Xenophobia Will Get Japan Nowhere in Today's Global Age
But despite need for foreign direct investment to help shore up
sagging economy, nation clings to defensive, inward-looking policies
Masahiko ISHIZUKA (Councilor for the Foreign Press Center Japan and a Lecturer at Waseda University)
When China embarked on a "reform and opening" drive 30 years ago
under the command of Deng Xiaoping, Japanese watched it with a
certain degree of doubt and condescension. It was as if they were
thinking: "Well, they've finally realized their backwardness. Let's
see how they change."
The truth is, Japanese are still inclined to see China with some
degree of disdain, mixed with the concern that despite - or rather
because of - its seemingly runaway economic growth, the country is
chaotic and could descend into greater turmoil in the future.
But while it certainly has a long way to go in its democratic reform
and may still be a "closed society" as opposed to a truly open one,
Japan should take a lesson from the phenomenal changes China has
accomplished - regardless of how disorderly or troubled the process
may have been.
A senior diplomat of a major Western country who has served in both
China and Japan said he marveled at the fast pace of reform in
China, even in its remote localities, whereas he was dismayed by
what he described as the snail's pace of action in Japan. It is not
even inconceivable that China might someday catch up with Japan in
terms of democratic progress, albeit in the distant future.
It is not just about domestic reform. Even more impressive is the
way in which China has opened up to the outside world. The country's
rapid economic development is often characterized as having been
achieved by an aggressive acceptance of foreign capital and
investment - a sharp contrast to Japan, which has been so guarded
against foreign investment and so jealously protective of some of
its domestic industrial interests.
All tied up
What is worrying is that Japan remains insular, at various levels,
even as it falls behind in this age of rapid globalization. Signs
abound that xenophobia is creating a latter-day sakoku mentality -
national isolation - to the great concern of those Japanese who are
aware of such a mentality's significant dangers.
After decades of shutting out inward foreign direct investment, the
presence of foreign business in Japan is shamefully low compared to
other major industrialized countries.
Only in recent years, with increasing signs of the country's
economic decline, has the Japanese government become anxious to
encourage FDI in the belief that it needs the help of foreign
capital to shore up the economy.
But despite the recognition of this as a necessity for the country
as a whole, a telling development is that, one after another, major
Japanese corporations are erecting legal barriers against possible
takeover attempts by foreigners. Bureaucrats' initiatives and
outdated judiciary decisions are only helping them along.
A pending government decision to introduce a law that protects
airport terminal operators from control by foreign ownership is but
one example. The proposal has been criticized by the media, and even
some cabinet members, as being counter to the policy of promoting
FDI - reiterated by Prime Minister Yasuo Fukuda as recently as
January in his World Economic Forum speech in Davos.
Meanwhile, the tax system, stock market rules and a whole host of
other regulations are cited as unfriendly to foreign capital and
investment. A shortage of talented individuals with good knowledge
of English and who are qualified for international business -
particularly in the financial sector - is also a disadvantage, the
result of past failures to develop just such human resources.
It is increasingly noted that the steep decline of Japanese stock
prices is being caused not just by the U.S. subprime mortgage
crisis, but also by foreign investor's desertion of Japan due to
their bleak view of this country's growth potential and its tendency
toward closing off.
Japan, some say, was too busy grappling with the postbubble economic
crisis that lasted for more than a decade in the 1990s and was left
in the wake of globalization's swift advance. But if that is the
case, it simply must work harder to catch up. The harsh reality is
that it has stalled, or is even backpedaling, when it comes to
opening its arms to the world.
There is a creeping sense of isolation here - feelings of being left
behind and missing out. Such sentiments are easy for Japanese to
fall back on, and it is a self-fulfilling process: the more they
feel this way, the more it becomes true, pushing themselves to
"social withdrawal" on a global scale.
Still sounds good
It was in 1986 that then Prime Minister Yasuhiro Nakasone received
the renowned Mayekawa report, which in a nutshell proposed a shift
of economic policy to expansion of domestic demand, more imports and
deregulation, away from heavy dependence on exports. The report,
written by a panel of 17 prominent businessmen, policy-makers and
economists chaired by Haruo Mayekawa - former governor of the Bank
of Japan - was accorded historic significance for its emphasis on
home demand and deregulation.
Two decades on, the report is still regarded as important simply
because its two key proposals - domestic demand enhancement and
deregulation - have yet to be fully achieved. Another similar report
is being considered today.
The fact that the Mayekawa report stands out in the recent history
of Japan's economic policy-making illustrates just how deeply
ingrained this country's inclination toward defensiveness really is.
The Mayekawa report was practically intended to be Japan's answer to
Deng's "reform and opening" agenda, but stronger political
leadership was obviously needed in order to realize its full
Tony Blair, reflecting on the lessons of his decade as British prime
minister, said in the June 2, 2007 edition of The Economist: "'Open
v closed' is as important today in politics as 'letf v right.'
Nations do best when they are prepared to be open to the world."
Domestic reform must be backed by the philosophy that a nation's
survival and well-being depend on whether it can open itself up to
the rest of the world.
For Japan - which constantly recalls its traumatic defining moments,
from the Black Ships in the 19th century to defeat in World War II -
fighting the diehard tendency to turn inward seems to be a perpetual
(Originally appeared in the February 25, 2008 issue of The Nikkei
Weekly, reproduced here with permission.)