Yoichi Funabashi, chief diplomatic correspondent of the prestigious Asahi Shimbun, points to resistance to reform among his country's leaders, need to reassess Japanese identity.
Dr. Yoichi Funabashi, long-time Washington correspondent of the Asahi Shimbun, told a lunch meeting at UCLA February 18 that his country's business methods are outmoded and that future economic recovery from Japan's long recession will require some fundamental rethinking of the Japanese identity. On world issues he foresaw a long period of instability if President Bush goes ahead with his plans to invade Iraq. In Funabashi's view this negative result would not be so much because of the war itself but because the United States no longer has the patience it demonstrated in postwar Japan 50 years ago to reconstruct a defeated adversary.
"Japan seems to be unable to solve its current crises," Funabashi said. "For instance take the example of the computer system failure at Mizuho Bank at the time of their merger last April. They are on the verge of collapsing." On April 1, 2002, three of Japan's largest banks merged under the name Mizuho Corporate Bank. The merger was supposed to include a new computer system, but this proved to be a disaster. Thousands of people did not receive their paychecks, savings were frozen, and millions of transactions were held up.
"I was surprised to see the failure of this software system because I think in a way that this kind of managerial logistics is perceived to be Japan's strength, Japan is good at meticulously managing these kinds of managerial procedures, but they could not come up with a workable system. At Shinsei Bank the president, Masamoto Yashiro, hired a number of Indian 30-something programmers to create their new system and they came up with a very successful program, and at a cheaper price. I wondered how and why the Japanese system did not work so well."
Japan's financial system "has not yet coped with the problems of globalization," Funabashi said. "Their model does not fit the challenges." He returned to the example of Mizuho Bank. "The top management have almost all been groomed at other banks where they have invested long years in developing human relations, old boy networks, wining and dining ministry officials. They are not good at customer or investor relationships. This leadership is very weak. They cannot override the vested interest in stove-piping [vertical reporting with few ties to other groups] their own turf. The financial crisis of Japan is lingering on, 12 years after it started."
With billions in bad loans, Japanese banks are trying to resist making new loans even to good customers, as this will increase their short-term debt, and with it the risk of bank failure. But "the politicians are still trying to put tremendous pressure on the Japanese banks to lend to companies. They see the banks as cash cows." Even though a shakeout could improve the health of the economy, "they won't let these banks go under because of obligations to their constituents. The bank managers have not been able to get out from under these pressures from the government. This is only the tip of the iceberg, of the whole structural problem."
In Yoichi Funabashi's view the resistance to reform is endemic in Japan, not just a problem of the central government. "The Democrats [Democratic Party of Japan, the country's second largest party behind the conservative Liberal Democrats] have many politicians beholden to labor unions and they, much more quietly, have resisted structural reforms."
In 2000, "Prime Minister Obuchi proposed making English a second language, which raised much controversy and uproar. This led to a mushrooming of praise of the Japanese language, its beauty and glory. This showed a great uneasiness about Japan and its mother tongue."
Who Is Japanese?
A second crisis, Funabashi said, is in Japanese identity. "In the past half century up until the late 1980s, Japanese politics usually revolved around the peace and war issue. Constitution Article 9 [which prohibits Japan from maintaining a standing army], the U.S.-Japan alliance. This has been replaced by a new politics, a politics of identity. The Japanese are starting to feel more unsure of themselves, for many reasons. The stagnation of the Japanese economy, the inability of the Japanese leadership to change, the rise of China. Perhaps 9/11 has also contributed to a shaking of the international order in which Japan had prospered so nicely for a half century. [Prime Minister] Koizumi's visit to the Yasukuni shrine [for military dead from World War II, including war criminals, which drew outrage in China and both Koreas], the Korea kidnap issue, all this contributed to the politics of identity."
Funabashi pointed to a worsening of relations between Japan and other major Asian states, particularly China and North Korea, as part of this unease. "There has been an intensely emotional response to Kim Jong Il's admissions about the kidnapping of Japanese nationals. This has put a tremendous constraint on Koizumi's plan to normalize relations with North Korea."
Japanese also feel extremely uncomfortable with the prospect of becoming a multiethnic society. "Many Japanese feel they confront two unappealing choices: one is accelerating Japanese companies moving to China to stay competitive. They need the cheap labor and resources. There are 27,000 Japanese companies operating in China." This strengthens the growth of China as a power in Asia and drains jobs out of the struggling Japanese economy. "Alternatively they could bring more foreigners, especially professionals, into Japan to keep Japan competitive, to stay in the game." This, he said, is posing unacceptable risks.
