"The economy just sucks -- it really does!" Nothing ambiguous about this view offered by Junpei Mitsusada, a 34-year old luxury car salesman. Though he won't say how much his annual pay has decreased in recent years, he leaves no doubt that Japan's weak economy is crimping his lifestyle. And those of his customers.
"A few years ago, I was going to France on vacation -- sometimes even Spain," he explains. "Now, it's more like a long weekend in Okinawa. I'm not eating out as much as I used to -- or buying new suits as often as I used to. And what's the government doing about it? Nothing." Experiences like Mitsusada's explain why the world is so worried about its second-biggest economy. Ditto for Standard & Poor's, which yesterday cut Japan's credit rating one notch to "AA-" -- its third move to downgrade the nation in 14 months.
Japan's rating outlook remains negative and Moody's Investors Service has threatened a two-notch downgrade.
Heads in the sand
Tokyo's response to S&P's action was as telling as it was disturbing. Asked about the downgrade, Haruhiko Kuroda, vice finance minister for international affairs, said he "doesn't understand" why it happened. Finance Minister Masajuro Shiokawa took it as little more than a "suggestion" Tokyo needs to do more to fix a banking system awash in non-performing loans.
When you really think about it, that's exactly Japan's problem. Credit ratings in New York, economists in Tokyo and car salesmen in Osaka get that Japan's economy has deep problems, but those in charge don't. If they do, they're not admitting it.
Certainly, Kuroda's dismissal of S&P's move -- he said it "has no effect on the yen" -- is little comfort to investors who want Tokyo to take recent downgrades seriously.
All of this gets to the heart of Japan's malaise -- and why it will be with us for years to come. The nation has lost its way and ideas to find it again are in short supply. Far from helping, massive borrowing, aggressive spending and zero interest rates have left Japan in worse shape than it was a decade ago. Instead of acting to repair things, politicians dither.
The economy may be Japan's biggest, clearest and most present danger, but politicians and journalists are on to a much sexier story. It involves a sudden rash of politicians caught up in scandals. Japan's leadership and those who write about it seem to think the misdeeds of politicians who aren't doing their jobs anyway warrant more attention than Japan's moribund economy.
Scandal more appealing
Disgraced politicians like Muneo Suzuki, Koichi Kato, Kiyomi Tsujimoto and others should be scrutinized and, if appropriate, prosecuted. Yet the energy and enthusiasm being expended on scandals is perplexing for two reasons. First, such misdeeds are hardly new here. Just like the gambling police chief in Casablanca, it's disingenuous for Tokyo to pretend to be shocked over corruption. Second, they pale in comparison to the larger wrong being committed by Tokyo's political establishment -- economic mismanagement.
A major reason Japan hasn't changed is fear of what real economic reform would uncover. Bank executives who have hidden debts and inflated profits for years would be exposed. Corporate bigwigs no longer would be able to pretend their businesses are financially stable. Politicians who looked the other way and enabled that process also would be found out. And so everyone winks, nods and sweats a bit to hold Japan Inc together.
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