Tuesday, January 3, 2017

How Japan resists the populist tide


JANUARY 3, 2017

After December’s No vote in the Italian referendum, the rise of Mr Donald Trump and the British vote to leave the European Union, it appears that the political landscape of the developed world is being redesigned by the victims of globalisation and technological change.

Anger towards political elites is pervasive. Yet a few rage-free zones remain, of which Japan is the most conspicuous. How come this country, whose economy has been in the doldrums for two decades and where the suicide rate is vastly higher than the global average, is not in the grip of anti-establishment populism?

The docility of the Japanese certainly appears counter-intuitive. This is, after all, a country that has suffered from debilitating deflation since the late 1990s, and where wages have lagged behind productivity growth for years.

Since the bursting of Japan’s notorious bubble in the 1990s, the loss of wealth has been huge. Nomura Research Institute’s chief economist Richard Koo has estimated the cumulative loss of wealth on shares and real estate between 1990 and 2015 at ¥1,500 trillion (S$18.5 billion) — three times America’s loss measured in relation to gross domestic product in the 1930s depression.

The 2011 earthquake and tsunami, together with the Fukushima nuclear meltdown, cruelly exposed the incompetence of the government and business leaders.

Meantime, there are plenty of people in Japan’s rural areas who feel as neglected by the political elite as the workers in American rust belt states and the English regions.

Ah, you say, but Japan is not the kind of society that throws up manic populists such as Mr Trump or Mr Beppe Grillo, the comedian who leads the Italian Five Star Movement opposition party. In which case, think again.

The novelist, film director and journalist-turned-politician Shintaro Ishihara, governor of Tokyo from 1999 to 2012, is an extreme nationalist right winger. His views about foreigners are notorious, and he provoked international outrage by claiming that the Rape of Nanking was a fiction made up by the Chinese.

Yet his populism failed to resonate with the wider electorate. When he set up his own right-wing nationalist party in 2010, it went nowhere.

Of course, it was no help to Mr Ishihara to be confronting a liberal democratic party led by the strongly nationalistic Mr Shinzo Abe. But it may be more fruitful to look elsewhere to find an explanation for Japanese exceptionalism.

The starting point might be the extraordinary hierarchical, consensual and inclusive nature of Japanese society. Consensualism was particularly evident in the solidarity with which its citizens responded to the tsunami in 2011.

While inequality has risen recently, it is still much less striking than in North America or Europe, not least because Japanese chief executives are paid much less than their equivalents in the US.

The crime rate remains astonishingly low. Importantly, and perversely, given Japan’s shrinking population, politicians are reluctant to permit much immigration.

Japan is also a winner from globalisation in the sense that, in the two decades before the global financial crisis, it ran persistent trade surpluses. Admittedly, its electronics industry has been devastated by international competition, but the notion that the economy has suffered lost decades is a distortion wrought by adverse demography.

In absolute terms the economy has shrunk, but in per capita terms it compares reasonably well with the US over the past 15 years.

Unemployment is just 3 per cent, and at its peak after the crisis it was a mere 5.5 per cent.

If that picture looks implausibly rosy, that is because it is — at least partly.

For the Japanese economy suffers from a structural imbalance between the household and corporate sectors, whereby policy has looked to business to address deficient demand while penalising household consumption.

Gross government debt, crazily high at 240 per cent of GDP, hangs over the economy like a sword of Damocles.

And while income inequality may be low by international standards, there are other inequalities. Old folk in big cities who enjoyed secure employment and seniority pay — and those in employment who still do — are hugely advantaged relative to the young and to low-paid part-timers.

Sahoko Kaji of Keio University detects a dangerous turbulence below the surface. She worries that because the young vote less than the old, the democratic process is not picking up the angry voices of the underprivileged.

Maybe Japan prefers to express its protest via the suicide rate than the ballot box. Nevertheless, its immunity from the populist political tide remains remarkable.



John Plender has been a senior editorial writer and columnist at the Financial Times since 1981.

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