"Mr. [Hiroshi] Okuda [chairman of Toyota Motors] has argued in favor of making Japan into a multiethnic society. The captains of industry know they have to open the door, to welcome Indian and Chinese professionals, particularly computer programmers. Nevertheless they are very reluctant, bringing up visions of crime and drugs and ghettos. They must decide what kind of society they want Japan to become."
North Korea and Nuclear Weapons
Japan also confronts a crisis in international security, Funabashi said. "This is the prospect of North Korea going nuclear. North Korea may not be only interested in using the nuclear card to bargain with the United States, but they may genuinely want to go nuclear. Once you acquire such a technology it will be difficult to resist turning it into a military technology. The North Korean military is already worried about losing their competitive edge as a conventional force. This will turn them toward nuclear weapons. We may have only a matter of months before we must resolve his situation."
North Korea, he suggested, might export nuclear technology to rogue countries, or even to terrorist groups. Such threats do certainly exist. But more fundamentally than that, he said, "It would change the whole security picture in Asia. There are a few, mostly eccentric, voices being raised for Japan going nuclear. This may move that position over to mainstream politicians. Taiwan might also be tempted to explore the nuclear option. It is not a secret that both South Korea and Taiwan tried to explore the nuclear option in the 1970s and they were only stopped by tremendous pressure from the Nixon and Ford administrations."
Will the United States Tire of the War on Terrorism Too Soon?
"It is still too early to tell how the U.S. antiterrorism campaign and war will evolve," Funabashi said. "My guess it that it will be a long and hard process for the U.S. and the international community to deal with the terrorist challenge and danger. We may see terrible fatigue, nation-building fatigue, exasperation in dealing with France and "Old Europe" in a multilateral setting. The U.S. may not be interested in pursuing this war. It may come to look like a war of attrition, like the Israel war of attrition, with no prospect of victory. It will be extremely difficult for any political leader to keep waging this kind of war. If the United States should then start to withdraw into isolationism or inaction this could have important implications for the U.S.-Japan relationship."
The Postwar U.S. Occupation of Japan as a Model for Rebuilding Failed and Defeated Countries Today
"Japan's postwar history has evolved from good loser to good builder to good citizen to good neighbor, albeit with some limitations and setbacks," Funabashi said. "We could have played a bad loser role, but we did not. MacArthur reciprocated in the role of a good winner. This good loser strategy is very relevant to the world scene now. The biggest challenge we face now is how to restore and regain the losers into the mainstream, particularly when we generate hundreds of millions of losers because of globalization, because of the failing of failed states, in Africa, in Asia and the Middle East. There are many factors that have contributed to this world of disorder. Take Afghanistan. They have ended by exporting only terror, drugs, and refugees.
The core of the problem "is to what extent the international community, particularly the United States, will commit to nation building. The United States occupied Japan for 6 years and 8 months. There were still 200,000 U.S. soldiers in Japan at the end of that time. This was a big commitment. This level of commitment needs to be considered for a postwar Iraq if President Bush goes ahead with his war."
The U.S. occupation led to Japan having "an unprecedented period of economic growth. This only happened because Japan was welcomed into the international system, first with the San Francisco Peace Treaty -- a treaty of trust and reconciliation -- and also the Bretton Woods financial system. This was one of the wisest deals between victors and vanquished. It stopped the cycle of revenge. It is very difficult to forge a good relationship between victors and vanquished, but we made it."
Japan's postwar reforms succeeded because the stakeholders of reform felt emancipated and formed a constitution pushing for reform. Dr Funabashi stressed that we have to ask again now, "Who are the stakeholders of reform?"
Turning back to the current crisis in Japan, he suggested that Japan should begin its reform process by assessing the stakeholders likely to support reform. "Koizumi has been held to be a reformist. I think the people are deluded on this. He is not a reformer, and now people have started to sense it. He doesn't have either the guts or the game plan to do this. The people have begun to realize this danger and his limit."
Funabashi concluded by suggesting that Japan's most useful role in the period ahead would be to contribute to nation building and re-building after the military phase of conflicts is over, to try to ensure a lasting peace.