock market
was also collapsing as each of these disasters unfolded,
which further weakened the banks and others holding stocks.
These pressures in turn made the banks unwilling to lend,
which in turn further depressed the economy.
The downward chain reaction effect of all recessions - an
effect to which Japan by nature is even more vulnerable
than most - was in full swing, orchestrated by people who
seemed to have little understanding of the mood-influenced
mentality of their own people.
Worse, they also had great tolerance for the ‘trash
and cash’ tactics of their friends in the US
financial community who would short sell furiously the
shares of yet another bank targeted for semi-collapse and
then buy back at great profit after rescue measures were
announced.
Japanese investors were naïve to such techniques.
........
Bankruptcy auctions soon became the one part of the economy
showing vigor.
In my own small area of Boso we would see half a dozen or
so properties thrown out for bankruptcy auction each week.
Most had been mortgaged for large amounts by willing banks
in the Bubble era.
Now they were being dumped on the market often at only one
fifth or tenth of their original bank mortgage valuation.
The banks did not seem to worry. After all they had been
told by Takenaka to clean up their bad debts, or else.
Their losses would be covered with public fund injections.
But the human distress was enormous.
In the countryside much business is done on trust. So when
firm A was forced into bankruptcy immediately dozens of its
buyers and suppliers would be in trouble.
I knew many of the people caught in this squeeze. Often
they were fine businessmen who did not deserve to be caught
in this vortex.
But down they would go, together with the people who had
trusted them.
None of this seemed to worry the pundits and the
policy-makers back in Tokyo.
After all, thanks to Koizumi Japan was going to clean up
its financial stables, once and for all, wasn’t it.
It was a classic example of what the Japanese call
match/pump.
First of all you use matches to create a fire. Then you try
to get kudos from bringing in the pumps to douse the fire.
........
A favorite theme justifying the forced bankruptcies had
been the need to create a floor quickly, from which the
economy could rebound.
The example of the US Savings and Loan crisis of the late
eighties was fresh.
But the S and L crisis represented only a small three
percent of the US economy.
The crisis Koizumi and Co. had managed to create involved
twenty to thirty percent of the Japanese economy.
The possibility of the entire economy going through the
‘floor’ was real.
It was only averted by the semi-nationalisation of the
banking system, and then the China factor already
mentioned.
Getting
the Economy Wrong
Early in the Koizumi years I was in a TV debate with
Sakakibara Eisuke, seen by many foreigners as leading
expert on the Japanese economy.
He pooh-poohed my warnings about the depth of the bad loan
problem, particularly if the Koizumi policies continued.
According to Sakakibara the danger was much less than that
created by the Savings and Loan crisis, and the US had
recovered easily from that.
Later he was to make himself look even more foolish warning
in 2003 that quick recovery from the bad loan crisis would
see interest rates soar, causing a dangerous collapse in
the prices of government bonds, which in turn would cause
yet a new crisis to the economy, and to the banks
especially.
This alleged economic expert still did not realize that the
Koizumi policies and their likely continuation would keep
the economy, and interest rates, down on its knees for a
very long time.
But the foreign journalists and bankers liked him, mainly
because he could speak some English, and was always
available for talks, advice etc.
The conservative foreign economic media – the
Economist, The financial Times, The Wall Street Journal
– liked not just him but the full range of
‘Structural Reform’ policies.
The one bright spot in all this is that those of us who did
realize the economy would remain on its knees were able to
make a lot of money from the yen carry trade –
exploiting the long-term interest rate differential between
the yen and other currencies.
I often wonder how those conservative investors felt about
all this.
They would have lost a lot of money by going along with the
pro-Koizumi financial gurus, including almost all those
writing for the main Anglo financial media busily
predicting how the Koizumi-Takenaka policies would soon see
Japan making quick recovery.
They must have lost a lot of money also by going along with
the same gurus who for years doubted the reality of
China’s economic progress.
The classic double whammy.
Good
Reforms?
True, some of Koizumi’s so-called
‘reforms’ made a kind of sense.
The knife needed to be put into some of the more corrupt
bureaucracies that had flourished over the years –
the Highways Corporation especially.
But often the knife reflected Koizumi’s personal
likes and dislikes within the bureaucracy rather than a
genuine desire to see Japan reformed.
