Martin Fackler wrote in the New York Times, “Few nations in recent history have seen such a striking reversal of economic fortune as Japan. The original Asian success story, Japan rode one of the great speculative stock and property bubbles of all time in the 1980s to become the first Asian country to challenge the long dominance of the West.” [Source: Martin Fackler, New York Times, October 16, 2010]

“But the bubbles popped in the late 1980s and early 1990s, and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money has reversed. For nearly a generation now, the nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.” “Japan used to be so flashy and upbeat, but now everyone must live in a dark and subdued way,” one small-business owner who used to live well but cannot repay the $110,000 that he owes on the mortgage, told the New York Times.

“The decline has been painful for the Japanese, with companies and individuals...having lost the equivalent of trillions of dollars in the stock market, which is now just a quarter of its value in 1989, and in real estate, where the average price of a home is the same as it was in 1983.” Fackler wrote. “And the future looks even bleaker, as Japan faces the world’s largest government debt — around 200 percent of gross domestic product — a shrinking population and rising rates of poverty and suicide.”

“Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.”

“Now, as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future,” Fackler wrote. “Even as the Federal Reserve chairman, Ben S. Bernanke, prepares a fresh round of unconventional measures to stimulate the economy, there are growing fears that the United States and many European economies could face a prolonged period of slow growth or even, in the worst case, deflation, something not seen on a sustained basis outside Japan since the Great Depression.”

After years of complacency, Japan appears to be waking up to its problems, as seen last year when disgruntled voters ended the virtual postwar monopoly on power of the Liberal Democratic Party. [Source: Martin Fackler, New York Times, October 16, 2010]

Effects of Japan’s Decline

Fukuoka downtown road collapse in November 2016

Martin Fackler wrote in the New York Times, “Perhaps the most noticeable impact here has been Japan’s crisis of confidence. Just two decades ago, this was a vibrant nation filled with energy and ambition, proud to the point of arrogance and eager to create a new economic order in Asia based on the yen. Today, those high-flying ambitions have been shelved, replaced by weariness and fear of the future, and an almost stifling air of resignation. Japan seems to have pulled into a shell, content to accept its slow fade from the global stage. Its once voracious manufacturers now seem prepared to surrender industry after industry to hungry South Korean and Chinese rivals. Japanese consumers, who once flew by the planeload on flashy shopping trips to Manhattan and Paris, stay home more often now, saving their money for an uncertain future or setting new trends in frugality with discount brands like Uniqlo.” [Source: Martin Fackler, New York Times, October 16, 2010]

“China has so thoroughly eclipsed Japan that few American intellectuals seem to bother with Japan now, and once crowded Japanese-language classes at American universities have emptied. Even Clyde V. Prestowitz, a former Reagan administration trade negotiator whose writings in the 1980s about Japan’s threat to the United States once stirred alarm in Washington, said he was now studying Chinese.” “I hardly go to Japan anymore,” Mr. Prestowitz said.

“As living standards in this still wealthy nation slowly erode, a new frugality is apparent among a generation of young Japanese, who have known nothing but economic stagnation and deflation. They refuse to buy big-ticket items like cars or televisions, and fewer choose to study abroad in America.”

“Japan’s loss of gumption is most visible among its young men, who are widely derided as “herbivores” for lacking their elders’ willingness to toil for endless hours at the office, or even to succeed in romance, which many here blame, only half jokingly, for their country’s shrinking birthrate. “The Japanese used to be called economic animals,” said Mitsuo Ohashi, former chief executive officer of the chemicals giant Showa Denko. “But somewhere along the way, Japan lost its animal spirits.”

Reasons for Japan’s Decline

Japan's Asset Bubble

Martin Fackler wrote in the New York Times, “When asked in dozens of interviews about their nation’s decline, Japanese, from policy makers and corporate chieftains to shoppers on the street, repeatedly mention this startling loss of vitality. While Japan suffers from many problems, most prominently the rapid graying of its society, it is this decline of a once wealthy and dynamic nation into a deep social and cultural rut that is perhaps Japan’s most ominous lesson for the world today.” [Source: Martin Fackler, New York Times, October 16, 2010]

Yukio Okamoto, a former diplomat and high-ranking adviser to Prime Ministers, told The New Yorker, “Japan was in a euphoric slumber for two decades,” he said. “Our life has been so comfortable, we became introverted. We forgot the need for struggle, during which time many top positions were taken over by Chinese and Korean companies.” [Source: Evan Osnos, The New Yorker, March 28, 2011]

“I was born in 1945,” he said. “When I grew up, there was a very concrete goal of El Dorado: it was called the United States. You listened to songs about girls adopted by families who lived in the U.S. by the seashore. There were G.I.s around, giving me chocolates and comic books. America looked like Heaven. What I’m saying is that the juxtaposition of a totally different world gave our people a very concrete psychology to work toward. We were trying to stand up from the ashes. People were living in miserable conditions, but we had hope.”

