Comment on Mr. Ishizuka's Article about "Xenophobia"

Jaymin Ling (University of Southern California, USA)

In Masahiko Ishizuka's March 3rd article "Xenophobia Will Get Japan Nowhere in Today's Global Age", he expressed concern about the Japanese "diehard tendency to turn inward" and how this attitude would put the entire economy at a disadvantage as the rest of the world turns towards globalization and the establishment of common markets. Japan has long been one of the world's largest economies, 2nd only after the United States, with much of its growth occurring from the 1960s to 1980s. However, with the opening of the Chinese market, Asia no longer belongs exclusively to the Japanese. Mr. Ishizuka notes that it is not "inconceivable that China might someday catch up with Japan in terms of democratic progress, albeit in the distant future." This is not an unwarranted concern as shown by the growth rates of the two countries – China has been averaging a real annual growth rate of 10.0% or more since 2002 while Japan's real growth rate for the corresponding time period is only slightly more than 2%.

Mr. Ishizuka attributes China's quick rise to the country's aggressive acceptance of foreign capital and investment as compared to Japan's more conservative strategy of relying on guarding against foreign investment. Japan's economic defensiveness can be traced back to 1986 when then Prime Minister Yasuhiro Nakasone received the renowned Mayekawa report, which proposed a shift of economic policy to expansion of domestic demand, more imports and deregulation, away from heavy dependence on exports. The report was noted mainly for its emphasis on home demand and deregulation and up till today, these aims are still the defining objectives for many Japanese firms as the full implementation of the policies has yet to be realized.

While I agree with Mr. Ishizuka's view that Japan should look towards improving its economic climate for foreign investments, I feel his article would have been more complete had he actually elaborated further on the dangers of xenophobia in Japan and proposed the next step for the Japanese government to take, instead of merely pointing out examples in which the Japanese had been adopting a protectionist standpoint.

The fault lies not with the country's economy, which is characterized by a large private sector and high economic freedom, but with the attitudes of the people. Many Japanese locals are inherently wary of foreigners and it is not difficult to understand why, given the country's history. As Mr. Ishizuka so perceptively points out in his concluding paragraph, many of Japan's defining moments, such as the Black Ships in the 19th century and defeat in World War II, were born out of the rest of the world's rejection of Japan. This has led the Japanese to view foreigners warily, choosing to keep them at a safe distance. As the rest of the world moves towards widespread globalization and the creation of common markets, the Japanese begin to feel a "creeping sense of isolation" which only serves to expedite their withdrawal from the global scene.

In sharp contrast, China's phenomenal economic progress is almost entirely attributed to foreign trade and investment. Since the 1980s, the economic reforms in China have focused largely on the opening of the economy to encourage greater foreign trade and foreign investment and in recent years, even sales of equity in the country's largest state banks to foreign investors and refinements in foreign exchange and bond markets have taken place. Compare this to the example of the pending government decision to introduce a law in Japan that protects airport terminal operators from control by foreign ownership which Mr. Ishizuka used in his article and the degree of acceptance of non-locals in each country becomes apparent.

Mr. Ishizuka also states "a shortage of talented individuals with good knowledge of English and who are qualified for international business – particularly in the financial sector" as a disadvantage of the Japanese. To expand on this point, Japan needs to not only be more receptive and welcoming towards international workers, but also to train their own people to be assets even outside the country, and this includes being able to communicate effectively with business partners abroad. The Japanese are well-known as being proud of their own heritage (and this is no surprise given the country's phenomenal recovery since World War II) but this rapidly advancing world economy is no place to express disdain towards anybody. Despite the troubles and unrest in China, it is an undeniable fact that the country's economy has indeed come a long way since its communist days. In its quest to sustain real economic growth, Japan should be able to put aside its condescension, examine why China has been able to achieve such exceptional progress, taking only a mere 30 or so years to position itself as the third largest economy in the world, and maybe even draw a lesson or two from the rise of their closest Asian economic rival.

After the war, Japan rebuilt itself almost without any help from the outside world. This has lent the false impression that the country is almost invincible and self-sufficient. While the Japanese strategy of deregulation and heavy reliance on domestic demand has worked in the past, it is now questionable whether this same tactic will be able to bring sustainable economic growth for Japan in the future. The rise of developing countries in Asia such as Singapore, Taiwan, South Korea, Hong Kong, China, and even India has posed Japan a challenge the country has never faced before. With the much lower cost of labor in these newly industrialized countries, Japanese exports have become relatively much more costly. In addition, many international firms have built production plants in these countries, developing the infrastructure and technology to suit their needs. All these prove huge challenges to Japan's economic competitiveness and while the Japanese quality of production and level of technology are still widely recognized as superior, corporations are often willing to compromise. Furthermore, the world is increasingly recognizing the potential of the rest of Asia as a huge untapped market. The Asian market of interest to investors no longer consists solely of Japan as it did years ago and should Japan choose to remain withdrawn, the economy's isolation would only be sped up.

The article draws attention to the dangers of xenophobia in the Japanese economy and provides a thorough analysis of why this attitude came about. Therefore, the next logical course of action would be to propose a set of solutions to overcome these problems. It is imperative for Japan to recognize that a more open economy is the way towards sustained economic growth and to review existing policies and laws to reflect this new attitude towards FDI. If the government truly wishes to enlist "the help of foreign capital to shore up the economy", they must take a stronger stance on the matter and do more to address the issues of protectionism. The world is rapidly moving towards the concept of a global open market economy and should any country resist this tide of globalization, they will fast be swept out of the way and left behind.