The Ties that Bind Japan

I was recently interviewed in the press about the recent Olympus scandal in Japan.

The Olympus episode illustrates competing moral virtues in Japan. In this case, it was the virtue of loyalty winning out over the virtue of honesty. I am increasingly coming to believe that one of the core problems in Japan is that while the elite may thoroughly understand the country's problems, it isn't necessarily in their short-term interest to push for change.

Real change will come from a change in thinking, which means education. People had put their hopes in seeing societal change come about from the election of the DPJ in 2009 or from the response to the earthquake in 2011. People also put hopes in corporate change coming from the response to business scandals like Livedoor and then Olympus. But it didn't happen. Now analysts are wondering whether a debt crisis (that some expect to hit Japan by 2018) might do the trick. I doubt it. Change will come about over a long term shift in the country's values.

When I recently visited Japan many people were talking about kizuna (social bonds), which was voted "the kanji of the year" for 2011. Sure Japan demonstrated the virtues of its strong community ties (or bonds) in its response to the earthquake and tsunami. But in a way, the bonds that tie Japan together are also part of the problem. They are binding Japan to the status quo or inertia. People are aware of this issue and are skeptical of powerful people taking advantage those bonds and the peoples' trust. For example, companies are using kizuna in their TV commercials and there is a new political party called kizuna. As one person told me, kizuna is fine as long as the social relations are on equal footing. Without equity, it's exploitation.

Now foreign investors are more likely to question the accounting books at Japanese companies. They are also more suspicious about Japanese corporate strategies for mergers and acquisitions. When the question of Tokyo becoming Asia's financial center comes up, people usually look around the room nervously like someone just told a bad joke.

"Toro Yama" photo by Chris Gladis.

How the Disaster May Help Japan's Brand

The March 11 earthquake, tsunami, and resulting nuclear accident have led some to question the health of Japan's "brand." Japanese products, services, and business partnerships in recent years have enjoyed a halo effect emanating from Japan's reputation as a land of safety, efficiency, and trustworthiness. As renowned Japanese columnist Yoichi Funabashi put it this week, "Instead of viewing Japan as a haven of immunity from danger and inconvenience, many around the world now perceive the country as fraught with peril and discomfort." The impact of the recent disasters on Japan's reputation or brand has been one of the focal points of experts who worry that the disaster would damage the prospects of Japan's strategic growth industries such as cuisine, tourism, and services. But this is not the whole story.

Rather it is the perseverance and calm that Japanese society demonstrated during the crisis that remains the enduring image of Japan in the minds of many people. This positive story was featured widely in the U.S. media immediately after the earthquake and remains relevant today. A case in point today is in Vietnam, a country I visited last month to conduct research on attitudes toward Japan and the United States. Every Vietnamese expert I spoke with told me that their impression of Japan had been further enhanced since the March 11 earthquake. In Vietnam, Japan's reputation was already positive in part due to Japan's vital role in Vietnamese economic development, for example as the largest contributor of foreign aid after the World Bank.

But more interestingly, many Vietnamese admired Japanese discipline, order, and perseverance during the recent crisis. Some Vietnamese want their society to resemble that of Japan as a leading Asian Confucian society, described in T.R. Reid's classic book Confucius Lives Next Door.

Vietnam is no outlier on this view. According to a survey conducted May 9-18 by the AIP-Hakuhodo Earthquake Recovery Project on the "Image of Japanese Products Internationally," positive attitudes of those surveyed toward Japan and Japanese products outnumbered negative ones. A total of 2,700 people were surveyed in China, Korea, Thailand, India, Indonesia, Russia, the United Kingdom, the United States, and Brazil. Most people were aware of the earthquake and nuclear accident but wanted to see Japan recover quickly (62.8 percent) and felt sympathy for Japanese people (56.8 percent). As for products, more people responded that their desire to purchase Japanese goods had increased compared with one year ago than those who said it had decreased.

These positive attitudes stand in stark contrast to those in Vietnam toward China. Vietnam's relationship with China reached a "critical mass" in 2008 and has deteriorated since then, reverting to the previous unfriendly relationship that prevailed for the past millennium. Vietnam's brief friendship with China in the 1990s was seen as naive by many of the experts I spoke with. I was in Hanoi during which China's maritime aggression was on display in the South China Sea, when one of its ships cut the underwater cables of a Vietnamese gas survey ship. These episodes have pushed Vietnam closer to the United States and Japan.

China's approach in other areas also has resulted in bringing Vietnam closer to Japan and the United States. Delays in the construction of power plants by Chinese contractors and Vietnam's reliance in its territorially-sensitive northern provinces on China for hydroelectric power have also had this effect. Meanwhile, the appetite for nuclear power and cooperation with Japan in this area remains strong in Vietnam despite the Fukushima crisis. The immediate need in Vietnam is for reliable, affordable electricity, and nuclear power will be a major source in providing that electricity.

