I've been asked by a variety of publications to write about my thoughts about Japan. I would love comments of my first draft.

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version 0.3
People call the last 10 years "Japan's lost decade." There is debate after debate about the cause of the Japanese economic downturn and what should be done about it. Nobuyuki Idei, Sony's Chairman, calls it Japan's middle age crisis. After the war, Japan was young and low-cost. Targets were set and everyone worked very hard to build Japan into the world's second largest economy. Now Japan is expensive and aging. It has to change from "young and single-minded" to "old and rational".

In post-war Japan the targets were clear. The ruling political party promised to double everyone's income. Japan could compete in manufacturing because of its able and low-cost labor force. As the large automobile and consumer electronics manufacturers competed globally and earned money for Japan through exports, the bureaucracy distributed the wealth evenly in Japan and protected the domestic industries from foreign as well as domestic competition. The central government's mission to double the income of all Japanese citizens meant that it was necessary to channel the funds from Tokyo to the rural districts of Japan. As the costs in Japan increased, these funds were used to subsidize agriculture as well as fund public works spending to feed the citizen for whom farming was no longer a viable option. This flow of funds created the basis for the current political structure where rural Japan relies on the central government for funds and has a much higher representation in the Diet due to the weighting of voting system.

While Japan was growing, it could afford to fund the ever-growing political machine. It could also afford not to change. Aging Japan is now faced with an increasingly competitive Asian manufacturing sector and a change in direction and a reallocation of resources focusing more on services is required. Japan is stuck with a system pointed in the wrong direction without the ability to change the direction. The domestic services sector is inefficient and unable to compete globally since it has been protected by the bureaucracy and has never had to compete with anyone. The markets are dysfunctional and unable to reallocate resources. The political system is unable to lead the nation.

Professor Lawrence Lessig points out that in a true democracy, there are multiple points of authority, the ability to criticize power without fear of retribution, critical debate and a competition of ideas. This is rather inefficient when there is a consensus on the direction of the country, but democracy is essential when a nation needs to change. Post-war Japan consolidated power in the ruling party. People were educated to be obedient. Harmony was maintained by co-opting or disabling people or organizations that could threaten the system. Diversity in the media, a strong judiciary, diversity in education and political diversity were stifled for the purpose of maintaining harmony. This harmony that once protected the happiness of the citizens of Japan is now the primary barrier to change.

At one time Japan was viewed as a competitive threat to the United States. "Revisionists" in the United States tried to force policy changes in Japan. Many Japanese have very bad memories from this period. In addition, Japanese generally do not enjoy discussing domestic issues with the outside world, feeling that the issues are either too complicated for non-Japanese to understand or fearing external pressure on internal issues. Japan is no longer a competitive threat to the world. Japan's inability to recover from the economic crisis is a threat to the global economy. Japan needs build a true democracy to execute the reallocation of resources required for a long-term recovery. Japan would benefit greatly from exposing the domestic core problems to the Japanese public as well as the rest of the world. Japan's core problems are its dysfunctional democracy and the lack of diversity. The system is self-perpetuating and is extremely resistant to change. It hides behind the powerful and complex bureaucracy and the monolithic media that does not represent a diversity of opinions.

Because the system is no longer able to change itself, a revolution is required. Japan must install a modern democracy and empower the people to participate. Revolutions to install democracies do not occur through negotiation with bureaucrats or academic debate. Revolutions involve people becoming upset and forcing change. Revolutions in the 18th century involved bloody wars and uprisings. 21st century revolutions will involve a public debate, which changes the ethics of the people. Japan has a constitution and almost all of the laws required to be a functioning democracy. What it lacks is the attention of the people and the ethics to execute on the rule of law.

The Japanese people are also beginning to show their unhappiness. Governor Tanaka of Nagano, an independent promising to shut down public works and crack down on corruption, was voted into office by people who were upset by the corruption and were willing to suffer short term pain in order to fight the corruption.

The combination of increasing public debate on the Internet and a global dialog will help the Japanese people become aware of the domestic problems as well as the context and responsibility of Japan globally. A new sense of global responsibility to achieve a higher ethical standard will help the Japanese people create a modern democracy capable of solving the domestic problems and allowing Japan to participate in the global geo-political arena as a true global entity. The revolution in Japan will be a ethical revolution about the people become aware that they are actually in charge.

41 Comments

I like the article overall but I would appreciate some facts to back up the opinions.

For example, how is Japan's social demographics changing? Could you provide some statistical analysis or similar? What are the explicit economic conditions that Japan is undergoing today? How about the historical precedences from economic history or such that could be tied into your analysis?

Without burdening you with an increased scope for your thoughts I would like to know what you view as the role of the large Japanese corporations which have shifted their production outside of Japan to avoid the negative aspects of the stagnating Japanese socio-economic conditions?

What about Japan's urban youth and the surrounding culture? What trends do you see there to push away from the status quo?

What are the resistant / reactionary forces to changes you identify? How entrenched are their position and how might it be shifted?

You allude to a connection with the Boston Tea Party and perhaps other revolutionary catalysts but I'm not clear what you see as a possible analogy in Japan.

I'm also not convinced that dialog and poor circumstances are enough motivation for change. What is the watershed you see for change? Has it happened or is it something that will likely happen? What straw will or has broke the camel's back?

I hope you see where I'm going with this. I see a statement of discontent and a good expression of historical forces at work but I don't see solid reasoning or planning in your thoughts in this piece. Perhaps this isn't the intent but it sure would push the article to a more inticing level.

Not so much a comment as a question... is there/will there be a japanese version of this essay? I would like to share it with my japanese in-laws when you've published the final version.

Roman. I think this will be translated in some form into Japanese. I will post it when it is.

Seyed. Thanks for the comments. This is helpful. One of the problems is that I have to keep the op ed around 800 words and another piece needs to be pruned down to about 200-300. Do you think that the article is trying to cover too much without substantiating my claims?

There is a great deal of existing literature and data about the Japanese economy already. Japan is demographically the most "aging" society in the world. There is a good UN population report and other figures I can add to support this. There is no historical precedent for the state of the economy in Japan. The deflationary spiral is a world's first. Paul Krugman argues that it is a matter of monetary policy, not structural reform. I argue that structural reform is necessary to execute a monetary policy. There is also clearly a misallocation of resources due to the dysfunctional market.

Companies moving production offshore is natural. I think the real risk is that large companies are unable to innovate efficiently, yet they retain the talent and the R&D funding. Venture businesses and risk-taking entrepreneurs are not supported.

Resistance is very entrenched. I can go into detail here, but basically it involved a relationship in each domestic sector between politicians, bureaucracy and domestic companies.

I think the example of Governor Tanaka shows that people are willing to act. It is sort of a Boston Tea Party. They are dumping public works funding to protest corruption. I think the real tea party will come when the Japanese understand where their tax money goes. Especially during these hard times... Follow the money. It's clearly being mismanaged and is easy to track if people focus on it.

So my question is... I think your questions are good questions and can add a lot to my argument. I will try to write a longer essay with more evidence and facts. Do you think that the article as it is does not work because my claims are too broad? Should I cut out some sections and substantiate more of the core claims?

Thanks again for the comments.

I think that the problems in Japan can probably be summarized a little bit, as it's pretty clear what they are at this point.

The thrust of the article is that Japan needs a revolution. Upon reading it, I start to think "How could Japan possibly have a revolution like this, given the current state of affairs? It's not gonna happen...".

What I'm really curious about is how this revolution could actually happen. (I don't know if this is what is expected for this article -- this is just my opinion so feel free to disregard...) What is going to bring the crisis of consciousness that will start the revolution?

Maybe it's Shinsei bank. Maybe it will happen when Japan's financial ratings are downgraded so much that they really feel shocked and embarrassed. Maybe when Korea or China passes them by... I don't know, but these are the things I really wonder about... ;)

I think you need to be a bit more direct. I think you should say that Japan must jump before it is pushed.

In my view, reform in Japan is inevitable, although it could be put off for some years. Howefver, Japan has a choice as to how it can go about reform.

1. It can do it the Easy Way, where Japan finds new ways to compete and collaborate with the rest of the world. This includes developing democracy, a free press, entrepreneurship and all the rest of it.

2. Alternatively, Japan can do it the Hard Way, whereby reform is forced upon the country as foreign influences slowly gains strength. This is being made inevitable by things like greater mobility, the WTO and a weakening currency.

The question I think you should pose is whether the Japanese Establishment is going to jump into reform on its own terms, or whether it is going to be pushed into a reform that is not of its making and beyond its control. If it waits to be pushed, the situation is going to be very very painful for many ordinary Japanese people.

