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Foreign Affairs
Japan, The Reluctant Reformer
By Robert Legvold
Leonard J. Schoppa is Associate Professor in the Department of Government and Foreign Affairs at the University of Virginia. The author of Bargaining with Japan: What American Pressure Can and Cannot Do and Education Reform in Japan, he is currently writing a book about Japan's struggle to reform.
Too Much of a Bad Thing
At the end of last year, Japan's citizens, having struggled for years with a bitter recession, were hit with still more bad news: another arbiter of international opinion had forecast their country's imminent decline. In its Global Trends 2015 report, the CIA predicted that, in view of China's ongoing rise, Japan "will have difficulty maintaining its current position as the world's third largest economy [after the United States and Europe]." Just a few months earlier, Japanese bonds had been demoted for the second consecutive time by Moody's, the U.S. credit-rating agency. After long enjoying Moody's highest rating, Japan's credit was now judged to be as risky as Portugal's.
Both stories made big news in Japan, as did the underlying problems that provoked such negative appraisals in the first place. Yet despite the widespread attention these economic woes received, the Japanese public remained strangely quiescent. This resignation has become a typical response to the ailing economy. Voters keep returning the long-dominant Liberal Democratic Party (LDP) to power, although it has presided over a decade of stagnant growth and sunk the government deep into debt. Japanese investors accept interest rates of less than one percent on their savings accounts, labor unions swallow pay cuts, and the business community watches meekly as the government's attempts to end the financial crisis fail to revive the nation's banks or alleviate the credit crunch.
Now Junichiro Koizumi, a "reformist" who became prime minister in April after the LDP elected him party leader, may finally break this pattern of resignation in the face of decline. But Koizumi's recent popularity should not be mistaken for a genuine, broad-based reform movement. The public appreciates the new prime minister's competence and openness, especially in contrast to the bungling and aloofness of his predecessor, Yoshiro Mori. And Koizumi has scored points by criticizing his party's habit of funneling subsidies to inefficient but well-connected sectors of the economy, such as public-works contractors. But public support for the kind of specific, painful reforms needed for Japan to turn its economy around remains only skin deep. Koizumi may manage to convert Japan's vague desire for change into the political capital he needs to overcome opposition within the LDP. But if instead he succumbs to the forces urging further delay, the Japanese public could just as quickly abandon him.
This points to a deeper question: Why have the Japanese put up with stagnation for so long? Why have they not demanded that their government do something to revive the economy and head off the national decline? After all, this is a society famous for facing dire challenges head-on. When American "black ships" forced Japan to accept unequal treaties in 1858, the country fought back by adopting reforms that catapulted it into the ranks of the great powers in less than 50 years. And after its devastating defeat in World War II, the country reinvented itself so effectively that just a few years ago it seemed poised to economically outpace the United States. What . . .