Another area is the export of rare earth supplies, which China has restricted, sending prices skyrocketing recently. These strategic metals are used in the production of batteries and high-tech electronics. Demand for rare earths in Japan will increase as its economy recovers in the short-term and as it explores alternatives to nuclear power in the longer-term. China began restricting exports of rare earths to Japan in September 2010 in response to the detainment of a Chinese fishing boat captain by the Japanese coast guard.

Chinese manipulation of the rare earths market again has pushed Japan closer to its neighbors. It has led the Japanese government and companies to promote exploration of rare earths projects in Vietnam and other countries. But one Vietnamese expert told me that he believes that China will begin dumping rare earths on the global market once other countries attain the capacity to produce the metals. This perception that China plays a zero-sum game is common in Southeast Asia and has convinced many that Japan represents a more trustworthy partner that values a positive-sum business ethic.

Many Japan watchers have called the March 11 earthquake a pivot point for Japan's future trajectory. Japan could very well seize this moment to promote innovation, for example in the areas of clean energy and efficiency, and build stronger relationships with its neighbors. But it is a step too far to say that if Japan fails to take advantage of this situation fully, the other path is ruin. It is rather more likely that Japan will face more of the same, with its long-term problems persisting. As one of the most coherent nation-states on Earth, Japan isn't going anywhere. Even if its government fails to come up with a winning strategy, Japan will remain one of the world's most influential economies for years to come.

It is certain, though, that the disaster and the country's response have humanized Japan and shattered stereotypes, making it a country that is more accessible and closer to the rest of the world.


Also published in the Huffington Post.

Photo by Marc Veraart.

Rise of the Rest: Japan and the World

I just got back from giving a talk on a panel titled "The Rise of the Rest IV: Critical Regions in Crisis" at Carnegie Council as part of the rise of the rest series we launched with Nikolas Gvosdev five years ago. The panel included Nikolas Gvosdev, Dov Waxman, David Speedie, and me. It is amazing how relevant this series remains after five years. My remarks were based on a lecture I give at New York University and from a forthcoming book I contributed to on the recent earthquake in Japan.

Here are my remarks from today's talk:

Today, I will touch on some ideas on "the rise of the rest" since our first panel in 2007 at the Nixon Center, then offer my own theory (of convergence), and speak about how it relates to the crisis in Japan.

First, a tour of the horizon on the idea of "the rise of the rest."

The cliche has it that we went from a bipolar world during the Cold War to a unipolar world in the 1990s to a multipolar world today with the rise of the rest. Joseph Nye has added nuance by imagining the world as a three-leveled chess board with the traditional hard-power game on top where U.S. military power still dominates. The second level is the interdependent, complex world of economic globalization, which might be described as multipolar. The third level is the world of transnational issues where no one is in charge, necessitating cooperation between states, companies, organizations, and individuals. The importance of this bottom level has grown with the advance of economic globalization and the information revolution, and it raises the importance of moral power. The power of information in the world of globalization has appeared recently in places like Libya and Egypt as well as in the connectedness the world felt with Japan and the world's response since the recent disasters there.

Kishore Mahbubani and others have expressed dismay in the unfairness of today's international institutions. Although there is a huge shift of power toward Asia, 3 billion Asians do not qualify to run the World Bank or IMF, he noted. This story has certainly come to the fore with the arrest and jailing this week of IMF head Dominique Strauss-Khan.

The original 2007 National Interest article by Barma, Ratner, and Weber pointed to the growing economies of Russia, India, and China as well as the pace in which these so-called non-Western countries were engaging with one another. And the article argued that rather than a simple hub-and-spoke model of international relations, a new choice emerged: countries could route around the United States, as Nick Gvosdev put it. This argument was similar to Parag Khanna's idea that the rise of other states means that relative U.S. influence might decline. This argument also set up the notion that there might be a competing system out there, outside of the U.S.-dominated system.

Harry Harding went on to describe these two systems as two political parties: One was an elitist reform party (which promotes democracy and individual freedom and self-determination, conditional aid, universal norms over sovereignty, skepticism over universal membership organizations, and selective FTAs) and the other was the populist conservative party (which values stability, harmony, and order for domestic systems; strong sovereignty and order internally; cultural diversity over universal norms; looser FTAs, and universal membership organizations). The U.S. wants order internationally while promoting democracy in nations; China opposes hegemony but likes democracy internationally, between nations.