Joi-san, something commentators often forget is the fact that Japan has never been a changeable society. As a society, Japan has always required catastrophe to change.
The Tokugawas won their big change with war, and brought the seat of government to Edo. The system the Bakufu set up protected vested interests. That's where the concept of "noren wo wakeru" came from. Of course, the Bakufu's entire system was geared toward maintaining the status quo. And it shut out foreign influence (nearly) for that very purpose.
So the next change in national direction came when Commodore Perry showed up with the threat of extreme force. But it still took from 1853 to 1868 for the government to topple. It had to topple. It was unable to adapt and had to be abandoned.
A new vector was set up by the Meiji genro, including a fairly comprehensive rewrite of Japanese history and installation of Shinto as the national religion. This national vector continued until the end of WWII.
The catastrophe of WWII and its aftermath forced Japan to change directions again. The pre-war leaders lost their credibility and young lions took over. (Interestingly, many of those young lions, such as Yasuhiro Nakasone, were products of the Japanese military colleges.) And when the communists tried to unionize on a national basis, they were crushed when the politicians made a deal with the syndicate (something you didn't mention in your article).
To make a long story short, I think major change will not come to Japan without a catastrophe.

My advice on your 800 word article would be to narrow the focus and deepen the treatment.

Charlie

Thanks for the feedback. The hardest part about this article is that MOST of the indicators and historical precident as you point out say that Japan needs a catastrophe to change and that probably a real economic meltdown in say 2007 or 2008 will force change. My position is to try to find positive deviants such as Governor Tanaka to show that maybe there is hope. The difficulty of focusing on HOW the revolution will happen is that HOW it will happen is the hardest to predict.

And Antoin... I don't think the Japanese Establishment will agressively reform. It can't. If there is a revolution it will be by the people with possible support from global forces in the market.

Trevor... I think that macro issues will not cause people to act. I think it will be Mrs. Watanabe realizing that as she pinches pennies to feed her family, the government is wasting the tax money, putting her postal savings deposits at risk. I know many people who feel the squeeze of the economic crisis kicking in. If they blame the Establishment and force accountability it might change. I know it's difficult to image, but so was an election like the one that happened in Nagano.

You seem to feel as I did when I lived in Japan in '76 (as an exchange student). I could see the "cracks in the seams" even then....lack of flexibility....political dark ages...the use of "polite" tradition to be plain rude in business....but of course the economy was good then.

I bet you could point out a broad range of disenchanted...from cyber youth - to OL's - to home makers.

more pics of food -- I miss it the most!

rdl

A lot in a nutshell

Joi-san, do you know if there is such a thing as referendum for national politicos? Notice what those people did when the mayor wanted to tear down their school and build a new one (for his construction industry cronies)? They got up a petition and forced a referendum.

Politicians see their posts as inheritances, if you will, positions to be passed on from generation to generation. A good referendum would set a few straight. I was totally amazed by the arrogance of the hantaiseiryoku who opposed Inose-san and the council for privatization of the Japan Highway Public Corporation. My Japanese wife was flabbergasted. Yet they get re-elected. Yeah, national referendums on specific hardline old guard politicians. Then a law to limit terms in the Diet. And finally, a law that says prime ministers must retire from politics after serving their term.

Also, one wonders why the women don't get up in arms. I thought when Takako Doi made it that women would get a burst of power . . . no such luck, at least not in the political arena.

I like your blog, by the way.

charlie

Joi,
I'm glad you mentioned the in-balance between rural and urban voting strength. When I first heard a bit this - I was shocked.

I also was freaked out when I heard of Nomura's colusion between their bond customers - and their retail stock salesforce - selling stocks based upon the premise that the price would go up and the cash garnered from the bond sales - would cost these bond issuers 'nothing'. That sort of thing is illegal over here and I believe to be another 'insiders' game in Japan's system.

That and the fact that ALL (or seemingly all) board meetings are held on the same day - to prevent Yakuza henhcmen from disrupting shareholder's meetings, says about all you need to say.

- Marc

You write

"The political system is unable lead the nation."

which needs a grammar check.

As to the substance, you might be interested in Karel von Wolferen's book "The Enigma of Japanese Power", 1989, which makes similar points.

And I miss some kind reaction to the
Nation built on intellectual property
concept. You are reasoning about how to decide things in a more democratic way. What strategy should a more democratic Japan take? Do you agree with the idea that intellectual property inflation is going to save Japan?

I love Wolferen's book. It's a classic.

I think that the way people think about intellectual property is still a bit weak. I think that things are become much more context oriented. I'll try to write something separately on that issue.

Thanks for the grammer check.

Marc, related to your point is that Sony is still one of the few companies that will soon have more outside directors than board members who also work at the company. The logic of Japanese companies is that outside board members don't know enough about the company to exercise good judgement, which sounds like very circular argument to me...

