A sign greets passengers arriving at Japan's second-biggest airport: "Welcome to Japan, an International Country in an International World." Just two problems with the notice -- one minor, one major.
First, it's written in Japanese, leaving anyone who speaks anything else in the dark. Second, the message itself -- that Japan, the world's No. 2 economy, is an international country.
It is, by many measures, and certainly thinks of itself as such. Japan maintains close diplomatic relations in all corners of the Earth, its people are avid world travelers and the yen is one of three truly global currencies. And in times of war, Japan is one of the first allies to which superpowers like the US turn for support.
Yet, looked at another way, the reality is very different.
For all Tokyo's pledges to open up its economy to a world dying to get inside, Japan Inc is still struggling to keep things as closed as possible. The reason: Japan has more to fear from globalization than virtually any other nation.
"One cannot underestimate the shock that true globalization would bring to a social system and economy like Japan's, which depends so much on being cut off from the world," Alex Kerr argues in his book, Dogs and Demons When you think of nations vulnerable to globalization, it's developing ones like Indonesia and Nigeria that come to mind. But Japan's unique brand of financial socialism puts it at even greater risk -- or so officials here think. Truth is, Japan has much to gain from opening its economy.
Tokyo has never had much use for competition -- certainly not from abroad. Keeping out imports, or taxing them beyond affordability, is how it keeps the whole enterprise together. That way, companies, no matter how monopolistic or inefficient, can employ the masses and pay them handsomely. Unemployment stays manageable and Japan Inc remains in business.
The fear is that letting in the raw forces of globalization -- capital, goods and people moving freely among countries -- would disrupt things and hurt living standards. Politicians also fear giving foreigners too much influence will disrupt Japan Inc and lessen its control over the enterprise.
It says everything about Japan's fear of globalization, for example, that its first and only free trade agreement is with tiny Singapore. The island nation of 4 million has no agricultural sector and, therefore, isn't a threat to one of Japan's most protected industries.
The trade pact is but one example of how "Fortress Japan" remains largely intact in a world being joined together by globalization. At its core, the concept of free trade is about countries scrapping uncompetitive industries and focusing on what they can produce efficiently and profitably. If you can import textiles, rubber or vegetables cheaper than you can make them, do it. Japan, in many ways, still fights that logic.
"The arrival of knowledge-based economies, combined with the rapid pace of globalization and the profound changes it's engendered, demand flexibility and adaptability which Japan hasn't yet achieved," says Donald Johnston, secretary-general of the OECD.
Take rice, long a symbol of the nation's closed markets and its cultural roots. You'd think that Japan's nutritional staple would be affordable, but it's anything but. The nation's powerful rice industry -- with help from the government -- doggedly protects local producers. Japan's farm subsidies are the highest in the developed world, a dynamic that shuts out other Asian rice producers and forces Japanese households to pay as much as eight times the going global market price.
Last year, East Japan Railway Co had a public-relations nightmare on its hands when it began selling boxed lunches packed with US organic rice and other foods. Agricultural groups and workers picketed, forcing the company's executives to apologize.
But why should Japan Railway be sorry for doing something that's good for the consumer? The US lunches were half the price of the Japanese-made ones.
Japan's trade policies haven't won it many friends around Asia. To many, the policies of Prime Minister Junichiro Koizumi have been guided by Tokyo's fears of losing ground to an increasingly vibrant China. One recent spat involved imports of Chinese leeks, mushrooms and reeds used to make tatami mats. Japan backed down, giving free-trade advocates an important victory.
Myriad other industries here are fighting the world, too. A group of former government officials wants to buy Softbank Corp's stake in Aozora Bank Ltd to prevent the lender from being taken over by US-company Cerberus Partners LP. The reason: Tokyo has found it hard to control the activities of foreign-owned banks.
Non-Japanese banks, for example, are less inclined to keep afloat struggling companies.
The Snow Brand affair is another microcosm of Japan's anti-globalization stance. The food company, which poisoned 13,000 consumers in 2000, earlier this year was caught cheating the government. But the real outrage was when some foreign companies expressed interest in buying Snow Brand. Tokyo acted quickly to block.
The episode provided a telling look into Japan Inc's efforts to keep its coughing, wheezing model alive. It's fine for Snow Brand to imperil the health of Japan's children, cheat the government and seek a taxpayer-funded bailout to stay afloat. But let a foreign company buy a stake in the company? Never -- that would introduce global competition where there's none.
The Japan Center for Economic Research recently ranked 31 countries on how they've embraced globalization. Japan came in 28th -- only Indonesia, China and India faired worse. "It's not a good performance," the report's authors admit. Of the 374 Japanese companies surveyed, 40 percent worried globalization would have a "negative effect due to excessive competition." In his book, Arthritic Japan, Edward Lincoln argues that Asia's biggest economy fears global competition because it's uniquely ill equipped to respond to it. While other nations tap the full potential of capital markets, Japanese banks remain at the top of the financial food chain. Tokyo's huge national debt, meanwhile, crowds out private issuers, limiting growth opportunities.
Lincoln also highlights long-term contracting among firms, which reduces bargaining power, not to mention the forces of supply and demand. It's no wonder that Japan-watchers are excited about Wal-Mart Stores Inc's entry into Japanese retailing. Many think Wal-Mart will single-handedly disrupt the nation's cartelized distribution system.
Consumers here pay far more for everything from books to food to bicycles than folks elsewhere because of the nation's multilayered distribution system. Middlemen have to go through middlemen to buy or do anything, which keeps prices artificially high. Add in the fact that Tokyo shields domestic producers from foreign competition and you have the perfect recipe for a nation where things cost way too much.
Japan's labor market practices -- which feature seniority-based wage scales and lifetime employment -- also are having a hard time surviving globalization. It stifles the innovation, entrepreneurship and labor flexibility that helps other economies thrive.
Those wondering what happened to an economy that a dozen years ago was the envy of the world need look no further than globalization. Japan failed to keep up with changes in the global economy, and the bureaucracy that guided its post-war boom -- keeping out foreign goods and ideas -- is impeding growth.
No economy has perfect free-trade credentials, including the US. After all, Washington aggressively protects its farmers and, more recently, its steel producers. Yet it's hard to think of a place that fears globalization more than Japan and, ironically, has more to gain from it.
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