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Sol Sanders Archive
Monday, December 29, 2008

For the remarkable Japanese, it's time to dance

Sol Sanders also writes the "Asia Investor" column weekly for EAST-ASIA-INTEL.com.

Japan is stumbling into what could be a year of seminal decision-making for a people, a culture, and an economy — all still unique and critical for her Asian neighbors and the keystone of U.S. strategies and policies in the region.

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The Japanese continue to be that puzzling amalgamation of tradition and innovation, even imitation. If you watch some of the Japanese TV pop culture, you can close your eyes and hear the beat of the wildest Hollywood and Broadway cacophony. There are jokes about young Japanese going abroad, visiting a local Japanese restaurant, marveling that they have to sit on tatami and eat raw fish with chopsticks, much the way an American tourist once did in Kyoto. More Japanese have jumped their peculiarly difficult hurdle of speaking and writing foreign languages; a Japanese academic’s meanderings – in English – over the thorny issues of the day can be as tortured and as vapid as any Harvard professor’s. Where once “Old Miss” was an opprobrium describing a young woman who hadn’t found a husband through the obligatory “omiai” [arranged interviews], it has been replaced by a whole generation of fashionable career women who not only don’t want to get married but have refused children. They threaten a demographic catastrophe for a dwindling 127 million – traditionally bitterly adverse to immigrants — with one of the highest longevity rates and the fastest ageing populations in the world.

But one suspects that there is still that other unique and mysterious Japanese ethic that has defied overwhelming Sinoization and Westernization over centuries. Japanese political loyalties and feuds, for example, are still as hard to decipher for foreign observers as they ever were. Despite horrific occasional criminal episodes highlighted in the press — far fewer certainly than in the U.S., or even Europe for that matter — respect for age and tradition are paramount in a stable civil society with rigid rules for correct behavior. That incredible Japanese capacity for detail still turns out commercial products superior to all others and it is being increasingly applied to the basic sciences for fundamental breakthroughs rather than the leapfrogging of past decades.

These crosscurrents have produced a smoldering political and social crisis, now intensified by the effects of the worldwide recession – quiet as most social revolutions always tend to be in Japan. And, of course, Japan is subject to the real and artificial press of world problems – from collective defense against rogue regimes to concerns about environmental pollution. The hullabaloo over climate change, after all, traces to unrealistic agreements concocted at a conference in its ancient capital, the Kyoto Accords. The current conservative Prime Minister Taro Aso, like his two predecessors, has an enormous capacity for hoof in mouth and may not be able to ride out the continuing storm. The fall of still another, the third prime minister in a few months, Liberal Democratic Party leader – head of the conservative government party for most of the postwar period – could produce this time around a whole new alignment of Japanese politics.

And like its Asian neighbors the propensity for Japanese to save even more in times of crisis is egging on a deflation, perhaps another round of the decade of stagnation which characterized the bursting of the Bubble Economy at the beginning of the 90s. Japan, again like its Asian neighbors who modeled their own economic modernization on hers, is still heavily dependent on exports to the U.S. and other industrial countries as well as to the Third World. China, which the Japanese brands had learned to use as a detour with its cheap labor on their way to many of these markets, is melting down as its Number 1 trading partner. And those markets are crashing everywhere.

All this comes at a time when the Japanese are increasingly concerned with the perceived threats to their security from the North Koreans – who flung a missile into the Pacific Ocean over them unannounced in 1998. And the always hate-love relationship with China is now worrying with a massive Chinese military buildup on which Beijing will not speak. Japan’s own substantial military force is tied up in the silken threads of the MacArthur Constitution which made a no war pledge. The concept of national defense – denied by everyone from the Communist-led teachers unions the U.S. Occupation permitted to grab control of secondary education under the rubric of democratization to the “interi”, self-appointed and often fatuous intellectuals – has been bent about as far as it can go to justify participation in UN mandated peacekeeping actions. It was even used to cover Japanese military logistics assistance to the American and NATO efforts in Afghanistan and noncombatants in uniform made token efforts in Iraq. Cmplicating this problem is an arcane debate, some of it real, some of it posturing, about Japan’s implementation of the right of collective defense under terms of the United Nations Charter. But things are a-changing under the press of events and technology. A sign: the old and understandable aversion to nuclear weaponry of any kind has been waived to permit the Americans to replace its last diesel-powered aircraft carrier with the latest nuclear-flattop to port at Yokosuka, perhaps a more important U.S. base than Pearl Harbor in the post-digital revolutionary age. Japan is heavily engaged in research and deployment plans for anti-missile defense. Its navy has deployed its state of the art U.S. Aegis missile carrying destroyers, an important part of such a system, to the Indian Ocean to work with the American fleet. And it is considering sending warships to join the multinational anti-piracy campaign under U.N auspices off the Horn of Africa [just behind China which has recently volunteered its nascent navy to joint the effort].