If change is underway and the revolution of transparency and feedback will reveal it -- an example of the revolution in practice would ground your arguement.

There's an important aspect that's missing from this theme: The influence of the media. Any plight or cause can only be highlighted through the channels that are available to the population in general. That means traditional media like newspapers and TV. Not that I'm saying it won't happen - who knows? - but I just don't see it happening anytime soon. The way I perceive "mass communications" in Japan is as a huge vested interest, with many long tentacles dipping into the pockets of people who happen to have reasons to be resistant to change.

Joi-san:

My humble comment and curious question - 1)who is your target audience of this essay?, and 2)what is the message?

Is this something you portray the current situation of Japan for non-Japanese speaker, advocating for change from outside? or Japanese native speakers are also included in the audience, and suggesting for change among inside Japanese?
Japanese people are so bad at public discussion/debate (I myself hesitated to post this because I seem to be the first Japanese (living in NY though)).

I think there is a cultural thing rooted in the past couple of hundered years, but the internet seems to be a good break-through medium even in the Japanese society. That's whay I see some potential of Joi-san's evangelical role to spread blog culture in Japan.

Anyhow, I just thought it's important to make it clear where you stand. It could be observer's standpoint(like Wolferen), cheerleader's(Tom Peters(?)), or leader's (like Jimmy Stuart in "Mr. Smith goes Washington=my favorite movie).

If you need to translate the piece into Japanese, I will do that- :-)

ichi

Hi
Just a question which came up after reading ichi's post. Can you direct me to some interesting japanese bloggers?

Thanx
Roger

Joi, given the brevity required for the piece perhaps your article is too broad without being substantive enough. Perhaps reducing it to a simpler but more forceful argument would be prudent.

I think to cover the picture you portray in the piece you would need more depth and perhaps at least 2000-3000 words. 4000-5000 would be overstretching it and perhaps a little too academic for a general audience.

Of course, it also depends on the audience you're aiming for but if it is intended towards a general, educated audience the larger scope leaves too many questions and seems a little too fluffy for the uninformed.

That said, thanks for your answers. I'll keep reading this blog for more interesting insights.

I firmly believe the key a Japanese Revolution will be:
a) Identifying the reactionary elements that oppose it (and working out how they can be circumvented)
b) Identifying the breaking point which will cause popular change (and pushing that point forward)
c) Identifying the eventual model and people which will shape the post-revolution system.

Historically when these pieces fit into the minds' of determined individuals revolution becomes inevitable and potentially immediate. It's not about the macro forces but about the individuals who shape them for their own purpose. History pivots on people not on trends alone.

Nice to see you are brave enough to write that down ITO. Keep up the great job !!! Regards from Brazil...

It's true, it's a lot in a nutshell. I think you could develop a bit more about how the revolution might take place, one or two scenarii (ever saw Gasaraki, the manga series, you should read about it, there is an interesting theory being developed about a way to change Japan), I agree with Trevor Hill's post. You should speak about the different classes of people and about youth nowadays compared to what they looked liked 10 years ago. I think you could also add a line about May 68. I've always lived in Europe and when I got to Japan, I was really shocked by the people's submission to the state and I really share your opinion about the revolution. I think that it really shows that Japan hasn't add a May 68 equivalent. I'll repeat again that you talk about revolution but not enough about the people who would do it. Is there anybody? Is there any real interest? I heard smbd say one day that if tmrw the Emperor was reinstated, nobody would really mind, and they would just go about their biz as usual.
Sorry I threw all of that like this, it s messy and incoherent but I feel better now.
Good luck with it!!
Paul

Wow -- this particular topic seems to have solicited the largest response and reaction yet. You've already posted a new revision in less than 4 hours after I read the previous one. Good job -- always great to see serious dedication.


