A Question for Asia: Is Japan Back?

"Japan’s return to 'normalcy' has been long awaited and welcomed by those of us who have hoped for Japan to step up in the security realm and punch at its real weight. No one, however, is cheering for Japan to throw the first punch."

The title of this article evokes a 2012 campaign promise by Prime Minister Abe Shinzō who declared that he would “take back Japan” (nippon wo torimodosu). Since his election and the triumphant return of the Liberal Democratic Party (LDP), the idea that “Japan is back” has become a standard part of discussion about Japan. But the campaign promise and the discussion it engendered beg two important questions: First, where did Japan go? And, second, which Japan are we talking about?

Strictly speaking, Japan did not go anywhere—it stagnated in place. Between 1992 and 2013, Japan’s GDP growth averaged less than a lackluster 1 percent annually. Shockingly, GDP declined in per capita terms in nearly half these twenty-two years despite a falling population. Japan was enmeshed in a vicious circle of contagion—stock and real-estate prices plunged; banks found themselves loaded with bad debt; and deflation gripped the economy. Public debt soared to the highest level in the world. Risk-averse Japanese investors responded by setting up shop abroad, “hollowing” domestic manufacturing. In 2013, after a decade in which Japanese firms abroad tripled their sales and doubled their employees, one third of Japanese industrial production—including more than half of all automobile manufacturing—was done elsewhere. Income inequality at home rose above the OECD average, and the number of Japanese citizens receiving public assistance has approached early postwar levels. Meanwhile, after three decades of remarkable growth, China accelerated past Japan in 2010 to become the world’s second largest economy.

Japan’s economic malaise affected Japan’s international standing in other realms as well. Anime, which had been the avatar of “Cool Japan,” went into what one observer called its “long slide into irrelevance.” Rather than celebrated for blossoming into the epitome of cosmopolitanism, Japan was criticized for its persistent gender gap, its closed door to immigrants, its blind eye to asylum seekers, the reduction in its overseas development assistance (ODA), and what many Japanese themselves disparagingly refer to as its “Galapagos”-like isolation. Alarmist news reports of youth unwilling to study—and of adults unwilling to work—abroad seemed to edge out reports of engaged Japanese NGOs and Tokyo’s global leadership by a wide margin.

The March 2011 triple catastrophe in Tohoku, known simply as “3.11”, riveted global sympathies and stimulated inflated expectations for widespread social, political and economic change. Japan would not only recover, but would be “reborn,” revitalized,” “reset,” and “regenerated.” For some, the silver lining in the dark 3.11 cloud was nothing short of the opportunity for “civilizational transformation.” But three years on, for many Japanese, the disaster evokes government ineptness and citizen lethargy more often than the renovation that was widely promised and expected. A record-ten-million voters stayed home as the remainder of the electorate responded in December 2012 to the promise that a renascent Liberal Democratic Party would bring their nation “back.”

The three arrows of “Abenomics”—monetary, fiscal, and structural reform—were trumpeted as the economic policies that would return and reinvigorate Japan. And for a while, the economic indicators responded, tickling high hopes. In 2013, the Tokyo stock exchange rebounded and inflation targets were met. But by early 2014, the reform package already seemed to be flagging. Markets that had risen by 50 percent in Abe’s first year began falling back to earth when exports did not expand and domestic investment stagnated. The solution, invoked ahead of a consumption tax rise designed to avert the economy’s falling off one of the world’s steepest fiscal cliffs, was additional fiscal stimulus—and hence, a steeper cliff. With growth transparently dependent on state spending—and with public debt commensurately engorged, substantive reform was left cooling its heels. Investors were underwhelmed by “national, strategic special zones,” a transparently feeble attempt at deregulation that would relax floor area restrictions on new construction, provide credit guarantees to farmers, or make it easier for start-ups to hire. Reduced tariffs and membership in the Trans-Pacific Partnership (TPP), another pillar of structural reform, remained unrealized. Analyst David Pilling wondered if Abenomics will end in “Abefizzle” or in “Abegeddon,” two equally unattractive possibilities.

But what about “Abepolitics?” Most foreign observers associate the prime minister’s political agenda with identity politics, though rarely in a positive way. Abe, who retains strong popular support, had been applauded for his pragmatism during his first term in 2007 in no small measure, because most observers expected ideology instead. He was born into a brand of conservatism pioneered by his grandfather, Kishi Nobusuke, once a leading architect of Imperial Japan’s industrial expansion. Whereas more pragmatic conservatives in the LDP followed Kishi’s rival, Yoshida Shigeru, and tilted away from Japan’s militarist past in the 1950s and 1960s to focus on generating wealth and technological autonomy, Kishi’s revisionist agenda—openly embraced by Abe—has had a larger rearview mirror. Since the Japanese left is largely in disarray, this division in the conservative mainstream has enormous consequences for which Japan might be “back”—and where it is headed.