Saturday, February 5, 2011

Japan—Turning It Around?

« Japanese Prime Minister Naoto Kan delivers his policy speech at the lower house of the parliament in Tokyo on January 24.
(Toshifumi Kitamura/AFP/Getty Images)

For the past decade and a half, the world has become used to a Japanese economy in the doldrums. Is Prime Minister Kan about to turn that around? By Ron Fraser
Following decades of energetic growth after recovering from World War ii, the Japanese economy had peaked by the last decade of the 20th century. Having been the powerhouse of Asia for years, as the previous century closed Japan slid into the doldrums economically.
Throughout the first decade of the 21st century, the Japanese economy wallowed in a slough of negative growth, its banks and investment houses, its great corporations moribund under an entrenched system enslaved to the deeply seated culture of “saving face.”
Prime ministers came and went in Japan it seemed as quickly as the seasons changed. Japan languished economically to the point where a number of its high-profile corporations that previously prided themselves on the quality of their products faced embarrassing recall after recall.
Japan’s problem was systemic. It would simply take drastic surgery to cut deep into the corporate and societal mores that were placing a drag on any effort for forward momentum.
Perhaps that surgery is now about to happen.
Japan’s current prime minister, Naoto Kan, following an unimpressive start to his premiership akin to a long list of his predecessors, has suddenly unveiled a package of initiatives that are designed to shock the nation back into a growth curve.
Described by the Economist as “recklessly ambitious,” though making “economic sense, which is a novelty in Japan,” the program calls for a complete overhaul of the nation’s social security system, raising sales tax to offset the national debt, and enabling growth through joining the nine-nation Trans-Pacific Partnership free-trade zone. As the Economist opines, “for the first time since Mr. Koizumi, a prime minister is articulating a vision of Japan’s place in the world, as well as a response to a rising China” (February 3).
The catch is simply, will Japan buy the package?
It would mean that the whole electorate would have to bite down hard while suffering the temporary pain for the longer-term gain. This is going to be a hard sell for the Japanese prime minister should he have the courage and his party’s support to take his proposals to the nation, even perhaps forcing an election over it at risk to his own prime ministry.
There are early signs that business and the press are turning to support Prime Minister Kan. Should he be able to mount a positive media campaign to gain the support of a majority of the electorate, then any resistance from political opponents may well be overcome and Japan could find its way—for the first time in two decades—returning to its prior position of being an Asian powerhouse economy, competing effectively with the rising giants of China and India.