Liberalizing Japan

"The Privilege of Choosing: The Fallout from Japan’s Economic Crisis" by Masaru Tamamoto, in World Policy Journal (Fall 1998), World Policy Institute, New School University, 65 Fifth Ave., Ste. 413, New York, N.Y. 10003.

Beneath Japan’s seeming indecision over how to revitalize its economy, sagging since 1990, is a society on the verge of a grand transformation, observes Tamamoto, a Senior Fellow at the World Policy Institute, New York, and a visiting professor in the Faculty of Law at Ritsumeikan University, Kyoto.

During the "bubble" years of 1985–90, there was much talk of Japanese-style capitalism, supposedly superior to the U.S. brand. Now, Tamamoto says, Japanese pundits acknowledge there is only one basic type— and that Japan has an over-regulated version. Deregulation alone won’t solve the problem, however. The Japanese will be forced to give up the "protected life" and strong "sense of community" they have come to know.

Pointing toward this transformation, Tamamoto maintains, are many apparently discrete changes already in effect or in the works. Some are seemingly minor, such as letting superior students skip grades, and making taxi fare schedules more flexible. Others are clearly earthshaking. A plan to cut back government bank deposit insurance, for example, will likely lead to the government allowing more uncompetitive banks to fail.

An even more fundamental change concerns the powerful Japanese government bureaucracy. In the post-1945 order, that institution has acted not only in an administrative capacity but as the nation’s legislature and judiciary. Now, however, the bureaucracy is losing the Confucian "mandate of heaven," Tamamoto writes. Recent arrests and indictments of Ministry of Finance officials and other bureaucrats have strengthened reform-minded politicians such as Naoto Kan, who leads the opposition Democratic Party. Three years ago, Kan was appointed minister of health and welfare in a coalition government. For nearly a decade, the ministry had claimed it could not locate records pertaining to a criminal negligence suit brought against it by hemophiliacs infected with HIV. "Kan ordered that the records be found, and they were produced within a few days," Tamamoto notes. "Resignations and indictments followed." This affair "accelerated the demand for transparency and accountability"—two new words in the Japanese political lexicon.

The aging of Japanese society is another force for change, Tamamoto says. By 2020, one in four Japanese will be over 65. Despite its prowess in certain export sectors, the Japanese economy is full of inefficiencies, and the only way to make the economy grow will be to increase productivity by sweeping them away.

In Japan, lacking a tradition of liberal individualism, the social change will be profound. Corporate lifetime employment is on the way out; seniority is giving way to merit in fixing compensation. As "the community becomes less a source of protection, welfare, and an ordered life," Tamamoto writes, the Japanese will become more individualistic— more concerned with individual rights, and more inclined to take risks. Inequality of results will become more acceptable.

Most Japanese remain oblivious to the direction in which their country is headed, Tamamoto observes, and "would be unlikely to approve the kind of society that is being forged."