But what about the global public goods such as freedom of movement and safe trading routes? In The Case for Goliath, Michael Mandelbaum demonstrates that the world needs governance and the U.S. is the only country that has been able and willing to assume this role.

For years, U.S. troops have abroad acted as a "public health service" forestalling outbreaks of war and nuclear proliferation, and as a "pest control service" against rogue regimes." Mandelbaum's three famous closing predictions about the world’s attitude toward America’s de facto role as the world’s government: "They will not pay for it; they will continue to criticize it; and they will miss it when it is gone."

Is cooperation and conflict more or less likely? Richard Haass calls the current world one of nonpolarity--power is becoming harder to organize.

This view recalls Parag Khanna's mega-diplomacy in his new book How to Run the World and Ian Bremmer's concept of a g-zero world where there is no "go-to forum."

Harry Harding was more sanguine on this point of cooperation, saying that if the transnational problems of today are so grave, then cooperation will become more likely. Climate change and energy security compel countries to cooperate.

Fareed Zakaria and John Ikenberry seem positive on the American-led system despite shortcomings. Zakaria says we need to integrate the rest, which rose on account of American system.

Similarly, Ikenberry said the United States has set up inclusive institutions that will prolong a Western order. Three aspects of the Western order make it difficult to overthrow:

-Through non-discrimination and an open market, the barriers to economic participation are low and the benefits high, allowing for states to expand their economic and political goals within the order.

-Coalition based leadership allows for shifts in the balance of power between states without affecting the overall order.

-And deeply rooted rules and institutions lay the basis for cooperation.

Moreover, Ikenberry says the security trap that the United States faces--the use of its power creates a backlash--makes institutions more important.

John Mearsheimer, Robert Gilpin, and other realists see times of transition as dangerous because new powers will want to reorganize the rules for their own interests. In Mearscheimer's words, "Given the difficulty of determining how much power is enough for today and tomorrow, great powers recognize that the best way to ensure their security is to achieve hegemony now." Mearscheimer believes trading with China is helping China gain power, which it will use to challenge the U.S.

Finally, some, including George Friedman and Minxin Pei, simply believe China’s power is hyped and focus on the internal problems that "the rest" faces.

Second, my view of convergence in international affairs.

Like the economic theory of factor price equalization, which observes that prices of factors converge as countries trade with one another, I would suggest that as China’s economy becomes richer and its international stake in the global system increases, China's overarching interests will resemble more closely those of the United States and offer less of a “competing model.” That means both more competition--for markets, allies, and resources--but the interaction between China and the U.S. will go both ways.

China's interests and principles in international affairs will change U.S. perceived interests and vice versa, pushing America to keep up in areas in which China excels, such as its advance in Africa and ASEAN, as well as education, innovation, and infrastructure domestically--the key words of President Obama's recent state of union in January 2011. Meanwhile China is racing to challenge American naval power and technology. In the long run, China will be compelled to adopt more freedoms and openness if it wants to continue to advance, I think.

The "West" must keep up with China's tools of statecraft; Japan has been considering launching a sovereign wealth fund and the U.S. has been pushing for more FTAs in Asia. While the U.S. didn't socialize its financial system after the 2008 financial crisis, the importance of regulation and the state was apparent as it is in Japan’s ongoing nuclear crisis today.

It won't be a competition of competing ethics because in a practical sense the right moral principles generally prevail in history, and America's moral principles of universal liberalism have proven right over and over.

Some convergence is being witnessed already. China hand Evan Feigenbaum writes:

"Chinese employment practices [in Africa for example] have produced a backlash in many countries. And that makes me wonder whether Chinese commercial engagement might not produce greater convergence with the US and others in rough, tough investment environments."

But China faces a big dilemma. For China to leap from a manufacturing economy to an innovation economy--which will be necessary for the Chinese Communist Party to generate jobs to stay in power--it will require China to adopt openness and freedoms that threaten its very stability.

Maybe what we will end up seeing is what Henry Kissinger calls a Pacific Community, in which China and the U.S. "co-evolve."

Finally, on this point, where was Japan when we thought it was a threat to the U.S. economy? It had identifiable brands, a strong navy, an unbeatable corporate model, a stellar education system, and a society that prided itself on low crime, high literacy, and social coherence--as, for example, lauded by journalist T.R. Reid. We should put Chinese power in perspective.

Third, what about Japan's recent crisis?

As for Japan after the March 11 earthquake and its relations with the world, we don't know its future but there has been disruption and internationalization stemming from the country's needs since the quake.

Themes showcased during the earthquake and tsunami crisis include: Japan's interdependence with the world, need for leadership, a desire for further transparency in the economy and politics, stoicism and perseverance, and solidarity between the world and Japan.

