With Economy Down, Soul-searching on the Rise

By Suvendrini Kakuchi, IPS, 4 February 1999

TOKYO, Feb 4 (IPS)—They are suffering their country's worst post-war recession yet, but the Japanese say economic reforms are no longer enough for them to make things right again.

From the prime minister to the local media, among school officials and even on housewives' talk shows, the call is for deep-rooted change that many hope will result in a new Japan to welcome the new millenium.

While there is still much discussion on how to do that, the emerging consensus is that Japan needs to learn to look less toward the West and instead rediscover its rich history and unique culture.

The toll of this period's (Japan's postwar economic miracle in just 30 years) of preoccupation with economic growth, was quite heavy, said a recent 'Mainichi' newspaper editorial. The new-found wealth was accompanied by a decline in moral standards, breakdowns in the education system and a dearth of capable leaders.

These are the consequences of ignoring historical and cultural traditions and are symptoms of a country whose intellectual and emotional development have been unable to keep up with its economic growth, it added.

The harsh observation is but an echo of what many Japanese are now saying in the face of a myriad range of problems, including rising juvenile crime and political corruption.

Indeed, a bestselling book, 'Japan Controlled by American Globalists', argues that the country's economic woes can be traced to the overt dependence of Japanese leaders on the United States.

Moves to rewrite the Japanese Constitution, which was composed by the occupying U.S. forces in 1946 following Japan's defeat in World War II, is seen as an extension of the rising sentiment that Japan should start thinking for itself.

Respected commentators such as Tokyo Institute of Technology Professor Kiroku Hanai have also called on the government to develop ties with Europe and departing from its total economic dependence on the United States.

At the same time, though, analysts observe that Japanese officials are starting to realise they must also pay more attention to strengthening ties with Asian governments.

In his book 'Globalists', author Takahiko Soejima argues that Japan must be less dependent on the U.S. security alliance and must pursue a more balanced foreign policy. Put another way, the new Japan should be a true global leader that is nobody's stooge.

As a society, we must change our very consciousness, Prime Minister Keizo Obuchi said last month in a Cabinet speech on what he called the national crisis.

Likewise, the government is emerging as a strong proponent of reforms that take into account not so much the technological innovations that propelled Japan into becoming an economic powerhouse decades ago, but also the social and cultural aspects of such changes.

Still, only a few argue against the need for Japan to first untangle its economic mess at home before the country recreates itself.

Some long-awaited steps have already been taken toward economic reforms. For instance, an independent financial supervision body was launched late last year to clean up Japan's loan-saddled banks.

The panel, an interesting mix of businessmen and former bureaucrats, will order banks to either clear their debts or just declare bankruptcy.

According to Finance Minister Kiichi Miyazawa, the body is independent and has nothing to do with the Finance Ministry and was created restore Japan's international credibility. Economists say the bank clean-up would make credit available again, reviving industry and investment.

Japan's efforts to reassert itself are also behind recent, bolder criticism of unfettered capitalism and louder calls for financial reforms.

Finance Vice Minister Eisuke Sakakibara has warned of the evils of market fundamentalism, questioning the rationality of the market economy.

In a recent speech, he pointed out that five Asian countries- South Korea, Indonesia, Malaysia, Thailand and Philippines- suffered badly as a result of the sudden reversal of private capital flows out of the region.

According to Sakakibara, the money that drained out of East Asia in 1997 reached some 100 billion dollars. No country or region can tolerate this kind of sudden shift in market sentiment from euphoria to panic causing a huge reversal of private capital flows, he said.

He said there should be a world government or a grouping of states that can restrain global capitalism through common international rules.

At home, Sakakibara says the Japanese government should take a more active role. Government is needed to ensure fair competition, he said, and only with appropriate supervision can financial markets function well and deliver socially desirable market outcomes.

He also said that U.S. leadership in the world is on the wane. Washington may not agree with this, but Japanese and European leaders have made common calls in recent months for a more balanced currency system and controls on financial volatility.

Japan's newfound boldness is not unrelated to growing economic friction with the United States, which has been criticising Tokyo for dragging its heels in helping Asia out of its crisis.