Some also praise Koizumi’s desire to destroy the LDP
factions he had come to detest on his path to power, and
even the party itself because of the way it had slighted
him for so long as an unruly maverick.
But factions, for all their faults, do much to create
stability – witness the success of Australia’s
factionalised Labor Party over the years.
They also help keep petty dictators at bay –
something the UK conservative party badly needed during the
Thatcher years.
That they survived and have been revived post-Koizumi was
not surprising.
Post-Office
Privatisation
The saga caused by Koizumi’s quirky dislike of
Japan’s surprisingly efficient post office system was
typical ‘theatre politics.’
Demanding that it be privatized, he insisted that anyone in
his LDP party who opposed had to be expelled, and
‘assassinated’ by deliberately chosen rival LDP
candidates in an election called on the issue.
As ever the media and the commentators loved it.
Yet it was a quite phony issue.
Even in our atomized Western societies the post offices
play an important social role in rural areas.
In groupist Japan the post offices with their variety of
functions – pensions payments, savings facilities etc
– play an even more important social role.
In the depopulating countryside they play an even more
important role.
Yet as ever the mesmerized public opinion went along with
him. He won a major election victory as a result.
Later everyone was to wonder what the fuss had been all
about as the ‘assassinated’ objectors were
welcomed back into the LPD.
........
The role of the post offices in saving Japan’s
economy from complete collapse was especially important .
During the Bubble period they were able to attract a large
share of private savings, which were then loaned to the
government for public works.
If those savings had gone to the banks, much would have
ended up simply adding to the mountain of bad loans to land
speculators, gangsters and pie-in-the-scale resort schemes.
Japan’s Bubble disaster would have been even more
spectacular than it was.
Even the use of post office funds for a some pork-barrel
highway or bridge project would have been preferable to
bank-financed spending on yet another gangster-operated
golf course destined to add simultaneously to gangster
fortunes and the bankruptcy lists.
Yet Koizumi was more than happy to go along with the
private banks and insurance companies clamoring for
privatisation and unhappy about having to compete with the
very efficient financial services provided by post office
system.
Efficiencies provided by the post offices, in addition to
low charges for money transfers, included:
• savings deposits could be cashed out freely without
any of the hassle and charges imposed by the banks.
• good unpretentious customer service, often provided
by motivated high school graduates anxious to improve
themselves, rather than by the bureaucratic, primped up
graduates from run-of-the-mill universities employed in the
banks.
• branches spread across the nation, even in remote
areas, providing travelers with service wherever they went.
And so on.
The post offices were not only good competitors. They were
also a fine proof that even in Japan state-run enterprises
can sometimes do better than private enterprise.
Yet they were marked for destruction. Rumors later
suggested that the luxury lifestyles Koizumi was later to
enjoy was financed by grateful donations from the banks and
US insurance companies who benefited by the weakening of
their major rival.
Koizumi
Foreign Policy
Disaster also dogged Koizumi’s attempts at foreign
policy, and not just because of his quirky willingness to
antagonize Beijing with his obstinate visits to the
notorious Yasukuni Shrine.
His true nature seemed to emerge in his childlike liking
for the US, both for its president, George Bush junior, and
for its lugubrious Elvis Presley legend.
His flippant remarks defending Japan’s support for
the US over Iraq did not help.
Asked in the Diet about the failure to find weapons of mass
destruction – WMD had also been the excuse for
Japan’s Iraq involvement – the best he could
say was ‘well they have not found Saddam Hussein yet,
so why the fuss over not finding WMD?’.
......
True, his 2002 breakthrough to North Korea to rescue
abductees was impressive. But that had been organized
entirely by others, including the much media-despised Mori.
And his passivity in the face of subsequent moves by his
LDP rightwing to turn this diplomatic triumph into a weapon
of hatred for North Korea quickly destroyed any kudos he
might have deserved.
He, together with the Gaimusho and other hawks, also
managed to sabotage serious moves under the Mori regime to
solve the Northern Territories dispute with Moscow.
Toward the rest of the world he showed little interest.
Fascistic
Populism
For five full years and more, Koizumi held office without
facing any threat to his position and without ever once
having to explain the failure of his various policies.
It was a tribute to his Hitlerian ability to mesmerize his
audiences.