But this growing integration of U.S. and Japanese military forces in an anti-missile shield plus the possibility that American naval and air bases would come into play in any Asian conflagration, under the U.S.-Japan Mutual Defense Treaty is a complicating issue. For example, a fire brigade operation to fend off a Beijing thrust at Taiwan, might well project from American bases in Japan. Tokyo, uncharacteristically, has joined the U.S. in a formal diplomatic reassurance of opposition to a Beijing military takeover. And there is always the dollar and cents issue of American base costs in Japan and the recently negotiated redeployment of American Marines and air power from crowded little Okinawa to the growing U.S. military hub at Guam.

These strategic and tactical military moves tie in – and at the same time conflict — with growing Japanese nationalist sentiments shared by all the recently short-lived prime ministers. At root, they are a call for the country to assume its logical role in the world balance of power, given its still second largest economy and probably third or fourth rank as a military power. It has, after all, been the second largest contributor to the [wasteful, corrupt and largely ineffectual overall including peacekeeping operations] of the UN and one of the largest bilateral aid and technology donors. As the credit crunch exploded, characteristically without being asked directly, Tokyo immediately talked of new loans to the International Monetary Fund to help sinking national economies. [Something yet to be heard from China with its two trillion dollar reserves.] The largesse of the Asian Development Bank has largely been on the backs of Japanese taxpayers. And it has only recently negotiated an end to subsidized lending to Beijing although it continues massive assistance in the bottomless pit of trying to halt China’s descent into environmental hell.

All of this has put strains on a political system – the so-called 1955 regime – which arose out of the end of the American Occupation, the reversal of American policy as a result of the Korean War and its demonstration that the U.S. [and Japan] faced new perils in Asia. That incredibly successful regime which built a new civil societal structure and a leading world economy reactivated, more or less, the strategies of the old Japanese prewar export-led economy [before the military took it on a 50-year disastrous detour for their attempted conquest of China].

Prime Minister Junichiro Koizumi, a startling political aberration for six years, broke the back of the old system with populist electoral appeals and seemingly started Japan on the road to an economic and political system closer to the other democracies. But the Koizumi Revolution, while still eating away at the old iron triangle of business, the bureaucracy, and a skewed electoral system giving disproportionate weight to the ultraconservative rural voter, is stalled for the moment. Koizumi’s LDP, which he tried to reboot into the 21st century, is caught in its own headlights, paralyzed between those who want to maintain the old system and those who want to follow the pull of the new currents. The marketization of the capital structure and an attempted decentralization of the tax and budgetary system to local and regional governments is still in its early and excruciatingly critical phase. At the national level, Japan still does not have a viable multiparty electoral system. The Democratic Party of Japan [DPJ], the official opposition, capturing by happenstance the heretofore irrelevant upper house of the parliament, is such a collection of has-beens and contradictory ideological positions, it poses little threat. Still elections must come by spring and there could be surprises. What seems an increasingly strong possibility is that both parties could split with a complete reordering of Japanese politics.

Just as in the U.S., Japan’s leftleaning mainstream media and elitist academics manage to confuse the issues. They have had a field day, for example, with the short shrift the U.S. Chief Negotiator and quintessential foreign service officer, Christopher Hill, has given the issue of Japanese citizens kidnapped by North Korea in the six power negotiations aimed at neutralizing Pyonyang’s nukes and proliferation activities. Although publicly continually promising Washington would support an accounting – President George W. Bush apparently was touched when he met some of the relatives at the White House – Hill abandoned it as a no-concession issue in negotiations. Those and other concessions have now again resulted one more breakdown with a crumbling, literally starving Pyongyang regime that only has nuclear weapons as blackmail. The result is that one of the few political issues which has aroused the Japanese public, Pyongyang’s refusal to say whether some of the kidnapped victims are alive or dead, to come up with total numbers of those shanghaied over several decades, returning remains of the dead which were not authentic, etc., etc., is now an irritant in U.S.-Japanese relations. Another part of the Tokyo-Washington issue: softening the U.S. economic restrictions [which added to those of the Japanese on the well known and perennial North Korean extortion of the three million Korean ethnics in Japan and their well known ties to organized crime] was the only effective leverage on Pyongyang. In fact, it was the Japanese economic noose around North Korea’s only non-weapons exports and remittances from Japan which pushed Pyongyang toward making nominal concessions – on which, characteristically, it has now welched. The fact Washington was willing to lift most of its own economic censures before real progress was assured has quietly infuriated the Japanese. And it goes without saying that Washington’s taking North Korea off the official terrorists’ list seems an even greater travesty for Tokyo.

