A JAPAN IN DOLDRUMS AWAITS RULER
Economy in bad shape compared to when Akihito ascended the throne in 1989
“MONEY dripping off trees” — that was the sentiment the last time a new emperor took the throne, at the height of Japan’s economic boom. But things have changed.
As Emperor Akihito prepares to step aside and make way for his son, Crown Prince Naruhito,
the boom time excesses have long gone, replaced by lingering worry about stagnation in the world’s third-largest economy.
From the ashes of World War 2, Japan witnessed what was dubbed an economic “miracle”, fuelled by innovative electronic goods that reached its pinnacle in the late 1980s.
The Tokyo Stock Exchange’s benchmark Nikkei index rallied to near 39,000 at the end of 1989, the first year of the Heisei era that will end with Akihito’s abdication on April 30.
Three decades ago, soaring land prices sparked wild cost comparisons: the Imperial Palace grounds were worth more than all of Canada, and the capital here and its three surrounding prefectures were worth more than the entire United States.
“It was an enormous asset bubble. It was a surreal world,” said former banker Tag Murphy.
“It felt as if money was dripping off trees.”
But as Naruhito prepares to ascend the Chrysanthemum Throne on May 1, the Nikkei has lost nearly half its peak value to hover around 21,000 and the central bank is waging a years-long losing battle against deflation.
Japanese corporate management was considered “something like magic”, said Koichi Haji, executive research fellow at NLI Research Institute.
“People were even talking about Japan’s economy overtaking America’s,” he said, describing the situation as abnormal.
But it all came crashing down when property prices collapsed and the bubble burst in the 1990s.
Nomura employees were told to take off corporate lapel pins to ward off attacks by furious investors who had lost money, said one former senior manager.
A truck filled with human excrement was rammed into a Nomura office. Executives wore bullet-proof vests for months, according to the former employee.
Japan Inc has never regained its glory, and the country is now struggling with a string of challenges ranging from an ageing population to innovation woes.
The country is also struggling to boost domestic demand and reform a system of life-time employment that Murphy describes as a “labour aristocracy”.
There have been small signs of inflation, with delivery company Yamato announcing in 2017 its first price increase for retail customers in 27 years.
“It was wrong to believe that a loose monetary policy would rehabilitate the economy,” said Haji at NLI, referring to a programme by the central bank that barely moved the needle on inflation.
“We must admit that we don't really know what the cause of this sickness is,” he added, saying that a widening gap between the rich and poor, and worries over the future, could be factors.