As things went from bad to worse under his Hooverite
economic policies he would just snap his favorite slogan at
the cameras: no growth without fiscal reform; no gain
without pain.
Heads nodded. No one seemed to think about the logic
involved.
(Interestingly, when his successor, Abe Shinzo, was wise
enough to turn this upside down to say – no fiscal
reform without growth – there was a similar nodding
of empty heads.)
Koizumi gained that ultimate in Japanese praises–
that he was wakariyasui, easy to understand.
For the Japanese wakariyasui seems to be a very important
quality.
One hears it used often, with the implication that one
should just accept what is being said without thinking too
deeply about meanings or implications.
The complexities often involved in most serious debate
– for example, ‘on the one hand this and on the
other hand that’ - are not greatly welcomed in Japan.
Ultimately it is a fascistic approach – the
assumption that the national collective should along with
whatever its masters disctate.
True, some of the more enlightened realized what he was up
to.
But even they did not seem too worried by the implications
– that if ‘theatre politics’ were the way
things were, then so be it.
That this undisguised populism could gain such unthinking
popular support in a mature, literate society as
Japan’s should be a warning to all of us
It tells us of the ease with which all our democracies can
be dominated over by shallow men with media plausibility.
I had seen a much milder version of the same during the
Whitlam regime in Australia, which I described earlier.
3. The
Koizumi Opposition
At the height of the Koizumi populism I was called out of
the blue by the intelligent LDP politician, Hiranuma Takeo.
I had not known him previously, but he wanted me to address
a meeting of his top supporters.
He had read one of my articles criticizing Koizumi policies
- the cuts in government spending, public works especially.
Hiranuma was not one of the public works zoku (tribe) of
politicians keen as they say in Japanese to ‘enjoy
the sweet juice’ from public works waste and
corruption.
He was something rare in Japan – a politician with a
liking for logic and morality, even if of rightwing
persuasion.
Like me, he realized the harm done to the countryside by
cuts in spending, and the need for such spending to revive
the economy.
Later he was to realize the kakusa (income inequality)
problem, caused in part by Koizumi policies.
......
My talk to Hiranuma’s supporters led to me being
called in several times to address other small groups of
party members also opposed to the Koizumi policies,
sometimes even within the LDP Nagata-cho headquarters.
There too the IQ level seemed higher than the LDP average.
But all confessed impotence in the face of the mood-based
consensus that had been created by Koizumi populism.
......
Hiranuma was to go on to oppose the Koizumi postal
privatization; he realized the harm that would be done to
remote rural areas.
Despite having served Koizumi faithfully as METI minister,
during which time he had loyally disguised his anti-Koizumi
fiscal views, he too was marked for
‘assassination’ i.e. to be expelled from the
LDP and have one of the wet-behind-the-ears,
soon-to—be-forgotten ‘Koizumi children’
run against him as official LDP candidate in the post
office privatization election.
But he survived.
That election finally showed the shallowness of the Koizumi
populism, with its attempt to exploit the Horiemon
phenomenon – a juvenile, jumped-up IT entrepreneur
called Hori who had relied largely on share manipulations,
some illegal, to build a business empire.
Koizumi had supported him to run in a Hiroshima electorate
to assassinate Kamei Shizuka, a conservative ex-police
administrator with a conscience (he was strongly opposed to
police interrogation methods) and who supported
Hiranuma’s economic policies.
Fortunately Horie was arrested and found guilty before he
could do any political damage.
But once again the foreign media showed their ignorance of
Japan, defending Hori as a victimized, scape-goated,
would-have-been forerunner of the venture-business,
entrepreneurial boom allegedly needed to bring
Japan’s economy out of the wilderness.
Voiceless
in Koizumi-land
Meanwhile I could do little more than vent my frustration
in Japan Times columns.
That this had some impact, at least among foreigners in
Japan, was shown by the way I was pulled in for various
chambers of commerce debates and talks.
But the foreign financial media listed above remained
unrelenting in their naïve support for Koizumi and his
‘structural reform’ slogans.
A serious article I prepared for the UK Financial Times
trying to point out the real problems in the Japanese
economy remained not only unprinted but unanswered.
Meanwhile a run-of-the-mill predictably pro-Koizumi
supply-sider logic by a former friend in Australia, John
Edwards, was run despite his lack of any Japan background.
