from Japan. Indeed, the term “Japan passing” came to be used in the 1990s to describe the phenomenon of people passing by Japan on their way to China, Korea, and Southeast Asia, overlooking the Japanese market in favor of greener pastures elsewhere. I became one of the passers.
Ironically, despite appearances to the contrary, Japan would have been wise to have listened to the small band of “revisionists” (in addition to myself, these included Jim Fallows of the Atlantic, Chalmers Johnson of the University of California at Berkeley, and Karel van Wolferen of the Dutch newspaper NRC Handelsblad) who were calling for reform and opening in Japan. As things turned out, Japan’s waves of exports and huge trade surpluses were not so much signs of success as of trouble. The Japan, Inc. catch-up formula for achieving the “miracle” had worked. But it is sometimes possible to have too much of a good thing. The miracle had been based on high savings, high investment in manufacturing, relatively low domestic consumption, and ever-rising trade surpluses of manufactured goods. By the early 1980s, constant repetition of this formula was already creating overinvestment in excess production capacity in Japan.
The economy was becoming seriously unbalanced. Japanese consumers were falling further behind their peers in the United States and Europe as the country continued to expand its huge, modern manufacturing sector while neglecting its increasingly inefficient and outdated services and new business development capabilities.
The big trade surpluses were creating pressure on Japan to strengthen the yen versus the dollar, and eventually it did so in 1985. This should have resulted in a restructuring and rebalancing of the economy. But the Japanese government and industry pulled out all the stops to keep the old miracle machine going. The central bank flooded the markets with cheap money, and investment became easier than it had ever been. Indeed, for major companies like Toyota in 1989–1991, the cost of capital became negative. That’s right—the markets paid Toyota to take the money. Of course, that made it easy for the manufacturers to add yet more capacity. On top of that, the easy money aimed at keeping Japanese manufacturers competitive despite the rising yen also created a huge real estate and stock market bubble. It was the bursting of that bubble in 1992 that set the stage for the ensuing two “lost decades” that have left Japan in its present crisis.
In 2011, I became engaged in a project comparing some key Korean industries to their Japanese competitors. While doing this project, I realized more and more that Korea was eating Japan’s lunch. At first, I couldn’t believe it. Hyundai was taking market share from Toyota in the US and European markets? Samsung was treating Sony like a ninety-pound weakling? And looking beyond Korea, Apple was acting as we used to expect Sony to act. Samsung and Apple were battling it out in the smart-phone market, but there were no serious Japanese contenders. Sony had only a single-digit market share. What was going on, I asked myself.
To answer my own question, I began spending more time in Japan talking to old friends and new acquaintances in business, government, academia, labor, and the media. What I found was disturbing. The old cooperation and communication between government and business seemed to be mostly dead. Despite lots of talk and some efforts, the economy had not taken many steps toward becoming rebalanced. There was also a kind of “nothing can be done” mood in place of what I remembered as the old Japanese spirit of optimism and perseverance summed up in the much-used rallying cry of “Gambatte!” Particularly among young people, pessimism was rampant. I found myself worried for their future, for the future of the children of my Japanese friends, and for the future of the country that had so much been a major part of my life. I was also approaching my seventy-second birthday, and was increasingly conscious of the passage of time and the fact that I had been watching and working in or on Japan for fifty years. What could I do to warn the country and help it reverse course?
I decided to write this book—in some ways a second bookend to my long involvement with Japan—in the hope that my experience might produce some insights and suggestions that Japan could use to restore its former vitality. The story opens in the year 2050, when Japan has, in fact, been fully restored. It is the world’s leading country in a wide variety of technologies and arts, as well as in business, innovation, and clean energy. Students around the world no longer want to go to Harvard or Stanford; rather, they want to study at Tokyo University or Kyoto University. Patients around the world no longer flock to the Mayo Clinic; rather, they go to the Meguro Clinic in Tokyo. This is very different from the way things looked in 2015. Of course, the question is: What happened?
The rest of the book tells the story of “what happened.” But first it emphasizes the point that “what happened” is potentially possible and fully believable. After all, Japan has reinvented itself twice in the past century and a half—once in the Meiji Restoration of 1868, when Japan opened itself to Western influences after centuries of isolation, and again after World War II. So we know that Japan is capable of revolutionary change. Japan can do it. The question now is only how to do it again.
The previous reinventions took place after moments of great crisis. So it is logical to conclude that the third reinvention will also require one or more crises. As it happens, Japan is already facing several severe crises, which are outlined in chapter 2. Most important in the short run is the threatening collapse of the economy in the wake of the failure of Abenomics. In addition, chapter 2 also introduces some conjectured crises, such as an Israeli attack on Iran and the withdrawal of the US Seventh Fleet from Japan, which are easily possible to imagine. These and other crises result in a national emergency and the creation of an Extraordinary National Revitalization Commission representing all sectors of the society, and which is charged with the task of once again reinventing the country.
Chapter 3 turns to the question of Japan and the international scene. For many years Japan has become accustomed to being sheltered under the American security wing, and many Japanese cannot imagine that this situation would change. But the fact is that it will. So it is important to understand that Japan’s major problems will have to be faced in the context of a world in which the US security assurance will be more limited than it has been since 1945. In this chapter, America adopts a policy of withdrawing its military forces from Japan to the second island chain, and Japan is forced to become a much more substantial geopolitical and diplomatic power, although the US does not entirely disappear from the scene.
Chapter 4 begins to deal with Japan’s key problems as I see them. The first is not the economy. That, of course, is a major issue and the most immediately palpable, but the truly existential issue facing Japan is its demographics. The country is dying; I cannot even add the qualifying adverb slowly, because the rate of population aging and shrinkage is rather rapid. Today’s 124 million Japanese could become as few as 88 million in the thirty-five years it will take to reach 2050. It is not too late to turn this around. Other countries like Sweden and France have done it. But in just a few years it will be too late. So Japan must very quickly take the steps that other countries have already shown can work. Mainly this will require a dramatic change in the role of women and the attitudes of men, as well as in immigration policies.
Chapter 5 deals with Japan becoming a bilingual nation with English-speaking ability similar to that of countries like Finland, Poland, and Germany. At first glance this may not seem to be a high-priority issue like demographics, but it has a huge bearing on demographics, which in turn has a huge influence on other issues facing Japan. If Japan could speak English well, the country would attract highly talented people from abroad as long-term residents and even, perhaps, as citizens. It could easily stay up-to-date on the latest developments in science, technology, business, finance, and everything else. Thus it is essential that Japan become highly capable in English.
Chapter 6 attacks
