Sat, Sep 19, 2009 - Page 9 News List

Comfortable Japan needs to wake up to its uncomfortable future

Productivity is declining amid public inertia, bureaucratic obstinance and the election of a government that emphasizes ‘happiness’ over economic growth

By Guy Sorman

Forget what you’ve heard about the hard-working Japanese salaryman.

Since the early 1990s, the Japanese have drastically slackened their work habits. Indeed, Tokyo University economist Fumio Hayashi has demonstrated that the main reason behind Japan’s 20 years of stagnation has been the decrease in the quantity of work performed by Japanese.

The government itself has led the way, starting with its decision to close public administration buildings on Saturdays.

Japan’s banks followed suit. From 1988 to 1993, the legal working week fell 10 percent, from 44 hours to 40. This, as much as anything, helped to bring Japan’s long-running postwar economic “miracle” to its knees.

In the service sector, the decline is even worse than in manufacturing, because services are heavily regulated and partially closed to foreign competition. In the retail sector, which employs a huge number of Japan’s unskilled workers — the so-called “mom and pop” shops — Japanese productivity is now 25 percent lower than in western Europe.

Former prime minister Junichiro Koizumi — who was in office between 2000 and 2004 — and his chief economic adviser and minister of finance, Heizo Takenaka, understood all too well that Japan was losing ground in terms of productivity. They sought to counter the trend toward less work through privatization and deregulation.

Japan’s powerful bureaucrats, nostalgic for the 1960s model of development, in which government and its business cronies nurtured the Japanese miracle, strongly opposed this bold, free-market solution.

But their model is obsolete, because Japan now competes directly with many other Asian and non-Asian countries, where work habits are of the type that used to prevail among the Japanese.

Moreover, public opinion never supported Koizumi’s policy, which was alleged then, as it is now, to be a source of inequality. But that is a canard: Real-estate speculation, not privatization, has been the real source of undeserved wealth in Japan. Nonetheless, the newly victorious Democratic Party of Japan (DPJ) has been able to make the accusation stick to free-market policies.

The recent electoral triumph of Yukio Hatoyama’s untested DPJ thus confirmed the popular wish not to follow the free-market model of the US. Hatoyama makes no economic sense in declaring that growth is important but that happiness comes first. Nevertheless, this sentiment does reflect the mood of many Japanese.

Assuming that Hayashi and Takenaka are right about the causes of Japan’s stagnation, one must ask whether today’s Japanese are willing to work more in order to catch up with the US and to lead Asia’s development. Stagnation is a tacit collective choice made by a country’s majority. Have the Japanese people opted for it?

Nearly half of the Japanese population is retired or near retirement age, and they worked very hard to achieve a high level of comfort. Thanks to them, despite the blighted economy of the “lost decade,” Japanese income is still higher than it is in Europe. Moreover, unemployment is low compared with the Western world, because the unproductive distribution sector absorbs young people who cannot find better jobs. Stagnating Japan has thus remained a peaceful and rather conservative society.

By contrast, a higher growth rate would require fewer golf breaks for salarymen and significant immigration in a nation that is unaccustomed to foreign intrusion and different cultural habits. Are the Japanese really ready to accept such a cure?

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