Land of the Setting Sun: Can Japan Reverse Its Long Decline?

By Wieland Wagner

Back in the 1980s, Japan was an economic powerhouse and the envy of the world. But there appears to be no end in sight to its current decline, as jobs are lost, pensions cut and companies move overseas. The country's much-vaunted social cohesion is also disintegrating as people find themselves forced to rely on their own resources.

Japanese businessmen and women pray for a good business year at the Kanda shrine in Tokyo (January 2009 photo): Japan has been in an extended crisis for almost two decades. Zoom

Japanese businessmen and women pray for a good business year at the Kanda shrine in Tokyo (January 2009 photo): Japan has been in an extended crisis for almost two decades.

The man who was listed in the records of the city of Tokyo as its oldest citizen had been lying dead in his bed for years. The body of the man, whose name was Sogen Kato and who was supposedly 111 years old, had become mummified. His 81-year-old daughter and his granddaughter told authorities that he had gone into his bedroom after a family argument and had never reemerged. That was decades ago. Since then, the Katos had been collecting the old man's pension and a government premium for centenarians.

In another Tokyo district, authorities found the skeleton of a woman, who was thought to be 104, in her son's backpack. The son, who was 64, said that when his mother died in 2001, he had washed her body, cut it into pieces and stuffed the remains into the backpack. He explained that he couldn't afford a funeral.

The macabre discoveries in Tokyo weren't the only bodies of elderly people the Japanese authorities had incorrectly listed as living citizens. After conducting a hasty, nationwide review, the government discovered that more than 234,000 people who were reportedly over 100 years old were in fact missing and presumably long dead.

Loss of Traditional Virtues

What shocked the nation most about the findings was not the fact that records were being kept so poorly, but the realization that so few of Japan's traditional virtues are still in evidence today, and that the country's once-vaunted harmonious society, with its supposed intergenerational solidarity, had fallen into such decline. Japan, formerly Asia's largest economy, has been in the throes of an extended crisis for almost two decades. Growing impoverishment is only one of the symptoms.

The country has become accustomed to a steady flow of bad news. In August, China replaced Japan as the world's second-largest industrialized nation. Tokyo's Nikkei stock index is only at about one-quarter of its all-time high at the peak of the boom in 1989, and this year the index fell by about 15 percent. Japanese real estate, too, is only worth about a quarter of its value in 1974.

Japanese politicians were determined that their high-tech country should at least serve as a role model for addressing the problems of an aging society, for example through using robots to care for the elderly. But even that effort was a failure. "If things go on this way, Nippon will go under," warns Shintaro Ishihara, Tokyo's 78-year-old governor, using the Japanese name for his country.

The Japanese were once obsessed with their goal of overtaking the West. Now they have succeeded -- but not at all in the way they had imagined. Today, industrialized countries like Germany can look to the example of the Japanese economy, with its collapse in 1991 and subsequent decline, as a harbinger of the doom they could also face.

End of the Boom

Japan's decline began in the mid-1980s. The economy was overheated. In response to pressure from the United States, Tokyo was forced to substantially revalue the yen, making its exports more expensive. To offset the losses, the Japanese government pumped massive amounts of money into the economy, and the central bank drastically lowered its prime lending rate.

With the cheap money, the Japanese began speculating in stocks and real estate. The property where the emperor's palace stood in downtown Tokyo was supposedly worth as much at the time as the whole of California. And because terrestrial profits were no longer enough for them, Japanese developers seriously began planning cities in the ocean and on the Moon.

But then the Bank of Japan began feeling queasy about the boom and raised interest rates. This led to a massive crash on the Tokyo stock market, followed by a sharp decline in the real estate market. After that, Japan kept launching new economic stimulus programs to save what was left to save. In the process, it accumulated more debt in relation to economic output than any other leading industrialized nation.

The stimulus programs didn't do much good. Admittedly Japan is by no means Greece, which profited at the expense of its European neighbors. Instead, the Japanese government borrowed from its own thrifty citizens. The Japanese are now doing their best to save face. It is a dignified decline, but in the process Japan is in danger of using up its own reserves.

'All People Think about Now Is Money'

Akira Nemoto, 59, has been running the department charged with caring for the elderly in Tokyo's Adachi district -- where the mummified remains of Sogen Kato were found -- for the past 10 years. His staff is currently combing the district on bicycles for other forgotten old people. Nemoto points to a thicket of wooden houses and apartment buildings. "Nobody here knows their neighbors any more," he says. In this neighborhood, residents' only contact with the tentative recovery that Japan's export industry is experiencing this year, thanks to demand from booming China, comes through the evening news.

At first, the small suppliers in Adachi went under, or they migrated to China together with larger companies. Then the stores closed, and finally the last places in the neighborhood where local residents could meet disappeared.

The Japanese are withdrawing more and more into the private sphere, from the elderly to their unemployed children, who are living on the pensions and savings of their parents. Many of the elderly are being downright exploited by their children, says Nemoto. "All people think about now is money."

For many families, Japan's thrifty older generation represents the last financial hope, and has replaced the state in many cases. The other nucleus of Japanese society, the company, pays very little attention to its employees these days.