Six Prime Ministers in Five Years

20111031-Noda Kantei  inag 02HOSSOKU_naikaku06.jpg
Yoshihiko Noda, Japan's Prime Minister in 2011-2012
The New York Times reported: Naoto “Kan was the sixth Japanese prime minister to step down in the past five years, the latest in a long line of Japanese leaders who have failed to energize this nation as it tries to escape from two decades of economic and social malaise. This lack of stable leadership could prove crippling as Japan struggles to overcome the triple disaster in March of earthquake, tsunami and nuclear accident, and also the threat of another global recession. Already deeply in debt, Japan can ill afford an expensive reconstruction program, especially at a time when a soaring yen has hurt its export-driven economy, which has been shrinking at an annual rate of 1.3 percent.

The Economist reported: “Another year, another prime minister. Yoshihiko Noda has become the sixth Japanese prime minister since the lion-maned Junichiro Koizumi stepped down in 2006. Mr Koizumi’s five dazzling years in office now seem like a golden era, followed only by political dysfunction: divided parties, a string of mediocre men and a confused, disillusioned electorate. [Source: The Economist, September 3, 2011]

Bruce Klinger of the Heritage Foundation wrote in the Los Angeles Times: “Like a hapless baseball team forced to go to the bullpen for yet another relief pitcher, Japan has called up a new prime minister, its sixth in five years...Noda...is the latest iteration of what has become an annual ritual of Japanese leadership change. Prime Minister Naoto Kan...has been unceremoniously tossed aside, although his 15-month term will be remembered as relatively long by recent Japanese standards.” [Source: Bruce Klinger, Los Angeles Times, September 1, 2011]

Failure of the DPJ

But the DPJ has disappointed mightily, first under the leadership of Yukio Hatoyama, a space cadet, and then under the divisive, indecisive Mr Kan. One problem is that a callow party declared war on the very bureaucrats needed to keep any country running...Meanwhile, far from offering something new, the DPJ has taken on the trappings of the old LDP. Lacking an ideological anchor, bickering factions are the DPJ’s chief organising principle. Once, during the economic growth of the LDP’s heyday, the factions had a point, spreading patronage to get the compromises needed for the sake of governing. Today, factions simply maintain their power to thwart. The leader of the DPJ’s biggest and most obstructive faction [is] Ichiro Ozawa , a grizzled wheeler-dealer...Factions are a chief impediment to the new politics towards which Japan is groping.[Source: The Economist, September 3, 2011]

The other impediment is constitutional. Post-war arrangements did not really envisage opposing parties controlling separate chambers of the two-house Diet. The constitution gives the upper house near equal powers to the lower one. Last year voters angry with Mr Kan elected an upper house controlled by the opposition. Since then the LDP has declared war on all government policy — the victims of the March 11th disaster go hang. Mr Noda should call for a truce in which the essentials of how to rebuild the north-east are worked out, and a modus operandi in the upper house is reached. Anyone in the LDP who reflects on how savagely voters might punish the party’s obstructionism at the polls should favour this.

That Japan keeps going at all is no thanks to its politicians, but to a peaceable, cohesive people, one able to endure much, as the response to the tsunami vividly shows. But the flip side is unhealthy: apathy or cynicism towards the country’s politics, and a reluctance by voters to make hard choices, such as accepting a rise in the consumption tax in order to ease the coming fiscal burden on the young. If Mr Noda fails to move the political system forward, then he should not hand over to the next grey man, but seek a political realignment and throw the matter back to voters in a general election.

Japan's real estate bubble in the 1980s

Bruce Klinger of the Heritage Foundation wrote in the Los Angeles Times: “The Democratic Party of Japan's star has faded. The DPJ was elected in a landslide victory two years ago amid euphoric predictions of bold new policies that would break the streak of Japan's revolving door of short-lived leaders. Instead, the party has proved to be as feckless and riven by factionalism as the regime of the Liberal Democratic Party that it replaced. The DPJ tenure has been a slow-motion train wreck, and "Japanese leadership" continues to be an oxymoron...The DPJ has been plagued by an inability to produce, let alone implement, policies, even after the earthquake, tsunami and nuclear cataclysms of March 11 had the populace clamoring for decisive leadership. But the politicians were unable to overcome their partisan and factional bickering.” [Source: Bruce Klinger, Los Angeles Times, September 1, 2011]

