THE INTERNATIONAL ECONOMY FALL 2009Japan - PDF document

THE INTERNATIONAL ECONOMY FALL 2009Japan’s Road orget what you have heard about the hard-working Japanesesalaryman: since the early 1990s, the Japanese have drasti-cally slackened their work habits. Indeed, Tokyo Universityeconomist Fumio Hayashi has demonstrated that the main rea-son behind Japan’s twenty years of stagnation has been theThe government itself has led the way here, starting withits decision to close public administration buildings onSaturdays. Japan’s banks followed suit. From 1988 to 1993, the legal work weekfell 10 percent, from forty-four hours to forty. This, as much as anything, helpedto bring Japan’s long-running post-WWII economic “miracle” to its knees.In the service sector, the decline is even worse than in manufacturing, becauseservices are heavily regulated and partially closed to foreign competition. In theretail sector, which employs a huge number of Japan’s unskilled workers—the so-called “mom and pop” shops—Japanese productivity is now 25 percent lowerthan in Western Europe.Former Prime Minister Junichiro Koizumi (in power between 2000 and 2004)and his chief economic adviser and minister of finance, Heizo Takenaka, under-stood all too well that Japan was losing ground in terms of productivity. They soughtJapan’s powerful bureaucrats, nostalgic for the 1960s model of development,whereby government and its business cronies nurtured the Japanese miracle,strongly opposed this bold, free-market solution. But their model is obsolete,because Japan now competes directly with many other Asian and non-Asian coun-Moreover, public opinion never supported Koizumi’s policy, which wasalleged then, as it is now, to be a source of inequality. But that is a canard: real- BYG Those lazy Japanese are goofing off again. Guy Sorman, a French philosopher and economist, is the author of COPYRIGHT: PROJECT SYNDICATE, 2009. F INTERNATIONAL ECONOMIC POLICY888 16th Street, N.W.Washington, D.C. 20006www.international-economy.com FALL 2009 THE INTERNATIONAL ECONOMY tization, has been the realsource of undeserved wealthin Japan. Nonetheless, thenewly victorious DemocraticParty of Japan has been ableto make the accusation stickumph of Yukio Hatoyama’suntested DPJ thus confirmedthe popular wish not to fol-low America’s free-marketmodel. Hatoyama makes noeconomic sense in declaringthat growth is important but that happiness comes first.Nevertheless, this sentiment does reflect the mood of manyAssuming that Hayashi and Takenaka are right about thecauses of Japan’s stagnation, one must ask whether today’sJapanese are willing to work more in order to catch up with theUnited States and to lead Asia development? Stagnation is atacit collective choice made by a country’s majority. Have theNearly half of the Japanese population is either retired ornear retirement age, and they worked very hard to achieve ahigh level of comfort. Thanks to them, despite the blightedeconomy of the “lost decade,” Japanese income is still higherthan it is in Europe. Moreover, unemployment is low com-pared to the Western world, because the unproductive distri-bution sector absorbs young people who cannot find betterjobs. Stagnating Japan has thus remained a peaceful and ratherconservative society.By contrast, a higher growth rate would require fewergolf breaks for salarymen and significant immigration in anation that is unaccustomed to foreign intrusion and differentcultural habits. Are the Japanese really ready to accept suchMost Japanese, mostly among the old generation, are sat-isfied with the kind of society they have built. They perceiveAmericans and Europeans as being obsessed with money andmaterial ambition, and they seem ready to accept some stag-nation as the price of remaining truly Japanese. HatoyamaHatoyama’s talk about a “new age,” which sounds strangefrom a Western perspective, is in harmony with the Japaneseway: this is a country where thousands of cult leaders offermyriad paths to Happiness, in particular a glib mishmash ofNew Age and Zen Buddhism.How long can Japan sustain this period of harmoniousJapan’s high-tech industries remain competitive, and thecountry is still the world’s second largest exporter. It retains ahighly innovative economy, which registers more new patentseach year than all European countries combined—second onlyto the United States and eons ahead of China and India.Japan’s 150 million people still produce far more than 2.5 bil-In ten years or so, however, Japan could lose its statusthe rest of Asia. Stagnation is already having a bigimpact on Japan’s young, for whom it is becoming hard tofind a job, let alone life-long employment in a leading globalcompany. Teenagers know that they will have fewer opportu-nities than their parents had. How they will pay for their par-ent’s pensions and health care is unknown.Most troubling is the absence of open debate about thesematters. Japan is a hush-hush society, where everyone is sup-posed to guess what is going on, and the media are carefulnot to provoke social division. Hard questions are not to beasked, and straightforward answers are considered too rudeand crude to be given. Foreigners are welcome to make com-It may seem to most Japanese that their continuing eco-nomic power affords them the luxury of indulging suchingrained habits. Perhaps they should bear in mind ErnestHemingway’s description of how a man goes broke: “slowly, ormer Prime Minister (in power between 2000and 2004) and his chief economicadviser and minister of finance, Takenaka,Japan was losing ground in terms of pro-ductivity. They sought to counter thetrend toward less work through privati- Junichiro KoizumiHeizo Takenaka the “lost decade,” Japanese income is still higher than it is in Europe.