The Koizumi approach fit their rightwing supply-side
biases. It also fit their image of Japan as a backward but
diligent student needing injections of Economist, WSJ, and
Financial Times reformist Thatcherite/Reaganite wisdom.
None of them as far as I know, has admitted how their
favorite student managed to increase Japan’s official
debt by 200 trillion yen while taking their advice.
On the contrary, they used Japan’s worsened economic
condition as proof that it needed more of their mistaken
advice.
Nor will they admit that part of the post-Koizumi recovery
came from Tokyo finally ignoring their advice, with some
loosening of the Koizumi fiscal stringency.
That loosening saw a rapid increase in tax revenues which
in turn allowed further partial loosening – though
not enough to give full recovery since Tokyo still seemed
partially under in thrall to the public-debt bogey.
The foreign media then blamed continued post-Koizumi
economic sluggishness on a failure to continue the Koizumi
reform program.
It reminded me of those old-time communists insisting
communist economic failure was due to lack of fullscale
communist zeal.
(I once had the chance to ask some US-based supply-sider
fanatics to tell me one reform, any reform, that would
stimulate the economy.
(Their replies would have been golden. Their silence was
not.)
(By all means have the reforms. But please realize their
total effect on Japan’s economic recovery is bound to
be marginal.)
(That economy can never recover properly until the vast
amounts – over 600 trillion yen - socked away in
largely non-productive personal financial assets can be
brought back into the economy, to be spent or invested more
productively.)
4.
Keynesian and Other Solutions Ignored
The tragedy in all this was not just the many personal
tragedies, including suicides, caused by the Koizumi
policies.
They also contributed greatly to the creation of the kakusa
(income differention) situation which was to do such damage
to Japan’s hitherto attractive egalitarianism.
But for those policies, Japan could have become an economic
and social model of great significance to us all.
For example, in an economy where individuals prefer to save
rather than spend, then surely the government has the right
to create the extra demand needed to keep the economy
turning over.
Here the scope is endless – demands for improved
environment, education, health, welfare, any number of
public services..
Filling those demands would not only allow any advanced
economy to return to the reasonably high growth of earlier
developmental years, assuming the resources of labor etc.
are available, which they often are, even in advanced
economies.
More importantly it would be a growth that works to create
a genuinely better society, rather than the Anglo growth
model that depends heavily on the rich continuing to
splurge and the others continuing to go into debt to spend.
It would come close to the dream of some Japanese in the
past – to create a sparkling, bright (hikatte iru)
society, a Switzerland of Asia etc.
Japan could have moved to create an attractive
Scandinavian-style society without having to rely on
Scandinavian taxes
Unfortunately that was not to be.
.......
True, there is the problem of financing this spending.
Sensible tax policies which do not cut demand are one
answer.
In the case of Japan that scope is large – a
clampdown on rampant income tax evasion is one obvious
move.
But the emphasis should be more on indirect taxation.
Instead of the demand-reducing, corruption-creating and
paperwork-producing consumption tax system (yet another
unfortunate import from the West) Japan should simply have
expanded its existing system of easily-collectible taxes on
specific products and services, those with high social
costs especially.
But in the case of Japan government borrowing of
non-productive personal financial assets to finance
spending also was, and remains, an answer.
At a very high 1500 trillion yen, these assets remain at
over $100,000 for every man, woman and child in Japan.
Of this about half is in liquid or semi-liquid form.
Reinvested productively in the economy, ideally by
individuals but if not then by government, those funds
could easily have helped keep Japan’s growth on an
upward path.
That in fact was the policy pre-1997, pre-Hashimoto.
Today this pre-1997 spending is condemned for increasing
public debt. And it is true if it had been spent more
wisely, in areas of the economy with better multiplier
effects, tax revenue would have increased and slowed
greatly the increase in public indebtedness.
But even so, the spending did at least get the economy back
on a growth path as consumers also gained confidence and
began the replacement and other spending normally postponed
during recessions.
For these and many other reasons government borrowing and
spending was not quite the evil it is made out to have
been, even if public debt then was pushing the 300 trillion
yen level.
The real evil was the unwillingness to do something about
the corruption in public works – corruption which did
much to push Japan into its anti-public works consensus.
