A few weeks ago, 51-year-old Kazunori Fukuda, Osaka branch manager of
the failed Long-Term Credit Bank of Japan, checked into a hotel in the port
city of Kobe, produced a rope from his bag, and hanged himself. He left a note
behind saying he was tired of living.
Only two weeks earlier, a senior executive at the same bank -- now under state
control -- killed himself in a Tokyo hotel room. Before that, an employee of
Japanese tire maker Bridgestone committed hara-kiri in his company's head
And, in the most notorious such case to date, three businessmen belonging to
related firms checked into a hotel in a Tokyo suburb last year, shared a final
drink together, and hanged themselves in separate rooms. Some say there have
been dozens of other such suicides in recent months, and that the Japanese
press is deliberately downplaying the incidents so as not to encourage
Japan is now approaching almost a full decade of recession, and, by most
accounts, the end is nowhere in sight. The strange thing, however, is that
this doesn't look anything like an economy in flames. People are still
shopping for brand-festooned clothing and accessories (Gap cargo pants: $70).
They're still dining out on small portions in absurdly overpriced restaurants.
They still line up to pay about $15 for a ticket to see Robert De Niro blow
things up in "Ronin," which just opened here.
The Japanese government has worked so hard to create a soft landing for its
plunging economy, it has succeeded in erasing virtually all sense of crisis or
urgency. The foundation may be crumbling, but, from the outside, Japan's
economic house appears as neat and tidy as ever.
This is no small accomplishment. While neighboring South Korea has been to
hell and back over the past couple of years restructuring its once-bankrupt
economy and restoring a semblance of global competitiveness, Japan has managed
to dither along with a series of short-term fixes that only scratch the
surface of its deeper problems. If putting off the really hard work has been
Japan's economic policy goal, then it can be said the country has succeeded
"The government has made it possible for companies to avoid restructuring and
for many people to stay in their jobs," said Brian Rose, senior economist at
Warburg Dillon Read (Japan). "There has been no dramatic crisis, and this has
allowed the country to keep muddling along."
Of course, such a situation can't continue indefinitely. "It may not feel like
a recession," Rose observed, "but things are worse now than they were a year
ago, and we think they'll get worse still. Japan has yet to hit bottom."
The Japanese government sees things differently. Although the Organization for
Economic Cooperation and Development is projecting that Japan's economy will
shrink 0.9 percent this year, Tokyo has forecast slight growth in coming
months. Moreover, Eisuke Sakakibara, Japan's influential vice minister of
finance for international affairs, has predicted "robust recovery" by next
year, paced by rapid corporate restructuring, "albeit in a Japanese way."
"It's almost like they're willing the economy to grow," Rose responded. "Their
forecasts are wildly optimistic."
I can't speak to the validity of the numbers, but I can offer the perspective
of someone who lived in Tokyo for seven years, from the height of the fat-rich
"bubble economy" in the late 1980s to the first inklings that things had gone
terribly wrong in the mid-1990s. Japan has changed, and not for the
In turn, the Japanese, never a particularly cheerful people, now seem
There are a variety of factors at work here: rising crime in a nation that
takes justifiable pride in its relative lawfulness; the emergence of a younger
generation perhaps more interested in self-satisfaction than in contributing to the greater welfare of society; plummeting land prices; the once-unthinkable
collapse of established corporate institutions like Yamaichi Securities; a
stagnant political system; and living conditions so severe for some as to merit
scrutiny by Amnesty International.
But what has finally shaken the Japanese out of their state-sanctioned complacency more than anything else is the widespread realization that the nation's much-cherished system of "lifetime employment" was actually a fiction.
Japan's unemployment rate remained at a record 4.8 percent in April. This
number will almost surely increase as bloated companies continue struggling to
reduce payrolls, and as more and more college students spill into a labor
market that has no places for them. A recent survey by the Bank of Japan found
that no fewer than 80 percent of the country's wage earners are concerned
about losing their jobs, and that nearly half have consequently cut back on
Over coffee, a man I'll call Hiro Takahashi, a 39-year-old employee of an
electronics company you've heard of, said the head of his section was recently
transferred to a distant subsidiary -- the Japanese version of corporate
exile -- and that he's pretty sure others in his department will be let go.