In effect, President -elect Barrack Obama will find himself right back at square one on the problem of North Korea and its weapons of mass destruction, and perhaps even more important, proliferation of missiles and nuclear technology. The hoped-for, wished-for, dreamed-of Chinese pressure on Pyongyang has simply not materialized. Beijing dare not imperil its "closer-than-tooth-and-mouth" ally for a flood of refugees, chaos – or even worse a reunited, powerful democratic Korea on its always perilous northeastern frontier. Washington’s handling of China and North Korea will be a test for Tokyo of the new Washington administration. If forgotten in Washington, the spectacle of the Clinton Secretary of State Madeleine Albright taking a turn on the dance floor with North Korea’s “Dear Leader” with no real satisfaction of differences still haunts East Asia.

Therefore Tokyo’s recent differences with the Bush Administration pale beside the new suspicions that many Japanese officials have of the new day coming with the Obama Administration. Tokyo doesn’t have good memories of the Democrats, especially of the Clinton years when trade issues became headline crisis material, and when Bill Clinton chose to overfly Japan to visit with the Chinese. [The Carter years were even worse for Japan on the economic front.] In fact, the preoccupation of Washington [and that seems likely to continue with Obama’s advisers] with China to what seems, often, taking the Japanese for granted, grates in Tokyo. The fact that always trendy American academia has virtually abandoned Japanese studies in favor of concentration on China is not appreciated in Tokyo. The naiveté of much of American comment on China often shocks the Japanese. And the large American multinational corporate presence in Tokyo is not much of an antidote. Interestingly enough, while more than their fathers they speak Japanese, they live in a foreigners’ ghetto with little knowledge of the country and its culture. Long gone are the generation of wartime military-trained students of the Japanese who provided the cadre for the universities and the American government all during the last half century.

Much will depend, of course, on where the Japanese economy goes during the coming period of a worldwide downturn. There are already painful signs it is a grim picture. Toyota, only months ago bragging about its soon to be No. 1 place in world autos, is running its first billion-dollar losses since it had a funny little product called the Toyopet in 1938. Plans for a huge expansion of American “transplant” factories – the bane of Detroit’s existence with their lower costs including cheaper labor in the U.S. South – are canceled with one new plant actually already mothballed.

Even the Central Bank’s lowering interest rates to 0.1 percent hasn’t had any effect in stopping the erosion. [Maynard Milord Keynes: you cannot do much pushing on a hanging string.] The pessimists are predicting that the Japanese economy will shrink as much as at the annual rate of 12 percent in the first quarter of 2009. That would be the sharpest drop in gross national product since 1974.

In fact, the Japanese are at the mercy of the U.S. recovery. Exports directly to the U.S. — $145 billion in 2006 — and the sales to others to reexport to the American market in China, South Korea, and Taiwan, have been crucial to the Japanese recovery. But in 2008, Japan, which typically runs a trade surplus not only with the U.S, but with the world, saw trade deficits. And November 2008 exports to the U.S. dipped by more than 20 percent from a year earlier.

Aggravating the fall in demand for imports in the U.S. and Europe is the appreciation of the yen which makes Japanese sales harder and devalues the remittance of profits from overseas. During 2008 the yen rose by more than 35 percent against the British pound, Australian and New Zealand dollars and hit a 13-year high against the US dollar. Despite the outlook for a Japanese economic downturn, counter intuitively, the yen is strengthening because of earlier heavier borrowing to finance international trade by traders when its interest rates were lower than other currencies. Those loans are now being repaid forcing the yen higher to the dollar and other currencies. There is also a strong movement out of other currencies into the dollar and the yen by speculators who believe that these two economies, long term, still have better prospects than the Europeans and, of course, third world economies also heavily dependent on the same export markets which are drying up. Another issue is that the Japanese banks, which underwent a major overhaul when the Bubble Economy burst, are in better shape than their American and European colleagues having largely directly avoided the U.S. sub prime mortgage markets and their collapse and they are on a modest campaign to acquire foreign assets at bargain prices. [They do suffer, however, from the fact that a part of the Koizumi program, ending the incestuous relationship between banks and Japan’s major companies through the keiretsu – old zaibatsu – “corporate family” ties, is still in its infancy.]

So, again, the Japanese will be looking to a considerable extent to the U.S. for their future. If the American economy shows signs of recovery in 2009 – not a major bet at the moment – the Japanese [and the Chinese] would be selling more there and things will start looking up. Failing that, the pressure could increase, it would seem logically – famous last words – for a continued pursuit of the Koizumi reforms and an expansion of Japanese domestic demand. That will be resisted by the Old Dinosaurs in the Liberal Democratic Party who long for “the good old days” of state capitalism. Their old prop, however, pump priming with public works programs, often ill conceived and corrupt, has created by far the largest internal debt of any of the industrial countries. And even its most stalwart proponents see the writing on the wall. What’s needed is for the Japanese public to go on a buying spree now that it is offered bargain prices. Whether the ultraconservative Japanese consumer will see that logic remains to be seen.


Sol W. Sanders, (solsanders@cox.net), is an Asian specialist with more than 25 years in the region, and a former correspondent for Business Week, U.S. News & World Report and United Press International. He writes weekly for World Tribune.com and East-Asia-Intel.com.

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