Leading article: Japan in crisis? - Don't panic

Share
Related Topics
WHEN THE chairman of Sony says "the Japanese economy is on the verge of collapsing", it is time to sit up and take notice. Especially when he adds a warning that this could "trigger a worldwide recession". To be blunt, even the news that the Japanese economy is going belly-up will hardly cause most people in this country to look up from their Fujitsu computer screens.

But when the man who makes Walkmans compares the inaction of the Japanese government to that of the American in the face of the 1929 depression, then we feel the stirrings of unease. Anyone with a moderate interest in current affairs will be dimly aware that the Japanese economic miracle has been in a spot of trouble for some time. It is ominous that prices have actually been falling in Japan, a sinking feeling not experienced in the West since the Thirties.

The casual student of world affairs is also likely to know that the so- called Asian tiger economies of Korea, Malaysia, Thailand and Indonesia have rather abruptly ceased to function as role models for the brave new world of dynamic capitalism. We may not have at our fingertips statistics such as the fact that east Asia has contributed three-fifths of world growth since 1990, but any intelligent observer can speculate that an Asian collapse taking down Japan as well as the "tigers" could drag down the rest of the world.

So is there cause for fear?

The first point to understand is that Sony is engaged in lobbying the Japanese Prime Minister, who arrived in London yesterday for an Asian- European summit. Here, he will come under renewed pressure to do two things: to reflate the Japanese economy and to reduce further the trade barriers that surround the Japanese market. Both courses of action are strongly supported by Japanese business leaders, disdainful of the narrow domestic outlook of Japanese politicians.

The second point is that, however deep and prolonged the Japanese recession might be, we should remember that it is a very rich country with a skilled and disciplined workforce.

Nor should a big downturn in the Far East - if that is what it turns out to be - necessarily harm Europe and America. We are so used now to the rhetoric of the globalised economy that our future as an open, trading nation might seem more vulnerable than ever to the backwash of global economic tides. But in fact the greater complexity of the world's trading system offers automatic protection against Thirties-style deflation. The response to the holing of the unsinkable Japanese economy is not, then, to scurry for the lifeboats, but to endorse Mr Ohga's plea for reflation and reform.

There is not much we in Britain can do to reflate the Japanese economy - we are already doing what we can by keeping the pound high and buying expensive four-wheel-drives by the shipload.

But we are well placed to offer advice on how to reform Japan's financial institutions, because we have been there ourselves. Back in the 1950s, when Sergeant Bilko found the idea of a radio that was "Made in Japan" hilariously funny, Britain suffered a similar problem to Japan's today. We were stuck in our ways, a set of ways which had been successful - which had indeed ruled much of the world - but which had ceased to work.

Now Japan has found that its manufacturing techniques can be replicated elsewhere, while its conformist education system does not produce the creative skills likely to succeed in the next wave of the global economy. It is notable that while Japan excelled at making hardware, it has fallen behind Bill Gates and British programmers when it comes to software.

Meanwhile, the closed nature of the Japanese financial system means that the Japanese economy cannot easily draw on the resources of international capital markets. In the Eighties, British financial institutions were opened to the world and the attitudes of managers and workforces transformed. Japan's financiers had their "big bang" this week, but they still have a way to go to achieve open, transparent markets.

Already there is an intellectual acceptance of the need for change in Japan, but it needs political leadership to make it happen. So it is right that Mr Ohga should put pressure on the Prime Minister, Ryutaro Hashimoto, to accelerate reform.

It is important to us, too, in the long run, that Japan should succeed. If Mr Hashimoto and his successors can get this right, then Japan will be one of the leading powers in the world in the 21st century. If they do not, that role might pass to China. Imperfect as Japan's liberal democracy might be, it is infinitely preferable as a global power to China's totalitarianism.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Test Analyst

£20000 - £30000 Per Annum: Clearwater People Solutions Ltd: An experienced Tes...

Mechanical Design Engineer

£35000 - £45000 per annum + competitive: Progressive Recruitment: MECHANICAL D...

SQL DBA (2005/2008/2012, projects, storage requirements)

£45000 - £50000 Per Annum + excellent benefits package: Clearwater People Solu...

Copywriter - Corporate clients - Wimbledon

£21000 - £23000 per annum: Ashdown Group: Copywriter - London As a Copywrite...

Day In a Page

Read Next
Ed Miliband, talks image politics with Andrew Marr  

Ed Miliband’s Question Time ripoff: Another proposal about style, not substance

Bobby Friedman
Tiger skin seized from a smuggler by customs officers in Lhasa, Tibet  

Save the tiger: Poaching facts

Harvey Day
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried