The era of costless capital is over for the time being, and respected Western financial journalists have written crisis scenarios for Japan's equity and real estate markets.  They are misinformed.  Economic outcomes are still very much under the control of the Ministry of Finance, and if necessary it will create a scandal--such as the recent one engulfing the securities industry--in order to get its way.  While the rest of the world desperately wants to believe that Japan is being punished like everyone else for fiscal irresponsibility, Japanese manufacturers have used the nearly costless capital of the late 1980s to invest in production capacity sufficient to give them a competitive advantage that will last well into the next century, even if such investment were to be substantially reduced today.

The Japanese Military

A MAIN characteristic of Japan's informal power system is that it needs to remain exclusionist, since the entry of a new, strong component would almost certainly throw it out of kilter.  This should be foremost in one's mind when contemplating the military factor in Japan's future.

The Japanese military has, without many people noticing it, grown to be one of the biggest in the world (the fourth most expensive when measured by budget allocation), while those opposed to it on constitutional grounds pretend that it is a shadow that may be ignored.  Only a very dramatic development--such as the reunification of the two Koreas, Korean possession of nuclear arms, or an open collision with the United States--could turn Japan into an unambiguous military power.  But a potentially unstable Soviet Far East, the obviously diminished resolve of the United States to maintain a military presence in East Asia, and the resulting vulnerability of the sea lanes between Japan and the main suppliers of its energy, as well as the eventual death of Kim Il-sung (the major obstacle to Korean reunification) are bound at least to accelerate the growth of Japan's naval forces.

The big question is how a Japanese military, less shackled than it is now, would fit in.  One possibility is an accommodation with the existing oligopoly, but the friction points in such a relationship would be numerous and it is doubtful that it could result in a stable arrangement.  Officials in the Ministry of Finance have so far provided the most significant curb on the euphemistically named Self Defense Forces, but they would not be a match for it in an emergency.  The problem is not that SDF leaders today give the impression of being power-hungry; the worry is about what future officers might on their own decide is in the national interest.

It is not only Japanese leftists who respond vehemently to suggestions of a fully rehabilitated military.  Those high up in the components of the Japanese System recoil at the thought that they would have to accommodate yet another cluster of power, one possessing the means of physical coercion.

Probably few Japanese would be able to make their thinking on this point very clear, but many Japanese are subliminally aware that their nation must cope with a structural defect relating to political control.  They believe that a Japanese military, fully legitimized and permitted to operate overseas, would be a potentially uncontrollable force.  As it is, Japanese prime ministers do not have the practical power to control civilian agencies decisively; how could they be expected to bridle ambitious officers?  Historically informed Japanese do not have much faith that postwar institutions will be better able to restrain a possibly rogue power element than in the 1930s, since the civilian control mechanism of today is not convincing.

There exists a good contemporary example of what a more self-assured military could be like in the way the police have in the past decade or so increased their gentle but formidable power to order people around.  During events deemed to be accompanied by security risks (visits of an American or Korean president, summit meetings, the funeral of Emperor Hirohito, the enthronement of Emperor Akihito) the police have demonstrated that they can bring normal outdoor activity in most of the capital to a halt.  Car searches for practice (even a month before the recent enthronement ceremonies) and picking up people whom the police consider potential troublemakers demonstrate police assertiveness.  Significant in all this is that neither the prime minister nor anyone else can make the case that there is such a thing as overdoing it.  The Japanese police force is essentially in charge of itself.  And the fear that the same would be true of a strengthened military is well grounded.

Beyond Complacency

IT BENEFITS no one to postulate wicked motives on the part of Japanese power-holders.  Japanese bureaucrats and the bureaucrat-businessmen of the industrial federations or the large corporate conglomerates are doing what is expected of them.  This has created a dangerous situation only as a result of the structural defect in the overall control mechanism of the Japanese political system.

Considering what is at stake--perhaps the very way we will live in the next century--I think it is nothing short of scandalous that only a few Japanologists specializing in relevant areas have so far seriously studied the issues addressed here by Hollerman and me. Instead, the American academic community is engaged in heavy self-censorship regarding Japanese political and economic subjects.  Seeing scholarly interpretations that can hardly be distinguished from what Tokyo's political elite produces for external consumption, one can only hope that the Japanese studies field will soon be enriched by an infusion of more discriminating minds.

Complacency, once merely unattractive, is now dangerous.  If Hollerman and I are wrong, our arguments should be rebutted with information that can stand up to meticulous inspection, since those arguments are not conjured up out of thin air.  Our kind of analysis should not be dismissed as ``Japan bashing'' or be met with accusations of ignorance, racism, or other unworthy motives.

If we are right, it would be fair to brand the willful ignorance of the administration in Washington as detrimental to American interests.  It would also be fair to brand the editorial policies of authoritative publications like the Wall Street Journal and the Economist, conceptually blinkered as they are, as more than irresponsible.  These policies help to bring about the very end that they seek to prevent: the collapse of the world's liberal capitalist order.

The Western countries need to recognize that international bodies such as the General Agreement on Tariffs and Trade are not equipped to cope with the global economic reality of the late twentieth century.  And if prevention of world-wide protectionism be their goal they need to design a new multilateral arrangement, while taking the extraordinary factors described here into consideration.  In the meantime, new conceptual tools are required to recognize that the Japanese economy is managed in a way incompatible with conventional assumptions of how economies can be run, and for constructing a modus vivendi ensuring continued amity between Japan and the Western countries.

Karel van Wolferen, the author of The Enigma of Japanese Power, has lived in Tokyo since the early 1960s.

 

Footnote 1: This system, which started to come into its own around 1957, was derived from a system of wartime financing for the manufacturers of war-related goods.  Before the war the average rate of borrowed capital in Japan was comparable to postwar rates in Europe and the United States--that is, some 30 to 40 percent.  But in the new order, until the late 1970s, major Japanese firms borrowed 80 percent or more of their capital from their [mdit]keiretsu[med] money pumps.

Footnote 2: Chalmers Johnson of the University of California, San Diego, is a major exception.  The degree to which he is considered ``controversial'' indicates the strength of non-intellectual impediments in academia.

Essay Types: Essay