(A key villain was none other than Ozawa Ichiro, then
assistant to Mr Three Percent Kanemaru Shin, who later was
to bolt the LDP claiming with a straight face he could not
stand LDP corruption.)
Also evil was the way much government spending had served
to create and sustain an army of useless institutions whose
main purpose was to provide employment for retired
amakudari bureaucrats. *
In each ministry a delegated senior official does little
more than arrange, or even try to create, cushy jobs with
large retirement packages for colleagues facing retirement.
Keynesians
to the Rescue
There has long been another answer and much more convincing
answer to this problem of public debt. And it is this:
Provided there is little risk of inflation, and especially
if there is continued deflation (as has been the situation
in Japan), governments should be allowed get or create the
money they need, free from repayment and interest payment
obligations.
One way is to require the central bank to create that money
and literally give it to them (for that, however, they have
to be wise enough to retain some control over their central
banks)
Failing that, they have the seignorage right themselves
simply to print money (as the US did in 1963).
One or other, or both these policies, have been recommended
for Japan in recent years by top US economists –
Lawrence Klein, Ben Bernanke, Joseph Stiglitz and Paul
Samuelson.
But non-rationalistic Japan did not even to realize what
these people were saying, let alone act on it.
Klein even made a special visit to Japan in 2003 to urge
such policies – a visit studiously ignored by the
Japanese press which usually falls over itself to report
the views of important visitors.
Clearly the foreign advice lacked the quality of being
wakariyasui.
But the Koizumi /Takenake policy of destroying the economy
in order to save it was very wakariyasui.
Japan’s
Rightwing Keynesians
True, a small Japanese group calling themselves the
Association for Japan’s Economic Recovery realizes
the need for these policies. I was invited to some of their
meetings.
(They belong to that interesting group of conservative or
rightwing Keynesians I mentioned earlier – the group
that emerged in the sixties to counter the dominant Marxist
economics in the universities.)
Through publications, meetings and Diet questions they try
hard to recruit and influence the policy makers.
They once spent much of their funds for a full page
newspaper spread to push their message.
But to date they admit they have had little impact, even
though they claim many sympathizers in high political
quarters.
As they put it to me (and in the process confirmed my own
views of Japan), once the consensus has been set – in
this case the post-Hashimoto consensus for reducing
official debt – it is almost impossible to challenge.
To do so is to put yourself outside the consensual
mainstream. You are isolated and reduced to impotence.
Their one hope, they say, is to try to influence things by
remaining in the mainstream, no matter how long and
difficult that may be.
So they go out of their way to avoid strong criticism or
confrontation with the mistaken economic policy-makers.
They rely heavily on meetings and written questions in the
Diet querying government policy (the answers to which are
often meaningless and ignored by the public).
But with a new post-Fukuda regime it is possible that Japan
might finally realize it has to rely on public spending to
re- stimulate its economy.
Once properly stimulated, private spending could be
adequate to keep the economy turning over.
........
True, low interest rates can also help the economy once
that dangerous Koizumi era combination disappears –
investors reluctant to invest and consumers reluctant to
spend.
Hopefully there will also be more spending by an aging
population which finally realizes that it cannot take its
money to heaven.
All this could well provide some of the demand needed to
keep the economy moving upwards again.
But that in turn leaves us with the declining population
problem.
The economic damage it creates could eventually outweigh
greatly any good from present or future trends for economic
improvement.
5. The
Population Crisis
For over four years I sat on the Justice Ministry’s
population and immigration policy committee. At first we
talked much about policy to refugee applications, resulting
in some slight changes for the better.
As ever, the changes were decided by the bureaucrats in
advance with only slight attention to what we were saying.
But we did get to see something of the contradictions in
Japanese policies – harshness to some worthy refugee
applicants and undue tolerance to some of the unworthy.
In a situation where it is almost impossible to get into
Japan without a visa of some validity, one has to assume
that most claims for refugee status are flawed.
........
From refugees we eventually turned to the question of
foreign workers in Japan, including illegals.
I like to think we did something to change the formerly
barbaric situation where illegals when caught were locked
up, often for months, taken to the airport roped together
like cattle for forcible expulsion and not allowed back to
Japan.
If there were special circumstances justifying their return
they would have to wait a minimum of at least five years.