That said, I've got some personal thoughts, suggestions, and responses to what others have posted. First off, it might be helpful to refer to this by the doyukai (which I found through your site). For those who have not seen it yet, it's titled "How to Make Japan a Place Where Non-Japanese People Want to Visit, Study, and Work". There are number of statistics in the back which I think would be helpful in supporting some of your claims. I don't come from the camp that says numbers are everything, but unfortunately it's the only thing certain albeit influential people follow. (the link points to a "tentative" English translation; the Japanese version is somewhere around the same site). Those numbers, and the comments and suggestions pointed out in the document, might help answer some of Razavi's questions.
A number of responses also comment about the length of your essay. Personally, I think a short, broad essay would do more harm than good. My impression is that there is general agreement things will change (politically, economically, etc.), and that the main question is when. A broad essay without specifics could be construed as repeating the same ol' mantra. I would suggest picking a specific point (you mention flagrant tax abuse often), and get some people red in the face with hard facts. The reaction you seek will only come about by people who are pissed-off. At the moment, I do not have a very clear understanding about where my tax money is going, but because I do not know it is going somewhere necessarily bad, I have nothing to fight against. Perhaps you could suggest a few installments of your essay, picking a second topic to chew-up. You comment "Follow the money. It's clearly being mismanaged and is easy to track if people focus on it." The problem is, you hang out with the elite -- most of Japan does not. As you write, you must remember who your audience is -- not necessarily the currently established. That is part of the point. You don't necessarily want the already established -- you want those who don't have anything to lose because they've lost it all already. Many things may be obvious to you, but they certainly are not to most. Your recent heated encounter with a higher-up from a "BIG" company is a case in point -- all your smoozing with the nice elite had clouded your perspective of who your real enemies are.
I am generally in agreement with Whipple-san when he says "major change will not come to Japan without a catastrophe." I would not be surprised if China, still a financial peon in comparison to Japan's market, surpassed Japan before anything changed. Apathy is one of the toughest attitudes to challenge, and the Japanese are all too just that. Couple it with a cultural aesthetic to maintain harmony, and nobody will want to make the first move. There needs to be a larger initial focus on the why before the how. Why is diversity good for Japan? Why should there be change? Why does Japan need to open up and maintain a strong presence? I do not believe most of Japan believes in any of those questions to even want to get involved for change.
It occured to me that you believe in a top-down approach to reform; you state "If there is a revolution it will be by the people with possible support from global forces in the market." To me, this reads as if the elite are the only ones who can make a change. The word "revolution", however, conjures images of peasants and lower-middle class raising arms against the aristocratic. Perhaps a clarification of 'revolution' would be helpful, considering there have been comments about the actual extent to which one could happen in Japan.
A final thought -- it might be helpful to have your essay printed in something like Tokyo Headline, published by maverick Kiyoharu Nakayama. (I read about him in Metropolis magazine). Sounds like he fought some serious uphill battles against the more established media, but now has a solid base of readers. Thing is -- those are the readers who will likely be more receptive to your radical thoughts and suggestions. And by having a series of essays (perhaps not as often as Ohga-san's daily bio in the Nikkei last month), should create an army, however small, of devoted fans. One issue will only hit so many readers, but by having a few issues published, you extend your viewership by magnitudes, given that people always miss one or two occasionally. And definitely invest in having it out in Japanese first -- Japan is not diverse enough even now to have any changes brought on by a foreigner.

Recommend revisit "needs build a true democracy," as a grammar check item. Paragraph starting with "Because the system is no longer able to change itself, a revolution is required..." reads in a very staccato way. Perhaps this is effective, considering its almost violent thrust, but this is simply to say that it might read better if perhaps some sentences were combined into one. Suggest the following three as candidates: "Revolutions involve people becoming upset and forcing change. Revolutions in the 18th century involved bloody wars and uprisings. 21st century revolutions will involve a public debate, which changes the ethics of the people."

This rings true. Consider that in the United States the "person of the year" in Time Magazine last year was 3 women whistleblowers, who stood up to the elite. Is Japanese society capable of making heroes out of whistle-blowers who embarrass the elite? Until the answer is "yes," they may not be able to get over their problems.

As an aside, China appears to be on the same growth path as Japan, with perhaps the same dead end as well.

Reference found on Doc Searls points to well-written article on Ratcliffe.

Joi,
It is an excellent essay.
I would like to add a few points.
We have to count on yanger generations for the change.
Japnanese government has accumulated and is accumulating enormous amount of debts, which will have to be paid back by future generations in Japan. My understanding is that about 50 % of national pension funds for the retired people are financed from the general budget, which has a huge deficit. This must mean that future generations will have to pay back the funds used for the current pensions using their future earnings. (Please let me know if I am wrong on this point.) Also, the future obligations of the national pension system for the future generations are huge, considering the fact that there will be much more older people and less yanger people in Japan in the future. Yang people in Japan should be very concerned about their future financial obligations.
Politicians and bureaucrats, which are controlled by the older generations, are not facing this huge problem. There has been so much debates on the bank problems, but I have heard very little public discussions and debates on this issue. We should educate yanger generations and warn them.
Masat Izu

Your essay provides a rational look at things but is not particularly convincing. Don't take this as a flame, but rather it just doesn't strike a chord in this tokyo resident. Let's look at the skeleton of your essay:

Japan's last 10 years have sucked

Japan's postwar system worked for a while.

