BRIAN DEER: JAPAN FEELS THE SQUEEZE Page 1

The Sunday Times (London) August 7 1994

By Brian Deer, Tokyo

On the day, late last June, when Japan got its fourth prime minister in less than 12 months, Tokyo and its adjacent cities were rattled by a quake. It was strong on the Richter scale - 5.3 - and for a moment the nation's capital paused to assess this natural event. Eyes flicked to the safety of doorways, and at main railway stations the ultra-reliable shinkansen bullet trains that hurtle along the spine of this Pacific archipelago were held past scheduled departure times as the earth thumped and buildings trembled.

The shaking stopped, however, in a matter of a few seconds, and the epicentre was way offshore. Sophisticated anti-quake devices intended to protect Tokyo's international markets and business centres, barely had time to kick into action before the ground again became still. Across the warren of high-density housing and clusters of modest skyscrapers that make up the metropolitan area, life cheerfully resumed its hurried rhythm with a sense of renewed hope. It was not the Big One that has long been expected and, thankfully, some tectonic pressure had been relieved along subterranean faults.

If only other shifts in Tokyo that day were half as reassuring. On the parliamentary scene, Tomiichi Murayama, the 70-year-old chairman of the country's Social Democratic Party, emerged to take the premiership - sending a shudder through those who wanted to see change in the world's second biggest economy. Meanwhile, on the financial markets, the mighty yen (already so absurdly overvalued that it is severely eroding competitiveness) continued its relentlessly upward drift against both the dollar and the pound. Unlike the shudders of geological rearrangement, human affairs seemed uniformly bad.

Until less than a year ago, when Japan's conservative Liberal Democratic Party (LDP) finished an astonishing 38 years in office, people said the country was like a one-party state. Now, in a mood of profound soul-searching provoked by the first home-grown economic slowdown since the war, the prime minister's office has become like a karaoke bar: almost anybody can get up and sing. Succeeding three more substantial occupants, Murayama was a virtual unknown before assuming the post and, amid the primetime jungle of game show television, had impressed the electorate most effectively to date as "that guy with the bushy eyebrows".

His appointment was all the more striking in that it appeared to lack any principle. At face value, Murayama was a man of the Left, but in order to take the reins in parliament, he was obliged to form a coalition with the right-wing LDP. A poacher turned gamekeeper, and worse. Within days, he packed his cabinet with conservatives and signalled that his party's long-standing programme would be unceremoniously junked. Over recent weeks he has made a string of jingoistic statements, proposing a firmer status for the armed forces, the singing of the national song in schools and for the controversial "rising sun" Hinomaru flag to be restored to widespread use.

But street vox-pops and public opinion surveys revealed no sense of unease. In this culture embedded in residual Taoist philosophy, Buddhist and Shinto religion and Confucian ideology, the Western logic of Aristotle et al simply doesn't apply. That a man could spend his entire adult life as a socialist and then form a right-wing government just went to show that Japanese thinking is situational rather than dogged. In Japanese thought, something can be and also not be, at the same time. Here, "yes" or "no" can mean the same thing, or sometimes mean nothing at all. So nobody much took it as an unchallengeable fact that things were the way they appeared.

The political system itself is perhaps the best example of this perceptual illusion. Part of the lack of concern over Murayama's side-switching stems from the universal feeling that an incumbent prime minister is not truly important to Japan. Like the traditional bunrakyu puppet theatre, politicians may be what you see, but they are worked by invisible hands. Manipulating from beneath and behind is an elite corps of crypto-Confucian bureaucrats, whose fingers have long tugged every lever.

Having more in common with the old Soviet central planners than Western public servants, the authority of the people who hold such posts has no parallel outside the East. After the new prime minister made a statement in which he was ambiguous about Japan's claim to a seat on the United Nations security council, for instance, the chief foreign ministry mandarin publicly corrected him - unthinkable in, say, the US or Britain. It is an authority, moreover, that extends beyond politics to business, social affairs and even the arts.