"I don't have enough seniority," Takahashi lamented. "If there are cutbacks,
then I might lose my job." He isn't sure what would happen after that.
"Luckily," he said, "I'm not married. I will manage to survive. But there are
others who have wives and families. What happens to them when their jobs
What indeed. The government seems to be at a loss for how to deal with the
social cost of widespread restructuring, and has done little more to date than
establish the usual task forces and study groups delegated to look into the
problem. As part of recent propaganda efforts, the state-affiliated Japan
Productivity Center for Socioeconomic Development reported that about 2.6
million new jobs could be created if companies simply stopped existing
employees from working overtime.
Takahashi laughed at such a suggestion. "Working overtime is part of the system," he said. "We consider it part of our regular salary."
The simple, unpleasant fact is that Japan's leaders lack the stomach for the
sort of wholesale changes that painfully restored a pulse rate to South
Korea's economy, which grew by 4.6 percent in the first quarter. "Any
restructuring implies a redistribution of wealth," noted Andrew Shipley,
senior economist at Schroders Japan. "Japanese society isn't ready to condone
He pointed out that the country's rapidly aging population -- within 20
years, it's predicted, fully a quarter of all Japanese will be senior citizens -- means tax revenues will decline, despite continued governmental spending to
prop up ailing companies and institutions.
"Ultimately, Japan runs out of money," Shipley warned. "The Japanese system in
place right now is not generating sufficient wealth to keep the structure
intact. Japan is basically in a deflationary spiral, which has been held in
check by the government spending lots of money. As soon as the government
stops spending, things will get a lot worse."
Not everyone, however, takes such a dire view of the country's prospects.
Takashi Imai, head of the powerful Japan Federation of Economic Organizations,
a leading business association, believes that "the economy has passed its
worst stage," and that "bright signs" are already visible on the economic
horizon. (Apparently those bright signs don't include a 4.8 percent drop in
April retail sales at the country's largest stores, according to the Ministry
of International Trade and Industry, or a third straight month of declines in
average household spending, as tallied by the Management and Coordination
Richard Jerram, chief economist at ING Baring Securities (Japan), is one of
the few foreign observers to hold a moderately bullish opinion of Japan's
economic outlook. "Japan is well past bottom," he insisted. On top of that,
Jerram believes the government has acted prudently in not taking a Korea-style
blowtorch to its corporate hierarchy.
"You don't want an aggressive restructuring of your economy when you're in a
deep recession," he said. "It's unnecessarily destructive. Some people say
Japan must destroy so it can rebuild, but this is staggeringly bad economics."
Jerram gives high marks to Prime Minister Keizo Obuchi -- the man once
described as having all the charm of cold pizza -- for having made more
strides toward addressing problems in the financial sector in the last nine months than previous administrations made in nine years. With Obuchi's
standing in public-opinion polls holding steady, it seems a safe bet that
he'll be reelected to a second term in office when Japan's political power
brokers convene either late this summer or in the fall.
In other words, expect the country to stick to its current course of go-slow
recovery efforts and half-hearted restructuring. "It just doesn't seem like
Japan is going to keep up with the rest of the world, and especially with the
rest of Asia," said Warburg's Rose.
Interestingly, Japan's youngest citizens already seem to have an instinctive
grasp that the nation they'll inherit will be vastly different from the one
their parents knew. A recent study by Dai-Ichi Mutual Life Insurance found
that students in kindergartens and primary schools nationwide have paid
attention to the grumbling of their fathers about uncertainties at the office,
and that few are looking ahead to a life of white-collar servitude.
Instead, a majority of Japanese children seem to be anticipating a country
that has tumbled from its economic pedestal, almost returning to its feudal,
agrarian roots. What occupation are kids here most looking forward to? Not
businessman. Not doctor. Not even baseball or soccer player.
They want to be carpenters.