Failure of Japanese Politics

Bruce Klinger of the Heritage Foundation wrote in the Los Angeles Times: “Neither the LDP nor the DPJ has displayed the vision or ability to govern Japan effectively. Despite Japan's national challenges, both parties remain focused on politics rather than policies. They are like two punch-drunk fighters bludgeoning one another to score points but unable to deliver the knockout punch. The result is political stalemate and policy gridlock.” [Source: Bruce Klinger, Los Angeles Times, September 1, 2011]

Japan is further hindered by a political system unable to produce national leaders who actually lead. Instead, it resembles an assembly line churning out ineffective politicians. And having prime ministers jump overboard at the first gust of disapproval prevents implementation of necessary but potentially unpopular policies.

Someday, Japan may experience a strategic political realignment that results in parties that offer real choice between opposing political ideologies and policy objectives. In the meantime, Japan's international influence and relevance are fading due to its inability to make decisions. Tokyo could learn from Will Rogers, who once said, "Even if you're on the right track, you'll get run over if you just sit there."

Japan in a State of Defeat?

“We’re in a state of defeat now,” the writer Haruki Murakami told writer Paul Theroux in the late 2000s. He described how the bursting of the baburu keizei, the economic bubble, in 1991 and 1992 had left people dazed and, in many cases, bankrupt. This period of uncertainty was followed by two events in 1995 that shattered Japan’s notion of itself as solid and immutable: the earthquake in Kobe and the sarin gas attack in the Tokyo subway. [Source: Paul Theroux, The Daily Beast, March 20, 2011]

These events, Murakami said, were traumatic, as he described in his book Underground: “Before “95, to get rich was everything. But hard work didn’t bring us to a better place. We found that money is not the answer. We had our goals. We achieved them, but the achievement didn’t bring us happiness.” It was Murakami’s view that the Japanese had lost their way. When I asked him what Japan’s goals were now, he answered, “Our goal is to be happy and proud. And we’re looking for a new goal.” He was optimistic that it would be found, because the Japanese wanted it. He said, “Japan’s people are its treasure.”

The Kobe earthquake accounted for about 6,500 lives, and the subway outrage by the Aum Shinrikyo cult killed 13 people. “Both were nightmarish eruptions beneath our feet — from underground,” Murakami wrote in his account of it. “Nightmarish” in this context is relative, because the world of horror that Murakami discussed with me one winter day in Tokyo four years ago seems trifling compared with the catastrophe that may have killed more than 25,000 people, wiped away whole towns, and, because of the damaged nuclear reactors, has poisoned and demoralized not just Japan but the wider world.

Japan's GDP growth rate

Nakasone on the Problems of Japanese Politics and Recent Prime Ministers

Former prime minister Yasuhiro Nakasone wrote in the Yomiuri Shimbun: Japan has had six prime ministers over the past six years. This is because they lacked experience. I feel recent cabinet posts were decided in a strictly businesslike manner. In short, many recent prime ministers are like salaried workers.

They also have lacked preparedness and determination for emergency situations. Politicians who want to become prime minister must always train themselves to deal with crises such as war and natural disasters. However, former Prime Minister Naoto Kan, who apparently did not have enough training, failed to properly deal with the Great East Japan Earthquake.

There is a big gap between people like me, who became a politician out of my desire for our country's reconstruction from World War II, and others who became politicians merely as a career choice. Kan became the prime minister because he had the opportunity. However, he had an obsession with "citizen-ism" — an ideology that heavily focuses on the needs of a country's citizens. This idea puts priority on pursuing the happiness of present citizens and regarding the country's past and future as unimportant. From my viewpoint, Noda has little interest in history and tradition. Prime ministers of the Democratic Party of Japan-led government have only shallow historical perspectives. Politicians are always influenced by luck and fate. They must have the power to overcome them. They must have the spirit to change society and move toward the future. All renowned politicians since the Meiji era have had this spirit.

The reason for the small-mindedness of current politicians is partly because the single-seat constituencies were introduced to the House of Representatives' election system. This left politicians trapped in their constituencies and they do not have time to think about other things. The LDP's factions in the past were training centers for politicians where senior LDP members taught prospective junior members. This is rarely seen in the current LDP factions or DPJ groups. It is a big problem that today's political parties are so poor at developing human resources.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Yomiuri Shimbun, Daily Yomiuri, Japan Times, Mainichi Shimbun, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated November 2016

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