In business, the bureaucrats intervene as if presiding over nationalised industries. Japanese law is often drawn vaguely, leaving huge scope for administrative interpretation. Through elaborate planning arrangements, civil servants step in to ensure that unprofitable enterprises do not go to the wall, but are defended until fit again. And with the corporate bosses of household name corporations, they conceive national plans that, through Japan's international influence, are global in their economic impact.

This all-pervasive involvement by the unelected, moreover, is not just a matter of style. "These bureaucrats are running the whole show and will continue to run the whole show," Masao Kunihiro, a member of the San Giin - parliament's upper house - and an ally of Murayama's, explained to me last week. "Some of them say, almost shamelessly, 'Elected officials are nothing but a bunch of passers-by. How could we entrust to them the fate of the nation?'"

Unlike the earthquake, a symptom of movement, Murayama's rise to the karaoke mike, then, was not taken as evidence of a shift. But if Japan remains politically in a state of lockup, worrying pressures continue to build. The rising yen, which surged to a post-war high at the new prime minister's ascension, has reached the point where exporting industry may no longer be able to compete. This drift (mainly caused by huge trade surpluses with the West), moreover, is not a temporary phenomenon - a mere blip on the business chart. In 1971, one US dollar would have bought you 360 yen; in 1985, it would have bought 245; and on July 12 just 97.

The strains that such rates are creating are hard to exaggerate - as is their long-term impact on international affairs. Mirroring the export price rises, the strength of the Japanese currency is causing capital to flee the country as businesses that for years were able to absorb the rising costs of domestic production rush to switch investment elsewhere on the Pacific rim. For the price of a couple of coffees in a Tokyo hotel there are people in China, South Korea or Vietnam who would gladly work all day.

Such thoughts are ominous for the new prime minister, but they bring smiles of relief in Washington. Last year, the United States' trade deficit with Japan stood at a staggering $60.4 billion - $10 billion greater than in 1992, and although both President Clinton and Lloyd Bentsen, his treasury secretary, have denied that the administration has sought the yen's rise, its strength may produce a historic moment for which Washington has long been waiting. For not only could the currency pressures cut Japan down to size, but they could win for the West a secret battle to advance the American Way.

According to six of the Group of Seven biggest economies, the solution for Japan's problems is simple: set the market free. Similar currency shifts and capital movements have, after all, occurred in other developed countries without earth-shattering consequences. If Japan took serious steps to open itself to imports, they say, domestic prices could fall and relieve some pressure on the yen. If Japan cut costs, restructured industry and shed surplus labour, productivity would benefit. And, above all, if the bureaucracy took its fingers off the levers, no end of reform might ensue.

It's an approach, however, that assumes that Japan is either just the same as a western economy - or, inasmuch as it may be different, that it ought to find a way to make itself more similar. After the collapse of communism, doesn't the argument for American liberal capitalism seem unassailable, if not inevitable? In the resurgent US, moreover, where even the once-ailing General Motors just posted record profits, where Silicon Valley has bounced back to supremacy in high tech, and where talk of Japan as a future number one is now laughed at by entrepreneurs, there seems to be only one model of economic organisation for the way the whole world will go.

But here comes the snag: Japan is different and doesn't want to be the same. Under the watchful eye of its ruling bureaucracy, and with the support of corporate and political power brokers, it isn't really a market economy at all, at least as we would know one. Despite its membership of the Group of Seven, its familiar products and its men in western business suits, this is a culture, it mustn't be forgotten, that works along alternative lines.

Whether those lines will survive, much less find emulation elsewhere, however, is the of the great current issues of world affairs. In the same way that the massive geological plate movements need relief beneath the Pacific, so Japan needs remedies to ease the tension, or it risks facing a terrible shock.

*****

This report is copyright, Brian Deer. Responses, information and other feedback concerning this resource on the role of women in the changing face of Japan are appreciated - via the briandeer.com homepage.