Now japan has competent regional competitors.

A good democracy with diversity is a good system. Japan does not have a good democracy or diversity. And the problems are mounting.

Japan does not share its problems and has a flawed democracy.

We need a revolution. But not a bloody one.

Nagano had a mini-revolution.

Through dialog within and outside japan, we'll get our revolution.
(end summary)

My biggest beef is that structurally, there's a rehash of problems taking up the bulk of your writing, followed by some musing that comes across as philosophical rather than grounded in truth followed by an unconvincing 'solution step' that leaves me thinking, "ok great. lets get an army of constitutional scholars arguing on loudspeakers in front of shibuya station. As Joe Blow I should just keep doing the status quo and not expect that a bunch of scholars will overthrow the LDP any day now." There's no next step.

And some tidbits of const. crit:
-the Nagano piece:it seems to undermine that the system cannot fix itself.
-Lessig: he's a great scholar but he's seen as the authority on intellectual property rather than great democracy (i know, he's a const. scholar who saw e. europe reborn and all but I don't think many people know that).
-Who's responsible or best able for fixing this problem or starting this revolution? Is it the people, the large commercial interests, small business, who??
-The final statement citing 'internet debate' as a saviour seems like deus ex machina. Blogging is cool and foreign criticism comes from really smart people but will it really save japan?
-Style: There's a ton of musings you could cut. I think it would make your argument stronger.

Chris

Great writing. Absolutely great. I'll post some misc comments separately...

paragraph 3. You tantalizingly offer a very technical critique of Japan when you say it's pointing in the wrong direction. Is this a general statement you're making (as in "things are not right") or do you have _specific_ thoughts on (a) where it's currently pointing and (b) why that's wrong. Of course, your entire article addresses this, but your use of the imagery about "pointing in a direction" suggests (to me) that you've got some very, very specific criticisms. If THAT'S the whole point of your essay, I say this point deserves top billing instead of being in the middle of the 3rd paragraph. Indeed, many non-Japanese will find your analysis insightful precisely because so many people are looking (IMHO) for a way to "find a new direction" for their own cultures/governments.

some more misc comments...


paragraph 3. inefficient domestic services sector. It would be interesting to hear specifically what inefficiencies you're talking about, how they came to pass, etc... I suspect you're referring to the result of government protections. Is that right? Specifically what kinds of "inefficiencies" does such protection create? Is globalism the answer? Does subscription to the notion of unprotected global markets lead to "efficient" sectors? Another tantalizing point that just brings up more questions. Why is "efficiency" good? Who is the sector "supposed" to benefit? What is the relationship between efficient sectors, a healthy nation, and global market forces? Yikes!

and more misc (paragraph 3!) comments...

You talk about "dysfunctional markets" and their inability to reallocate resources. To someone not schooled (as I am not) in the intricacies of economics, this sounds like the tip of a very specific technical analysis, but I don't know what you mean. Are these "dysfunctionalities" the same "inefficiencies" you referred to earlier? It seems like the term "dysfunctional" assumes that there's some universally agreed upon purpose that these markets should perform that is not being performed. What are these purposes? What relationship does the history of post-war Japan have to the appearance of those dysfunctionalities, and in particular what makes you believe that they have necessarily been caused by the structure of post-war Japan -- for instance, do similar dysfunctionalities exist elsewhere, where difference circumstances led to them? All these questions come to mind not because I somehow disagree with the point you're making (au contraire) but rather because I don't quite understand specifically what you're referring to when you say "dysfunctionalities".

IMHO words like "inefficiencies" and "dysfunctionalities" suggest specific technical analysis (or specific examples of governmental/market behavior) lie behind your point. Yet paragraph 3 uses these terms without referring to the specific analysis or behaviors you're evidently thinking of. It strikes me that someone with a different point of view might then be tempted to conclude that you're using the term as a thin veil for "bad things" (ie, using technical sounding terms to just say "things aren't working well"). Clearly, you're not doing that. I wonder if there's a way you could provide some examples to avoid the possibility of this happening.

BTW, "examples" of inefficiencies and dysfunctionalities would also help those of us not in Japan use your analysis to understand how OUR systems (governments/markets...) are (or are not) in need of reevaluation.

GREAT STUFF!