And these illegals often included people who had gone to
much trouble to learn Japanese and were working hard to
help some area of the Japanese economy.
We managed to see the law changed to allow those who gave
themselves up to remain out of prison, and possibly to
return to Japan after a year.
I am sure that this helped some of the illegal Peruvians I
had got to know in Boso - attractive people of middle class
origins forced by Peru’s then desperate employment
and political situation to come to Japan to work in
factories.
I was less happy when I went to the Immigration authorities
holding-room for those who did turn themselves in – a
room crowded each day with up to 100 young fit people,
mainly Asians, all able to help the economy, some with
small children playing happily together in Japanese.
Japan was expelling precisely the people it needed if it
was to do anything serious about its population problem.
..........
On the committee, I came to realize that reform to
immigration policies was unlikely if Japan did not realize
the economic dangers of population decline.
Apart from Nakatani Iwao, another economist and my
successor at Tama, none on the committee seemed to realize
the dynamic downward spiral effects of declining investment
as population declines.
Much entrepreneurial investment is based on expected future
demand increases. If there is no expectation of increases,
then no investment.
An amateurish paper produced by some METI bureaucrat seemed
to see the economy in purely static terms.
Technology improvements and the use of female and elderly
labor to fill any gap from falling work force numbers was
handed out as evidence of a bright future.
The dynamic downward effects were ignored.
Besides, Japan’s problem was not falling work force
numbers. It was falling investment confidence and demand.
On the contrary, as investment and demand fell there could
well be a surplus available for the work force – from
the ranks of the unemployed.
Immigration
as the Answer?
Given the unlikelihood that birthrates would about turn,
and even if they did about-turn there would still be a
generation gap of around 20 years before demand recovered,
immigration seemed the only answer.
But most on the committee remained obsessed with crime and
integration problems.
They had been influenced by the problems with many of the
400,000 Nikkei Latinos whom Tokyo had invited to come and
work in Japan during the high growth period and even later.
Japan had done this rather foolishly, thinking that
Japanese blood and appearance would allow these mainly
unskilled people to integrate easily, despite the fact that
most were fairly uneducated and many preferred to cling to
their attractive Latino culture rather than adjust to
Japan’s difficult language and culture.
Many of their children were even refusing Japanese
education and ending up unemployable.
Some were turning to crime.
There was also the more serious problem of criminal gangs
from China, Taiwan, Hongkong and Korea, able to penetrate
Japan’s visa requirements.
I was not unsympathetic to these problems. But that in turn
was to give me another problem.
.......
Amongst foreigners in Japan there are some who seem to have
a personal or psychological interest in proving that Japan
is a racist hell.
They like to produce figures showing foreigners commit less
crime than Japanese.
But it goes without saying that foreigners, both legal and
illegal, trying hard to make it into Japanese society are
not going to commit crime.
The problem lay largely with those Chinese and Korean gangs
who came to Japan to exploit the relative lack of
anti-theft precautions.
Their willingness to use violence brought a new dimension
to the crime scene, one that was quickly imitated by
Japan’s home-grown gangsters.
Here Japan was justifiably concerned.
I was in favor of any measures, no matter how drastic, to
crack down on these people, in particular the ease with
which they could forge documents or obtain short-term visas
to enter Japan.
And without seeming to be racist I could understand also
the Japanese desire not to end up with the ethnic and
cultural problems of our Western societies.
Our laissez faire attitude to immigration – one which
claimed the worthy goal of multi-culturalism but which I
suspect began with arrogant and soon-to-be-demolished
assumptions that our cultural superiority guaranteed that
immigrants of any color or creed would easily be integrated
and assimilated – had clearly failed.
(Fortunately quite a few others in the West are now
beginning to realize the superficiality of the
multiculturalism logo.
(But when I first started to point this out, in Australia
in the seventies, I was quickly dubbed racist, despite
having done a lot more than most to break down racial
barriers, in my own personal life and elsewhere.)
Japan was more than entitled to say who could and should be
allowed to enter and work in its unusual society.
Besides, assumptions of easy integration had clearly taken
a bad knock at the hand of those Nikkei Latinos.