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1. The end of the boom, or a boom to the end; that is the question
Norberto_Tyr 11/21/2010
The end of the boom, or a boom to the end; that is the question The main problem our best analysts always miss, sometimes deliberately and sometimes unconsciously (in Freudian terms), is the fact that we live in an artificial world (from a sociological perspective) engineered in Crimea, Yalta, in 1945. The artifices of our current world neither had any notion nor regard for the long-term viability of their ‘solution’, their main concern was to exact as much juice as possible from both, the vanquished and the allies, some of them very reluctant indeed. Essentially the outcome of WW II can be summarized by the energy, financial and strategic military technology monopoly of the victors, the utter destruction of the infrastructure of the vanquished, and a financial draught for the rest of the world. Let US analyze this outcome one by one: 1- with the exception of nuclear weapons and their associated delivery systems the energy and financial monopoly has already been broken, Israel could not achieve its main purpose, namely controlling the flow of cheap Arab oil into Europe via the Mediterranean (General Sharon mentioned just before entering into a comma that sooner or later Arab oil will flow through Ashdod). The unholy alliance between the pseudo Christian powers (USA-UK) and the atheist Stalinist USSR has been broken after the fall of the Berlin Wall bringing another source, albeit sometimes unreliable, for cheap energy into Europe. In regards to the financial monopoly there is no need to dwell too much since the 2008 global financial fiasco, nevertheless I had to endure many sarcastic smirks before 2008 when predicting the collapse of that pseudo system at MGSM, and China is the true financial power in 2010, no doubt about that. 2- The deliberate destruction of enemies infrastructure utilizing two different methods: a- localized incendiary bombing in areas relatively close to concentration camps; and b) generalized bombing utilizing experimental chemical weapons (nuclear) with no certain knowledge regarding the relative extension in time and also space of the impact in areas where contamination of concentration camps were not a risk. Unfreeze, deconstruct, construct and freeze, this is the change of management process as per most modern business universities, accordingly, the systematic destruction was followed by a systematic construction thanks to the Marshall Plan. The main problem is that Iraq failed to fulfill the criteria specified by that humanitarian plan, or at least, a remake of that plan; namely the Iraqis are still fighting, 2010, and for this reason the military strategists are trying to redefine the notions of victory and defeat, otherwise the result can be summarized in few words: Iran and Aljazeera won, Iraq and the coalition lost. 3- The financial drought of the rest of the world turned to be a blessing in disguise. Once a friend asked me (before 2008) what will happen in Argentina IF a crises of the magnitude I was predicting materialized itself ‘se cae la estanteria’ I answered ‘nothing at all’, ‘things will be as good and bad as usual’, the rationale lies in the fact that in so called third world countries we are thoroughly accustomed to budget and trade deficits, corruption, irresponsibility, nepotism, et cetera, lets say Europe today, 2010, but with a great disadvantage, high interest rates. We can negotiate this crises, and also much worse ones while USA-UK & Co. will have serious problems. Let US name one that none mentions YET, there is no credit and the interest rates are at a record low, therefore: “where is the market ?”. I’ll let the economical gurus to elaborate. Nevertheless my common sense, the least common of the senses, indicates that there is a dead rat in the sewage of the FED combined with the monopoly of the mass media starting after the USA and French revolutions when foreigners acquired domestic political rights, sheer madness in the words of Schopenhauer. Back to our topic, according to Marlowe, Tamburlaine (Timur) did not had any regards for the long term future of his empire, only destruction, for that reason it lasted a few decades; well, I would say that the three stooges of Yalta are similar to Tamburlaine (an Asiatic horde) in this aspect, only interested in the loot and leaving the problem solving to others, therefore they prospects regarding permanency and stability are really poor, thus, the countries that learned to adapt to that flawed system like the glove to the hand need to change again, the currency carry trade is not enough, but this time with a good view on the future. Norberto
2. Everything goes in cycles
lakechamplainer 11/21/2010
Everything goes in cycles, Japan will bounce back eventually. Long-term, Japan and other countries with low birthrates will eventually recover, as people will have opportunities to advance and innovate, as they won't be blocked by the sheer numbers of their elders. Countries like Japan (for example the USA) will have to stop following the "religion" of the "free market". I remember the Heyday of the "Japanese Scare" in the US, in the mid to late 80s. Probably it is best symbolized by the time President George H. W. Bush threw up at a state banquet after having played tennis, with I believe the Crown Prince. I also remember the constant calls for Japan to import more rice from the US, and the response that they would like to, but they couldn't, because the "Japanese stomach" was suited only to digest the varieties of rice grown in Japan. I also remember the huge movement in the US in the late 80s into the 90s and beyond to implement "six-sigma", "lean-manufacturing", "just-in-time", etc. etc. etc. The unoriginal, copycat people who ran US businesses jumped right on this bandwagon. They didn't have the intelligence to realize that Japan naturally had a completely different set of conditions than the US. For example, they had "lifetime employment" at least in the large companies, which made it worthwhile to train employees for the long haul. I believe this was a good feature, and the second most important key to Japan's success. I think the most important key is that they are very hard workers. Also, Japan had the advantages of being a much smaller country, and that its industrial areas were fairly near each other. They could implement "Just-in-Time" - it doesn't really make sense to be shipping under huge time pressures from the East Coast or West Coast of the US to the Midwest, or vice versa. I think the over-implementation of "Six-Sigma" was the biggest copycat mistake made by American business. As a chemical engineer, I saw several times in different jobs improvements stifled, because they didn't conform to the six-sigma rules. The batch process, "specialty chemical" industries in which I worked could not get great results from six-sigma, because the large number of different products and the constant introduction, removal, and "tweaking" of products makes it harder to implement statistical analysis. It can still be done, but not via "six-sigma" - by definition, to apply this accurately, you need thousands of data points. The other techniques apparently were not in the playbooks of the consultants hired by the american Captains of Industry. Anyway, I'm sure Japan will recover, her people have shown themselves to be very innovative and creative, and very hardworking.
BTraven 11/24/2010
---Quote (Originally by lakechamplainer)--- Everything goes in cycles, Japan will bounce back eventually. Long-term, Japan and other countries with low birthrates will eventually recover, as people will have opportunities to advance and innovate, as they won't be blocked by the sheer numbers of their elders. Countries like Japan (for example the USA) will have to stop following the "religion" of the "free market". ---End Quote--- The fate of a country which relied too much on exports. Japanese should have invested their revenues in US-Bonds instead of buying every skyscraper in big apple. The Chinese are smarter.
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