LAND OF THE SETTING SUN

No, I don't know what's going on here, but it sure looks funny. Image source: The Economist

Abe pretends to be a rice farmer in the tsunami-devastated area.
Image source: JIJI PRESS/AFP/Getty Images

So far, I’ve looked at China, Asia’s foremost rising power and a likely future superpower; India, Asia’s secondary rising power and a potential future economic giant; and Indonesia, Southeast Asia’s dominant nation, a sleeping giant and a potential future Great Power.

This leaves one other major player in East Asia to discuss — the country that, in modern terms at least, is the region’s old, established power, now a giant with fading glory.

BACKGROUND
Japan, the “Land of the Rising Sun” (so-called because it is east of China), has always held itself somewhat aloof from the outside world. A string of islands some ways off the coasts of Korea and China, it is obviously influenced by those cultures, yet also fiercely independent; it was only conquered once in its history.* It developed its own civilization, its own writing systems, and its own religious tradition. Outside influences were welcome, though, and they have been intimately integrated with Japan’s native culture over the years.

Although Japan largely developed on its own, in the 700s it imbibed many Chinese influences. China at that time was in one of its Golden Ages, and Japan’s rulers realized how much more advanced China was: It had huge, well-organized cities, a sophisticated administration staffed with crack bureaucrat-scholars, a complex law code, and a fiendishly complex writing system. It adopted these features, along with China’s Confucian philosophy and Buddhist religion, but it also kept Chinese politicians at arm’s length; there was no way it would allow itself to get absorbed into the Chinese Empire.

Over the years, Japan drifted away from direct Chinese influence, helped by the Tang dynasty’s collapse in China and the weakening of the Japanese emperor’s own power. It turned into a feudal society dominated by warlords and samurai. Then Europeans showed up in the 1500s, bringing guns, Christianity and access to the global trade network. The Tokugawa family used the guns to reunite the country under their rule, but flatly rejected most of the European influences. Instead, Japan sealed itself off from foreign contact completely in the 1600s, confident that the outside world was harmful and would just go away anyway.

You might think Japan would stagnate under these conditions, and in some ways it did, but the Tokugawa era also brought widespread economic prosperity. Trade within Japan boomed, thanks to a bustling collection of ports and well-maintained roads. Edo, Japan’s capital, ballooned into the world’s largest city (a title it’s held ever since, at least until recently).** A sophisticated commercial sphere created a vibrant merchant class, and arts, literature and theatre flourished with their support. Despite all those samurai and warlords, peace prevailed thanks to the stern supervision of the shougun (commander-in-chief). But of course, Japan trailed behind Europe and America, just like the rest of East Asia did.

This hit home in 1853, when America forced open Japan to trade with it. The Japanese were suddenly aware how far they had fallen behind militarily. Civil war broke out over how to deal with the foreign threat, and unlike everywhere else in the world, the reformist faction won. Before long, the country embarked on a crash course in modernization: education was emphasized and subsidized, the samurai were quelled, a constitution was drafted restoring the emperor to power with an elected parliament (“Diet”), industrialization was pursued along the British model, and a professional military was trained in Western strategies. The results astonished the world: by the 1900s, Japan was an industrial power on par with Italy and a military power capable of beating China and Russia.

Japan’s modernization was all the more surprising because of the complete reversal in attitudes towards the outside world in a matter of years. But Japan didn’t stop there. Conscious of its relatively small size and limited natural resources, Japan hungered for more and more prestige. Imitating Europe further, it bullied the rest of East Asia, extracting economic concessions from China, annexing Korea and Taiwan and exploiting the Philippines. When its economy crashed in the Great Depression, Japan lashed out even more, embarking on a savage war of conquest in China, sweeping through all of Southeast Asia, picking a fight with the US and Britain and embracing a suicidal warrior ethos that only ended in its complete destruction in 1945.

That could have been the end for Japan, relatively speaking; its cities lay in ruins, its people were starving and impoverished, its government and emperor were discredited, its military humbled, sunk and piled dead on the shores of the little Pacific islands it had conquered. But America, as in Europe at the same time, saw how critical Japan was in East Asia both economically and strategically. It occupied Japan for 7 years, retaining the emperor and most of its government while reworking Japanese society to put business at the center of national life. Kids were taught to revere democratic, capitalist ideals and like America. When the Americans pulled out, the postwar regime mostly carried on with their program.

Once again, the results were astonishing. When the world’s attention returned to Japan in 1964, it was shocked to see a country recovered from the ruins of war, with a thriving economy, healthy democracy, renewed energy and a more welcoming manner. Focusing on more high-end products like electronics, appliances and cars, Japan totally reworked its image. Where before the war “made in Japan” stood for cheap crap, by the ’70s it stood for quality, efficiency and compactness. Its high-speed bullet trains were emblematic of a country looking to the future.

By the ’80s, the rest of the world was getting scared. Japan had pulled so far ahead of its neighbors in East Asia, who were still mostly getting started on their industrial development paths, that it looked like it might be on course for another imperialist takeover. Real estate in Toukyou was worth more than all of the US. Brands like Sony, Panasonic, Nikon, Nintendo and Toyota had global domination. Its scientific and technological prowess was first-rate. When the UN started its Human Development Index in 1990, which ranks countries by overall living standard, Japan topped the list. The Nikkei, Japan’s stock market, was white-hot. Delirious or resentful Westerners began predicting a new Japanese Empire or even Japan as the superpower to replace the Soviet Union.

