Japan feels like land of the setting sun
TOKYO– Japan is searching for a way back. This once supremely confident country cannot figure a path out of the economic doldrums in which it is caught. It is pinning its hopes on a truncated trade deal that may not get off the ground.
This, at least, is the impression I am left with after a whirlwind return visit to Tokyo.
It has been almost 30 years since I lived and worked here. At first blush, things seem much the same.
There are the same public service announcements on the subways, urging honoured customers not to leave anything behind. There is the same level of almost intrusive politeness shown by shop owners and restaurateurs.
Thanks to Japan’s idiosyncratic street numbering system, getting around Tokyo remains desperately difficult. These days even the cabbies have trouble, the result I am told of deregulation of the taxi industry.
People keep asking me if I notice many differences 30 years on and I say no. Finally, in frustration, one man turns to me and says; “Don’t you notice? We are depressed.”
Indeed there is a kind of weariness that I don’t remember. It has been a long time since Japan was the cock of the walk. No one talks about the Japanese miracle any more. No one has since the early ’90s when the bubble burst. Now they talk instead of the lost decades. The technical term for what Japan is experiencing is deflation. The economy is growing again. But growth has been so fitful that prices are falling.
You might think this shouldn’t matter much: If prices fall and incomes remain steady, real purchasing power still rises.
But psychologically, deflation can be debilitating. “When year after year you never get a raise, you feel that you are never getting ahead,” says one acquaintance.
This malaise expresses itself as a reluctance among consumers to spend.
In order to break free, the government of Prime Minister Shinzo Abe is banking on trade, one of the three elements of so-called Abenomics.
The other two, expansive monetary and fiscal policy, have not worked. Loose monetary policy — essentially printing money — has not provided enough oomph on its own to revive the economy.
Fiscal policy has been inconsistent. The government has increased spending on the one hand, which boosts domestic consumption. But it has raised taxes on the other, which throttles it. Trade is the only major policy lever left.
Japan has long been a trading nation. After the Second World War, it competed mainly by offering goods at cut-rate prices. During the boom years of the ’80s, it competed in terms of quality.
So successful was Japan that in those years the government deliberately dampened exports and encouraged imports in order to forestall other countries — particularly the United States — from imposing restrictions on trade.
These days, however, China is outgunning Japan in trade. Tokyo’s policy has shifted from encouraging imports to boosting exports, says Kazuo Nakamura of the Japanese External Trade Organization.
Most important, Japan sees its salvation in socalled rules-based trade and investment agreements — particularly ones requiring standards that favour more sophisticated economies.