JAPAN: Adrift, Tokyo Tumbles from Asia’s Leadership Perch

By Suvendrini Kakuchi Reprint | | Print |

Analysis - Suvendrini Kakuchi

TOKYO, Apr 24 1998 (IPS) - Japan’s standing as a world leader is being eroded by an increasingly unpopular government, a spreading sense of economic gloom and overseas criticism of its failure to show leadership in Asia’s toughest crisis in decades.

In recent months, countries like the United States have led stinging attacks against Japan’s failure to stimulate its economy to revive Asia’s momentum. In more muted voices, China and South- east Asian nations are expressing frustration and a sense of betrayal over Tokyo’s inadequate help.

In short, Japan’s once shining reputation is taking a tough blow. “Paralysis”, “indecisiveness” and “inward-looking” are often used these days to describe the world’s second largest economy, the role model for many developing countries.

And as Japan drifts along, China is being seen as an influential regional figure. Though its aid to crisis-sticken countries are a fraction of Tokyo’s assistance, Beijing has scored political points by pressing ahead with bold, painful reforms and sticking so far to a pledge not to devalue its currency.

“Japan is bogged down with its own economic crisis. We cannot rely on Japan to exert leadership in Asia,” Taiwanese Prime Minister Vincent Siew said last week in Taipei.

He called for increased cooperation with China to deal with Asia’s problems, instead of waiting for Japan to bail these countries out with funds or expand its imports of Asian products.

This week, Singaporean Information Minister George Yeo said the failure of Japan — the world’s second largest economy after the U.S. — to do more for Asia’s crisis could spell bad news for the global economy. The price of “Japan’s paralysis are horrifying”, he was quoted as saying.

Anwar Ibrahim, Malaysia’s deputy prime minister and finance minister, said that while Japan is trying to revive its economy, it could be “more responsive to its neighbours and friends”.

Japanese officials have repeatedly said Tokyo has done its share, adding that an economic stimulus package of 16 trillion yen would jumpstart the economy. But the figures are not very encouraging. Unemployment reached a record 3.6 percent in February, and without stimulus, the economy is projected to contract by 0.3 percent in 1998.

Stimulus packages, tax cuts and more public works spending however do not impress many Japanese. Some even liken the situation to the dark days that engulfed Japan just after its defeat in the Pacific War half a century ago.

“There is loss of hope as what to do next now. People are desperate and resigned and it reminds me of the time after the war when I was a still a youth,” political analyst Minoru Morita told reporters Wednesday.

The economy’s poor performance is behind the growing call for Prime Minister Ryutaro Hashimoto to resign and accept blame for Japan’s ills. According to poll results on Wednesday, public approval for his Cabinet has slid by 40 percent to reach 31 percent compared to five years ago. National polls for Parliament will be held in July.

Japan faces grave economic problems that could trigger a worldwide recession, observed Norio Ogha, chairman of Sony Corp.

Japanese newspapers are filled these days with articles that either berate the government or appeal to it to modernise the political and economic system — pursuing deregulation to allow foreign companies into Japan, cutting income taxes and boosting domestic demand. These, they argue, would help Japan command the world’s respect once again.

The ‘Yomiuri Shimbun’, Japan’s leading daily, said proof of Japan’s decline was evident in the tenor of talks among Group of Seven officials in Washington last week.

“In the past, such conferences were almost always coloured with envy of the mighty Japanese economy. This time the participants expressed compassion. . . and being an object of pity is a sad state of affairs,” the newspaper argued.

Japan’s stature now is a far cry from its reputation as Asia’s postwar economic miracle, the war-torn nation that rose from a dependent of foreign aid to become the world’s biggest donor.

Over the decades, developing countries in Asia watched Japan’s rapid ascent with envy. Leaders like Malaysian Prime Minister Mahathir Mohamad adopted ‘Look East’ policies that proposed learning from Japan instead of following the west.

Analysts say it is time that Japan — which posted the lowest growth rate among G-7 countries for the second straight year — to confront structural ills like poor economic management protected by the government, a powerful, unaccountable bureaucracy resistant to change, and corruption that has found its way to the finance ministry and central bank.

Bankruptcies have piled up, seen in the collapse of the giant securities company Yamaichi that left 7,000 workers unemployed in Japan alone. Investigations revealed that its crash was caused by top Yamaichi management who conducted high-risk trading for preferred companies, behind the backs of finance ministry officials.

The price of what many call Japan’s refusal to change the old ways of running the economy is showing. The World Competitiveness Year Book 1998, which ranks countries’ competitiveness, put the U.S. in the top spot. Japan dropped nine notches to 18th place, just ahead of Iceland and far below Singapore’s second-place slot and Hong Kong’s third.

Yukio Okamoto, president of the consultancy firm Okamoto Associates Inc, blames Japan’s decline on inward-looking policymaking that refuses to take a leading role in the dynamics of the ever-changing world, but rather reacts to the symptoms of real problems.

Last week in the ‘Nikkei’, Japan’s leading financial daily, Okamoto warned of deteriorating Japan-U.S. ties as the U.S. takes on Japan’s role of absorbing Asian exports while Tokyo is preoccupied with economic problems. “The (U.S.) State Department is showing increasing interest in China, while its feelings toward Japan have cooled,” he wrote.

Still, behind Japan’s black mood are emerging calls for it to reassert itself.

Vice Finance Minister Ebisuke Sakikabara, dubbed ‘Mr Yen’ for his influence on currency markets, said Wednesday that Japan’s crisis is a “confidence crisis — that is the proper explanation of the situation”. Japan’s fundamentals are strong, so “it is a sort of identity crisis that Japan is faced with at this time”, he said.

Takashi Inoguchi, an expert in international relations at Tokyo University, says it is understandable why Asia feels let down by Japan. But “what is disappointing is that Japanese politicians are afraid to speak out,” he argued.

“The reforms that are being imposed are designed by Washington to make us more like the U.S. But there are many problems in the U.S. — the widening gap between the rich and poor and high unemployment are the most obvious — which Japan wants to avoid. This must be explained,” Inoguchi said.

In the end, Inoguchi said: “While everybody supports change in the Japanese system, it must be carried out to suit our values and society, not those imposed by others.”