Of course, it was all bosh. Beginning in 1989 — by coincidence, the year that Japan’s longtime emperor, Hirohito, died — the Nikkei collapsed. The dizzyingly high real estate prices had been an unsustainable bubble. Too much investment had been made in unproductive sectors. Banks were loaded with more debt than they could pay off. The economy slumped, and Japan entered a long period of stagnant recession. Called “the lost 10 years,” it really lasted longer than that. An entire generation came of age in an environment more uncertain and less ambitious than before. A long deflationary spiral pulled the en (Japan’s currency) down; exports were no longer competitive.

Politicians were of little help. One of the remarkable features of Japan is its consensus-oriented culture; although of course there are leaders and deciders at the top, most decisions are made as a group. Emperors have always been figureheads. The great achievements of the Meiji era were made by a group. Few of Japan’s prime ministers have stood out as great leaders and deciders; most only serve 2 years anyway. Jun’ichirou Koizumi, prime minister from 2001 to 2006, made a concerted effort to reform Japan, but made little headway. Since then, his successors lasted a year each. A new party, the Democrats, took power in 2009, but underwhelmed. The catastrophic earthquake/tsunami/nuclear meltdown of 2011 only strengthened the image of a nation in inexorable decline.

CURRENT SITUATION
Starting in 2012, Japan finally seems bound to make a turnaround. While it will never reattain its headstrong ’80s pride, a new economic program has given the country a shot in the arm and a renewed lease of hope and forward-looking spirit.

Shinzou Abe was elected in 2012 and has been the pusher of this scheme, called “Abenomics” in his honor. In many ways he’s a weird proponent for economic reform; he was prime minister for a year in 2006 and underwhelmed just like everyone else. But he’s strongly nationalist and animated by a strong desire to save Japan before it becomes irrelevant. Although he’s gotten severe reservations both at home and abroad for his nationalism and increasing control of the media, the clarity of his platform and the fervency with which he preaches it has won him widespread support.

Abe describes his economic platform as “3 arrows.” (It refers to a lesson about the strength of 3 arrows gripped together told by a Warring States era-warlord.) The 1st arrow, fired in 2013, was a $116 billion economic stimulus to defibrillate the economy and revive consumer spending. The 2nd arrow, fired the same year, was a “quantitative easing” program: the central bank bought tens of billions of dollars of bonds to halt Japan’s longtime deflation. In the short term, the program worked, with the stock market rising 40% in the first half of the year, business picking up, and Toukyou’s property market reviving.

Since those hopeful days, the picture looks less clear. Abe more or less still hasn’t fired his final arrow — which is the hardest to do and the most important. It’s called “a growth strategy to encourage private investment,” and encompasses a bunch of structural reforms Japan desperately needs — and has needed for a long time. He’s opened up a few protected industries, reformed corporate governance, and pushed for more women in business and politics.

But most onlookers are disappointed. A lot of the reforms tackle powerfully entrenched businesses, like agriculture, medicine and electricity. Opening them up to outside competition could be ruinous, and their lobbies have accordingly been fighting hard. Making it easier to fire employees is bitter medicine for those who have worked for the same company for decades. As a result Abe’s plans are a lot more ambitious than his accomplishments so far.

Underlying much of Japan’s social woes is its terrible demography. Japan’s population only grew by 5 million in the 20 years after the bubble popped, and is now beginning to fall. About a quarter of its population is now old (above 65), with only about 15% being kids. The rural areas, long relatively empty as a result of the usual urbanization that comes with industrialization, are now getting REALLY empty, with some country towns in danger of completely vanishing. The future will see the number of babies born each day equaling the number of people turning 100! (Japan also has the world’s highest life expectancy.) This demographic profile has stunted Japan’s forward-thinking energy and lent the country a more somber, conservative tone.

Overshadowing Abenomics (and everything else in the region) is China. Japan hasn’t paid China much heed since the war, but its undeniable rise since Japan’s bubble popped has awoken a primal fear. Putting aside panicked visions of the People’s Liberation Army storming Toukyou, Abe and friends worry that China will eventually usurp Japan’s position as high-end manufacturer. A longtime rivalry with China (which I’ll go into later) feeds a competitive urge.

The future remains hopeful. Japan is the key country in a Trans-Pacific Partnership being negotiated with America and a bunch of other “Pacific” (East Asian and Latino) countries that will knock down barriers to trade. Japan is still the world’s 3rd-largest economy and the envy of its region. It remains a comfortable, pleasant country with a very high standard of living, the world’s best health care, a highly educated populace, a citizenry easy to mobilize for grand national projects, and many world-renowned brands. Abe won re-election last year by a comfortable margin, and other political parties are too weak to effectively challenge him. The economy has recovered from a brief recession last year. Yet it is hard to shake the image of a country in long-term decline.

I have a soft spot for Japan. Its achievement in kicking off centuries of isolation and narcissism and embracing desperately needed modernization is amazing. As my history lesson hopefully shows, Japan can push through far-reaching changes when it really wants to. Innovation and experimentation remain hallmarks of its culture. Its economy, population, prestige and history entitle it to a role as a Great Power and a mover and shaker in East Asia.

But it is a country in decline. 40% of its population will be old in 2050. China, India, Vietnam, even South Korea are growing forces in the region, and Japan no longer feels as special as it used to. Even if Abe successfully fires his 3rd arrow, it’ll be hard to overcome these basic facts.

My prediction? Japan will decline in the long term, yet remain relevant and an economic force to reckon with. Its technical knowhow, great universities and wealth will continue to speak volumes in East Asia. Japan may seem like an aging, tired shell of an empire, but it can pull off some neat tricks when it really needs to.

*

It could be argued that the Korean migration in ancient times was a conquest, but historians aren’t really sure.

**

O.K., O.K., it only counts if you include the entire urban area. It has since been surpassed by the Pearl Delta megacity in China.

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