The Ugly
Gaijin
At this point I should relate how about this time I had an
especially nasty run-in with a strange group of seemingly
moralistic foreigners (but some more interested in
self-promotion) determined to hunt down and prosecute for
racial discrimination small Japanese enterprises which had
felt they had no choice but to use exclusion notices to
protect their premises from Brazilian shop-lifters or
unruly Russian sailors.
And when they succeeded in these anti-discrimination
prosecutions the self-promoters in the group not only
boasted to the media about how they had slain the Japanese
racist dragon in his den. One of them even wrote a book
about it.
(I later discovered that the self-promoting book-writer had
severe psychological problems in adjusting to Japan. He had
earlier in his Japan stay boasted in speech and print how
he had rebuked and had had dismissed Japanese shop workers
who had assumed that as a foreigner he would not know
Japanese or Japanese ways.)
(Later he was to make himself look silly by declaring that
the word ‘gaijin’ was the equivalent to US use
of the ‘n’ word.)
So I found myself in a strange situation. When in print I
criticized these people for their mistakenly excessive
anti-discrimination zeal I was subjected to their
prejudiced, savage website and print attacks.
Meanwhile on the Justice Ministry committee I was trying to
counter excessively anti-foreign feelings and prejudices on
the Japanese side.
Sometimes you just cannot win.
.........
But to return to the immigration reform committee.
It was clear that Japan did need foreign labor, both
skilled and unskilled.
The Indians and Chinese who have done much to improve
Japan’s backward IT software and finance industries
were but one example.
With unskilled labor there is not just the obvious point
that many firms cannot compete with the emerging economies
unless it too has access to cheap labor – a point
strong enough to persuade the usually very conservative
Keidanren to work hard on our committee and elsewhere to
promote relaxation of immigration restrictions.
As well there was something I learned the hard way in Boso
– that the high cost of labor in Japan also chokes
off new labor-intensive development investment.
Such new investment produces income gains across the entire
economy.
These gains are far in excess of any loss of income due to
wage repatriations by foreign laborers (which in turn are a
valuable form of foreign aid anyway).
A
Solution
What to do?
An expansion of the trainee system under which many Asians,
Chinese especially, were able to find their way to Japan
for two-three year work experience was one answer.
But longer term Japan seemed very much to need a
point-system visa policy similar to that of Canada and
Australia should be used.
Here foreigners who could clearly contribute to Japan, who
had reasonable education and skills, would be favored.
Very heavy points would also be given to those who had made
progress with Japanese – the key factor in the lack
of integration ability that the Japanese were right to be
concerned about.
But our ideas and proposals all ended up in the too-hard
basket.
Tokyo continued its crackdown on illegals, causing much
harm to smaller enterprises that relied on their labor
(some were forced into bankruptcy) and depriving many small
towns of the cultures and consumers that had given them
some vitality.
I think it was around this that I began to give up hope
Japan would ever move to the sensible policies needed for
its survival.
7.
Conclusion
This chapter is aimed not simply to point out policy errors
since 1997.
The Japan that I had known in the past, for all its
eccentricities, had always managed to show verve and
dynamism, even when it was at its silliest as in the Bubble
years.
But the past ten years have seen a sea change in national
psychology.
The attractive dynamism has been replaced by a pervasive
defeatism.
Simply glance at the TV and film footage of the crowds in
the pre-Bubble era.
People may not have seemed rich or fashionable. But you can
almost sense the optimism and the egalitarianism that for
me in the past made Japan such an attractive country.
Today in the poorer backstreets of Akihabara and Shinjuku
you sense the beginnings of the squalor and hopelessness
that I used to see in Britain back in the seventies and
Moscow in the Yeltsin years.
The countryside is a village-by-village disaster zone, with
shuttered shops and barely a young face to be seen among
the elderly shuffling along with their pram-carts.
It did not have to be that way.
The idiotic economic experiments over the past ten years,
the Koizumi/Takenaka years especially, not only brought a
still dynamic economy to a smouldering halt.
They have thrown a blanket of inequalities, poverties and
frictions that has stultified this once dymanic society.
They have knocked the legs out of a society that could
easily have become a model not just for Asia but for all of
us.
And to think that it never had to happen in the first
place.
* footnote. Amakudari is yet another uniquely Japanese
groupist phenomenon. Ministries inevitably put the
interests to their own bureaucratic group ahead of the
national interest - koku eki yori sho eki.
Next.
Life in the Slow Lane
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