Asia Times: COMMENTARY: The gaijin factor



	April 27, 1999	atimes.com

Japan Economy

COMMENTARY: The gaijin factor
By Uwe Parpart
Editor, Asia Times Online

Think back to 1982 and the miserable state of the U.S. economy at the time:regional bank failures and scandals by the hundreds (the S & L crisis), aLatin American debt crisis threatening to pull down some of America'slargest banks (Citibank, Chase Manhattan), corporations no longercompetitive on the international scene, recession and growing unemployment.

Decisive action by the Reagan administration and the Congress turned thingsaround: the Resolution Trust Corporation disposed of bad bank debts,deficit spending and tax cuts got the economy moving again, restructuringand downsizing revived corporations, and rapidly growing investment ininformation technology ushered in a period of large-scale productivity gains.

Now think of Japan today: regional bank failures and scandals galore, anAsian debt crisis threatening some of Japan's largest banks, corporationsno longer competitive on the international scene, recession and growingunemployment.

Since last summer, decisive action has been taken by the Obuchi governmentand parliament to turn things around: a Resolution Trust Corporationdisposes of bad bank debts and large amounts of public funds have beeninjected into the banking system, deficit spending and tax cuts to get theeconomy moving again have been enacted, restructuring and downsizing bycorporations is the order of the day.

So, why then does the Japanese economy remain stuck in the mud and, somerecent stock market gains aside, show few signs of comeback? What musthappen or be done (or done differently) for a U.S.-style comeback and returnto long-term sustained growth to be effected?

Those questions - and their apparent inability to answer them - must keepJapanese policymakers awake at night pondering their sorry lot.

The answers are not that difficult to come by; but since finding them wouldmean for Japan to question some of its basic cultural values, they are noteasy to embrace. What is required in Japan is not just enactment of the''right'' macroeconomic policies and corporate restructuring to effect returnto profitability; what is required are basic changes ranging from educationto adoption of a vastly different business culture well beyond justadditional business deregulation.

Since such changes do not happen overnight even if pursued with thegreatest of determination, but are of the order of magnitude and time-scaleof generational change, do we then have to conclude that the world'ssecond largest economy must be written off not for months or years butdecades?

Were this the 19th century or even the middle of the 20th, the answer wouldbe a simple ''yes''. Alas, it's the end of the century and millennium andJapan is not an isolated group of islands in the West Pacific, but anintegral part of a daily ever more integrated world economy and, call it theeffect of globalization or what not, even basic change can and does come ina hurry.

Just two or three years back, graduates of Japan's elite public and privateuniversities - Tokyo University, Kyodo University, Waseda, Keio - saw jobsat the Ministry of Finance, the Ministry of International Trade andIndustry (MITI), and the Ministry of Foreign Affairs (in that order) asmost desirable; jobs even in the largest and most successful corporations,while not shunned, were second choice. This year, for the first time,corporate employment in five major corporations topped the list andministerial jobs were chosen well down the line. For the first time aswell, some 15 percent of top graduates said that corporate jobs were justpreparation for pursuing independent entrepreneurial activity in thefuture. The word entrepreneur is no longer a term of derision.

Meanwhile, whether in the financial services industry or in suchquitessential Japannese industries as automobile production, foreigners aregaining an ever growing foothold and bring with them their own homegrownbusiness culture and outlook. Most employees of Japan's oldest, nowbankrupt, brokerage firm, Yamaichi Securities, now work for Merrill Lynch;Mazda Motors is making a determined comeback under Ford Motors' aegis; andIBM Japan and Yahoo! Japan are becoming premier ''Japanese'' companies.

Japan has a long road to travel. But it has done it twice before: at thetime of the Meiji Restoration when it changed from feudal to modernindustrial society in a few decades; after World War II when it recoveredfrom the ruins of militarist imperialism to become a modern democraticsociety. Japan's great quality is that it is not afraid to learn from thoseobnoxious gaijin when it is necessary and advantageous to do so.

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©1999 Asia Times Online Co., Ltd.