Issue 251 of SOCIALIST REVIEW Published April 2001 Copyright © Socialist Review
|The governor of the Bank of Japan looks glum at the latest economic news|
Despite assurances from many mainstream economists last year that Japan's ten-year slump was bottoming out, events, as usual, have proved them wrong. The recent slide of the Nikkei (stock price) average to a 16-year low of just under 11,820 on 13 March is a remarkable decline from a high of over three times that amount during the speculative economic bubble of the late 1980s. But plummeting stock prices are only one indicator of the country's ills.
The January industrial production index plunged 3.9 percent from the previous month, the sharpest decline since a similar setback in March 1993, mostly reflecting cutbacks in cars and computer components. The banking sector lies in deep trouble, buried under a mountain of bad debt. The investor services company Moody's estimated in March that Japan's banks were holding losses of at least 5 to 10 percent of GDP and, with many of them stuck with stock portfolios from the diving Nikkei index, things can only get worse. Their woes are compounded by the decline of land values in major cities, also backing many bank loans, which have fallen 65 percent in ten years. The government is already getting ready to bail out some of the weaker banks with a rescue package, and further consolidation of the finance sector will no doubt follow.
Public debt is the worst in the industrial world at 130 percent of gross domestic product, and it continues to spiral as the government prepares yet again to try to spend its way out of recession. Finance minister Kiichi Miyazawa's statement on 8 March that Japan's public finances were 'very near collapsing' made headlines all over the world and helped precipitate a short run on the yen, but he was only voicing what is common knowledge in government circles. Corporate bankruptcies are running at about 1,350 a month. Unemployment is at a record high of 4.9 percent and is expected to rise further. And on 16 March the government acknowledged that the economy is now in the grip of deflation, after releasing statistics that show consumer and wholesale prices dropped for two years in a row--the first such acknowledgment since the end of the Second World War. Many of Japan's university students will graduate this spring into a very bleak situation indeed.
Amid this chaos Japan's ruling coalition, dominated by the conservative Liberal Democratic Party (LDP), flounders like a rabbit caught in headlights. Prime minister Yoshio Mori, chosen by party fixers in a backroom political deal after the death of previous leader Keizo Obuchi, is clinging onto power despite approval ratings of less than 10 percent. His cabinet has been racked by scandals involving cash for questions, links with ultra-rightists and the ever present bribery that greases the wheels of power in Japan. The salary men and women at my workplace in Tokyo say that Mori is 'beyond embarrassment' and can't understand why he doesn't just go. If, as expected, he is ousted in the next month, his successor will be the eighth prime minister in ten years. The revolving door of leaders reflects the crisis of a political class that cannot deal with the massive economic problems facing the country. The LDP, paying lip service to parliamentary democracy, remains wedded to its base of business support, particularly banks and construction companies, and its latest public works 'rescue package' will primarily help these constituents.
The US view of Japan's problems, at first concern tinged with schadenfreude, has recently turned to alarm. The size of Japan's fiscal hole, the depth of the crisis of the financial sector, and the ramifications for the rest of Asia and indeed the US economy should the crisis deepen, have the US ruling class deeply worried, reflected in Secretary of State Colin Powell's comment in March that any further deterioration could pose 'a security threat' to the US. The faltering US economy, heavily dependent on financing from Japanese capital and increasingly integrated with the economies of south east Asia, badly needs Japan to pull out of its slump. The advice from the new US Republican administration, like the previous Democrats, is for Japan to further deregulate its economy, cut taxes and persuade Japanese consumers to spend more, although quite what they would spend it on is not clear. The Japanese already have some of the highest ownership of consumer durables in the world, and it is difficult to see where they would put more cars, televisions and washing machines in their crowded roads and cramped apartments.
While the political class appears paralysed by the economic crisis, the same cannot be said for business leaders, who continue to restructure and relocate their firms with devastating consequences for workers. Unemployment continues to inch up, and those employed are under growing pressure to work harder or lose their jobs. Even the business paper Nikkei Weekly admitted last month that more Japanese workers than ever are suffering problems, with incidences of mental and physical illness increasing.
Japan's continuing slump has so far not led to any organised fightback by workers, most of whom are too ground down by the demands of the system to mount a challenge to it. Union membership continues to fall, strikes are at a historic low, and voting turnouts for political parties of all shades continue to decline. Nevertheless, there are hopeful signs. Where alternative political candidates running on anti-establishment platforms have squeezed through the system they have achieved enormous popularity, demonstrating the widespread disgust with establishment politics. There is a clear sense among ordinary Japanese people that the political old guard, led by the LDP, which has led the country through most of the postwar years, has had its day. But in the absence of a political system that reflects this desire for political change, and an organised challenge from the left to force it through, things in Japan will probably get worse before they get better.