Asia Times: EDITORIAL: Sakakibara vs. bubble.com



	May 27, 1999	atimes.com

Japan Economy

EDITORIAL: Sakakibara vs. bubble.com

As his nickname - Mr. Yen - indicates, markets used to keenly listen when Eisuke Sakakibara, vice-minister for international affairs at Japan's ministry of finance, spoke. That was then, in the early to mid-1990s, when Japan's economic and banking crisis was still young and most expected it to be resolved and the country's decline to be reversed in short order.

That hope is long gone; in fact, the Asia-wide crisis that set in in mid-1997 proved that Japan's slide into recession and protracted economic malaise was not a cyclical phenomenon, but indicative of fundamental structural flaws not easily fixed with a few hefty doses of deficit spending.

So, then, there's not much point anymore in listening much to the man whose book, published in English in 1993 and titled Beyond Capitalism: The Japanese Model of Market Economics, had eloquently extolled the virtues and superiority of the Japanese system.

In this past year and to date, Sakakibara has not enhanced his reputation as pundit and economic and financial policy authority much by endorsing such queer schemes as yen-dollar-euro fixed exchange-rate bands dreamed up by a bunch of euro-socialists and by calling for governmental intervention mechanisms to control international capital flows.

Nor has there proved to be much substance in his repeated warnings since last fall that the U.S. stockmarket (bubble.com), the U.S. economy and, along with those, the global financial system are on the verge of collapse. It is sad to see and - more importantly - a bad omen for the fate of Japan's economic reforms that a leading Japanese intellectual with major responsibility for and inputs to Japanese restructuring should repeatedly have been so wrong and purveying nonsensical perscriptions.

He and his colleagues at the MOF, at MITI and the at the BOJ should take a close, hard look at economic facts and figures, including Tokyo stock market data, to get a better idea of what's wrong in Japan and in East Asia and how to fix it. And he should - instead of looking to euro-socialism for guidance - study U.S. bubble.com rather than just dissing it.

The Japanese companies that have done well recently, regardless of bad debts and recession, are those - whether in the financial sector or in other areas of industry - that have invested in information technology and knowledge-intensive industries and have tied up with foreign partners in those fields and are not shy about learning from those gaijin.

Sakakibara and his colleagues should also take a quick look at the way recent Japanese graduates of elite universities (those still able to find jobs) are voting with their feet: If you came from Todai, you would go to MOF, MITI or the Foreign Ministry - in that order - before even considering private sector employment. This year, job seekers didn't even list any of those ministries among their top five choices.

That's the most encouraging trend, that young Japan - quite pragmatically, relatively unencumbered by traditional hang-ups - is choosing new directions.

In the accompanying story by the Australian Financial Review, Sakakibara is quoted as saying that Japan will catch up [with the U.S., presumably] in two to three years. ''We have not fallen that far behind,'' he says. ''I don't think Japan lacks fundamentals in that [IT] area. It is a question of management. I think Japanese are quite well suited to something like computer software; we excel in new game software. There are no fundamental deficiencies, the problem has been the rigidity of our organization. I think the public sector as a whole has a problem with the way traditional bureaucracies react."

Well, that's pathetically mistaken, all of it.

Japan doesn't have a snowball's chance in hell to catch up with the U.S. in the IT or other key fields of the new economy in two to three years. There ARE fundamental deficiencies by the dozens, ranging from education to entrepreneurial drive and ready access to capital by new ventures. The very idea that computer game software is even significant to the issue is ridiculous.

And, yes, Mr. Yen, hide-bound bureaucrats, rigidity of organization - not to mention the old guard of LDP politicians - DO constitute fundamental deficiencies.

In the same article, Sakakibara is quoted as saying that Japan today is confronting the same challenge of reform and modernization that culminated in the 1868 Meiji restoration, which led Japan into the modern industrial era. As an accomplished economic historian, he should know that the run-up to and completion of the reform tasks undertaken by the Meiji reformers spanned a period of decades. History is moving faster now, but generational tasks still remain generational tasks and the very idea of catching up in a couple of years, or of denying that there are fundamental deficiencies in the Japanese system, means that Sakakibara has no comprehension of the scope of the problems to be tackled and the fundamental change his country must be prepared to undergo.

The Meiji reformers succeeded precisely because they were not victims of Sakakibara-style cultural arrogance.

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©1999 Asia Times Online Co., Ltd.