Thanks Hasan. You and others are not inspiring me to write my book which I think is what I need to answer all of the questions and convince people that we need a revolution. Maybe I'll start with a shorter manifesto first...

To answer some of your questions here...

Life time employment, promises to vendors and business partners, collusion and general inefficiencies in running businesses due to lack of competition have caused Japanese companies to run at much lower efficiencies from a basic Key Performance Indicator perspective to similar companies in other countries. This makes it difficult for these companies to compete globally. Most domestic companies are also heavily regulated while at the same time protected. Regulation increases costs as well and regulation makes it necessary to hire generally useless people from the ministries that management them in exchange for protection. These "amakudari" usually don't do much work and draw huge salaries and retirement bonuses. If you look at the PE's of Japanese companies, they are high because Japanese companies are not as profitable as their foreign counterparts. (Although this is not the only reason for a high PE.)

The market is measurably disfunctional in many ways. When Hikari Tsushin was tanking, I think the market was unable to price to stock for a week or something... Liquidity is VERY low on Japanese markets. Many companies trade only several shares a day. The market is still "rigged" with a lot of institutional traders taking advantage of the lack of oversight. There is no powerful SEC type organization. Individuals have been systematically screwed by brokers who sell them bad stocks to make money for their big clients. There are a series of scandals involving large securities firms having lists of people they have promised to make money for at the expense of average individuals.

Although it is increasing, there is about an 18% cross-shareholding of equity by other companies. This contributes to an artificially inflated share price.

Also, with interest rates at zero, you still find people olding about 50% of their assets in cash. No one trusts the markets.

Japan is one of the few countries where the retail price does not track the costs. When the costs go down, the retail prices generally stay the same, the middleman taking the extra money to feed the inefficiency.

It is VERY difficult to sell homes, cars, etc. directly. The "market" for these things are relatively controlled, a lot of it having to do with regulatory paperwork making it difficult for individuals to do.

Having said all of that, it's getting better slowly and the economic pressures are forcing people to change. Also, companies such as Sony and Toyota who compete globally, are much more efficient than the domestic companies and their best practices can be a model for Japanese companies.

Joi,

I wouldn't be too optimistic about reform being led by the people. Reform is hardly ever led by 'the people'. Sometimes the people will demand it, but they will hardly ever lead it.

My feeling that the reform will hit ordinary Japanese people very hard when it comes. They will be the people who will be kicked out of their jobs-for-life. They will have to cope in a very strange marketplace. If things are not well-managed, there will be strikes and turmoil all over the place.

That is why it is very important to convince powerful people in Japan to act in a responsible manner.

Joi,
Here's an outspoken foreigner's view.
1. Competition.
I think the key to Japan's problem is more than just democracy and diversity, it is also lack of competition. Japan used to compete through low cost labour, which gave it a big enough cushion to cover inneficiency. That cushion no longer exists and the only way to root out the inneficiency is competition from abroad (it will take a very long time otherwise). Japan needs to open up its markets to world competition if it wants to return to growth, this would in turn cause the political revolution as the businesses that don't change get swept away.
2. Uniqueness.
I don't think Japan's situation is unique (I don't think any country is). The US faced something a bit similar economically in the 1930s and made the same mistake of isolating itself from the outside world. Mexico had a similar system of democracy and opened up to competition by joining NAFTA, which then drove political changes.

My conclusion is that Japan won't make it till it stops gazing at its own navel and starts looking outside.

Joi-san,

Good specifics. It might very well be that your audience will already understand these details when you refer to "inefficiencies" and "dysfunctionalities". I did not. I suspect that whether you write a short manifesto or a longer piece, your point will be strengthened by specifics such as these. It certainly helped me understand your points better.

With respect to writing a shorter "manifesto"...

Here's what I understand you to be saying:

- Japan has problems
- amoung these: inefficiency, dysfunctionalities in the market
- the causes derive from certain structural characteristics of the markets and government
- democracy is the answer

1. Is this an accurate sketch? If not, perhaps the manifesto needs to make sure readers like me don't go astray.

2. Even in a manifesto, I think a few examples are needed, perhaps not for every point you make but at least for some of the bigger observations.

3. As others have pointed out, the final point (as compelling as we mind find it) does not necessarily follow axiomatically. Is democracy in fact enough? Indeed, just WHAT do you mean by "democracy" and what changes are you suggesting to institute it? Are there other possible solutions? Are there other forces than just "democracy"? Is "transparency" relevant? What about "globalism/open markets"? (I'm not disagreeing. My point is that even a brief manifesto probably ought to address these questions in some way lest it be interpreted as a polemic.)

