The Japanese Economy
A Look at the Post-Bubble Japanese Economy
At the beginning of the 1990's Japan was set to challenge the U.S. as the world's number one economy. It was the time of the Gucci loafers and two Rolex watches worn on the one wrist... by 18 year-olds.
The value of land was astronomical: it was calculated that the Imperial Palace grounds in Tokyo were worth more than California in its entirety. Based on land price, the real estate value of Japan was seven times that of the U.S. Then the bubble burst.
There is now a runaway budget deficit as the government has attempted to spend its way out of trouble by pumping 117,000 billion yen into the economy in the past ten years. As of autumn 2010, debt in Japan was running at 189% of GDP, second only to Zimbabwe.
Department store giant Sogo went bankrupt due to a US$20 million debt. Japan's flag-carrier airline JAL filed for bankruptcy protection in 2010. The lifelong employment system is under threat. It used to be difficult for the big firms to directly fire their employees; now part-time workers and "freeters" make up an increasing percentage of the labor market.
For example, the massive Osaka company, Matsushita, (known better overseas as National Panasonic) had never fired anyone. Once in, always in. Nowadays, some employees who are felt surplus to requirements are left alone in isolated rooms and are given nothing to do, thereby compelling them to resign.
Thousands of people have lost their jobs in the current period of "stagflation." Those who had worked for, or were working for, small companies are especially hard-hit. One of the reasons: the much-vaunted "just-in-time" system (whereby a large company farms out some of its smaller jobs to small companies in the area) suddenly seem uneconomic, particularly because this cosy marriage meant the big companies were not always getting the products at the lowest price. This situation is now changing as profit margins within the big firms have been cut: they seem to be now shopping around for parts.
Mazda is not looking after its home base of Hiroshima any more; instead it's looking after its bottom line. Protectionism in Japan was localized within these relationships, in addition to the institutionalised obstacles to foreign companies doing business here.
What is surprising is that Europe and the States don't reciprocate protectionist measures against Japan. But that would be hypocritical in the face of their own free-trade stance.
In a way, the big company plays a similar role to that of the State in a centralised economy: company housing and benefits mean workers from the same company are encouraged to marry each other, in the hope they will produce offspring as future workers for the great corporation.
Women workers who do get pregnant are usually expected to quit their jobs. How long this situation is going to continue remains to be seen, but temporary contracts are now being offered which will perhaps erode company loyalty.
On the ground in Japan today, what are the visible signs of the recession? In Kyoto, the venerable former capital and cultural wellspring, there are many more taxis than ever before; workers who can find no work in other parts of the country have arrived in large numbers to take advantage of the 40 million visitors which descend on the place each year; language schools have closed; there are fewer and fewer people on the streets in the entertainment districts; and the number of homeless has increased. And this in a city, which, besides tourism, boasts new-economy firms Nintendo and Kyocera among its employers.
The psychological impact on Japanese workers who have been made redundant is huge. They grew up with the expectation that cradle-to-grave security was an automatic right.
Those who have lost their jobs have also lost face in a society that exalts the worker who puts in long hours and who doesn't take his or her full holiday allocation.
The situation in Osaka is particularly acute: the streets around Tennoji are teeming with the unemployed.
The park surrounding nearby Nagai Stadium, which hosted three World Cup matches in 2002, has hundreds of homeless people who try to maintain a precarious living by collecting bottles, cans and cardboard for recycling. It is images such as these that the Japanese authorities try hard to hide from foreign view.