Japan: An Existential Election Victory
‘Change’ is a powerful message. Barack Obama made this his main slogan in his 2008 campaign. Rocky Balboa proclaimed this to the Soviet Politburo at the end of Rocky IV. UK girl band Sugababes called their fifth album Change. Now, even Japan has opted for change, after 54 years of rule by the Liberal Democratic Party.
But what does this all mean for Japan? Will the triumphant Democratic Party of Japan (DPJ) really bring change? I suspect that in the near term, change in Japan will be limited. But that does not undermine the importance of Sunday’s victory. The psychological impact is highly significant. Had the LDP been re-elected, it would have sent the message that Japan is completely incapable of change, even amid the worst recession in 60 years, so soon after the ‘lost decade’ of the 1990s. Thus, even if the DPJ does not bring change, its election might at least serve as a catalyst for it, regardless of DPJ policy.
On the policy front, incoming Prime Minister Yukio Hatoyama’s manifesto does not sound like a recipe for radical and certainly not neoliberal reform. In fact, in a recent Japanese magazine article later adapted by the New York Times, Hatoyama lambasts ‘market fundamentalism’ three times in the first two (short) paragraphs, hits out at globalisation, and strikes a distinctly anti-US tone while quoting the values of the French Revolution and praising European integration. All this has a distinctly protectionist leaning in an economy that is already in many ways more protected from competition than many others. In fact, foreign investors have long bemoaned the closed nature of Japan’s economy. Of course, Hatoyama’s main constituency is the Japanese public, and his emphasis on improving social well-being may well pay economic dividends if consumers become more confident, spend more and lift the economy out of its doldrums. However, it is far from clear if he can set Japan on a course of sustained revival.
Is Japan’s Decline Irreversible?
There is a widely held belief that Japan’s decline is irreversible. Only last week, Newsweek magazine carried an article seemingly arguing that this is the case. Early in 2008, Newsweek also ran an article criticising Japan for failing to invent the iPod. Meanwhile, Japan’s economy is on track to lose its Number 2 status to China within the next year, per capita GDP, once in the world’s top five, is now not even within the top ten, and Japan’s competitiveness, number one in the world 20 years ago, is now 17th. On top of all that, Japan’s population started shrinking in 2005, and could fall by 25% by 2050, and by 50% by 2100. With this in mind, Japan’s lost decade, which began in 1991, is looking more like a lost eternity. However, having once been a believer in Japan’s irreversible decline, I am now less sure.
Part of the problem in assessing this is the de-synchronisation of Japan’s dimensions of power. Japan’s politico-military power peaked in the 1940s, long before its financial power peaked with the bubble economy in 1990. Japan’s nominal GDP as a percentage of the US peaked later, in 1995, when a super-strong yen brought it close to parity with the US. Demographically, Japan’s population peaked in 2005. More recently, I’d say Japan’s soft power seems to be expanding even today, judging by the number of Japanese restaurants overseas, translated books and the like, and other such entertainments exported abroad. Even assuming every aspect of Japan has peaked, they are still at a high pedestal (though cynics would say this means further to fall).
The key arguments supporting Japanese decline theories stem from its rapidly ageing and slowly shrinking population. However, this is a ‘linear’ view of thinking, and thus potentially misleading. After all, many linear-ists in the 1980s assumed that Japan would keep rising, and become the world’s dominant power. As I explained recently, demography is not necessarily destiny. Japan still has some cards to play to reverse the decline. Realistically, this will be virtually impossible without substantial immigration. Ultimately, changing course will require many more years and probably several more elections.
When Emperor Hirohito announced Japan’s surrender at the end of World War II, he called upon the country to ‘endure the unendurable’. Now Japan has to ‘reverse the irreversible’.