Much of this piece rings utterly true to me, but then, I'm hardly unbiased. : . )

I would caution, though, that the business mores and social dynamics that "obviously" made Japan uncompetitive on the world stage in the early 1960s were identical with those that made it "unbeatable" in the 1980s, which are in turn identical with those that count as "stagnation" now. We all seem to have 20/20 hindsight regarding the "obvious" causes of socioeconomic outcomes, but the truth is ever a lot messier.

I'm not denying that Japan is in deep, serious trouble. But let's not count it out just yet. History reminds us that the obviously hidebound conservatism of 2003 could turn out to be stable, steady stewardship seen from the perspective of 2013.

Though for the life of me, I cannot see how.

Adam is right. It is important to focus on Japan's fantastic strengths and how they can be exploited, rather than seeing it only in terms of weaknesses.

A quick recommendation -

For anyone interested in the current cultural, political and economic malaise in Japan, I cannot recommend a more insightful book than Alex Kerr's "Dogs and Demons". It is a very, very perceptive and comprehensive analysis.

I found this site today via a link and bookmarked it for future enjoyment. I am very interested in Japan and will enjoy reading your insights.

About Japan's revolution, I wonder if the aging of the population will effect this. Revolutions are for the young, are they not? With the young in such a minority, perhaps a dramtic revolution will be impossible.

Globalism and Free Trade have proven to be failures for the past ten years. The great need of our times is the need for real jobs and not wars.
Japan is an island nation and needs both an added value local economy and real trade.
Japan with the help of USA launched a wonderful economy at the end of WW2 and enjoyed exports too. However, time ran out on the balance between value added local economies and trade that was subject to Globalism triggering unfair trade.
Free Trade ended up in moving factories and outsourcing jobs to the cheapest labor markets down to wage slave labor and not products per se.
Now Japan and other countries no longer can rely on trading products but need also to plug into this new Globalism that is destined for total failure due to all the imbalances related to destitute workers.
All countries have to realize that consumers are also the worker. If the worker does not get enough income to buy products, the economy becomes a house of cards ready to fall.

With Globalism, a working poor class have been created in the former industrialized nations and a destitute or wage slave class in other nations.If these destitute workers can not buy the very things they make, how can they be expected to buy anything the other nations have to sell. At the same time, a working poor class can no longer buy even cheaper imports.

In Japan as in other nations, the local value added economies have to be grown so that as communities there would be sufficient incomes up and down the line to support the flow of all businesses and jobs. Any trading must be based on products and not the manipulations of production being sent to the cheapest labor market. And every time a job is outsourced to another cheaper labor market the home economy degrades a bit more. Human beings should not be the items traded but the emphasis should be on products and not costs of labor. The costs of labor in any country has to balance out with the whole common culture and the entitlements that any particular country needs to support. Otherwise we start the slave trade all over again in a different way. See more at http://tapartnews.filetap.com http://tapsnewstory.filetap.com http://www.absolutearts.com/portfolios/a/arklineart

Joi, I was reading an amusing definition of a libetarian as someone who "thinks, talks, but does not do". I think your comments are great and I really do not think you should worry so much about whether your writing is sufficiently rigorous enough. You must stop with this frustrated academic thing. You know the old phrase "those that can - do and those that can't teach" well they also appear to spend a lot of time giving advice to Joi about how he can write like an academic. This is my advice Joi, get out there and speak with passion and sincerity, from your head and your heart to Japanese people. Don't worry about the academic rigour - everybody know your points are correct. Stop worrying what westerners think - thank you lucky stars that you have a Chanpon background and speak, speak and speak again in Japanese and in Japan. One of my favourite young lions - was a young man from a junior Samurai family in the ending days of the Tokugawa Bakufu. This young Samurai went to London University and came back to be part of the movers and shakers at the time of the Meiji Restoration. This man also became a Japanese Prime-minister. You know who that man was Joi because you have his last name. Stop trying to be an academic Joi, go out there with a new spirit, a brave heart, a laser sharp mind, and a tongue that speaks the truth and you just might lead this peaceful revolution.

How about the march of death,do you have any idea about it?

i have aquestion what effects this bomb had on the japannessespeople.

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Joi Ito, probably the most interesting GLOT's in Davos (even the WOZ mentioned him recently) and a fearless powerblogger, has made a first draft of his thoughts about Japan. Just a short quote which should be enticing enough to go read it in full le... Read More

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