It also may have dispelled some stereotypes.

Stereotypes about Japan have gone through many phases in the American imagination. During World War II, Japan was a foreign enemy and afterward it was the occupied. In the 1950s and 1960s, Japan was seen as a mystical place offering "exotic" traditions such as tea ceremony, karate, geisha, and Zen Buddhism. Whereas in the past to study Japan was something specialized, learning about Japan is now considered part of becoming a globally minded person. In that sense, the recent disaster may have helped extend the trend of Japan becoming a place people relate to.

A new door to the world also has opened for Japan. One potential impact on how Japan views itself in the world may come from the effect of Japan's experience with and participation in Operation Tomodachi, the deployment of 18,000 U.S. personnel who helped with disaster relief and the delivery of emergency supplies.

Other international connections are being made through the introduction of foreign companies helping with the reconstruction and the surge of good will from nonprofits, charities, and foundations helping from abroad and in Japan. In the months following the disasters, many Japanese companies will consider pushing more of their operations abroad--to the United States, China, or Southeast Asia--to hedge against risk, further internationalizing corporate Japan.

On the other side of the coin, interest in Japan has reached new heights with searches for and mentions of Japan on Google and Twitter reaching records since those data have been collected. A Pew poll said during the March 14-18 period, 64% of blog links, 32% of Twitter news links, and the top 20 YouTube videos were about the disasters in Japan.

But these social networks are only a tool or a process. They don't constitute a galvanizing issue to change Japan.

One possible galvanizing issue could be the need for more green technologies and alternative energy in Japan. The nation went through a dramatic shift in energy policy after the oil shocks in the 1970s, and perhaps the nuclear crisis could push the country into another revolutionary shift. At a press conference last week, Prime Minister Naoto Kan said his government will conduct a fundamental review of the nation's basic energy policy.

A second issue that the nuclear crisis has highlighted is the need for transparency broadly speaking. Japanese have looked abroad for foreign sources of information in frustration with their country’s press and the current dissatisfaction in the government's handling of the crisis has a lot to do with a sense that officials, politicians, and companies were holding back information.

Transparency could become a rallying cry that weaves all of the issues in Japan. Whether Japan takes this chance for change is uncertain. But most people agree that this is probably Japan's last chance in our lifetime to shift its course away from comfortable decline.

Photo: Japanese Woman with Mirrors from George Eastman House

Fukushima and the Fragility of Modern Civilization

As a companion piece to an on-the-ground account of the Japanese earthquake we published last week, I am posting here some thoughts from our colleague Peter David Pedersen of the Tokyo sustainability consultancy E-Square Inc. He reflects on the longer-term consequences of how Japan (and the rest of the world) will change behaviors related to potentially dangerous energy sources such as nuclear power. Peter has had personal experience with censorship in the Japanese media when it comes to criticizing TEPCO specifically and nuclear power in general.

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Ogoto-onsen, near Kyoto, March 18, 2011

I am writing to you from a hotel along the shore of Biwa-ko, Japan's largest lake, some 528 km west (and slightly south) of the Fukushima nuclear power station. Fresh snow is covering the landscape in what would normally be a very idyllic setting.

Right now it feels absolutely surreal, as if all the earthquake destruction in eastern Japan combined with the man-made specter of nuclear destruction were scenes out a Hollywood movie entitled "Twin Disasters." But this is no movie, and whether there will be any form of "happy" ending to the nuclear malaise remains entirely unpredictable.

The Japanese government "cannot" talk openly and honestly to the Japanese public about the potential dangers in a worst-case scenario at Fukushima, primarily because of fears of panic among the 30 million people in the world's largest metropolitan area, Tokyo and Yokohama.

Over the last 10 years or so, I have repeatedly experienced the attempts of TEPCO (Tokyo Electric Power Co.) to control information on nuclear power in this country. For eighteen months, from 2000–2001, I anchored the main news program at MX TV, Tokyo's local TV station, and was told by the producer that "since TEPCO is a sponsor of our program, I would prefer if you do not openly criticize nuclear power."

On another occasion, I was writing a piece for a well-known publication for 5th and 6th grade school kids on the environment. That time the chief editor told me, "TEPCO is one of the sponsors of our magazine. While I would like you to write on the environment, please don't be critical of nuclear power."

On a third occasion, not directly related to TEPCO, I was interviewed by the Yomiuri newspaper, one of Japan's top two newspapers in terms of circulation, about the 1978 demonstrations throughout Denmark against the possible introduction of nuclear power, in which I participated as a child. When the interview appeared in the newspaper, my phrase "demonstrations against nuclear power" had been altered to "demonstrations for renewable energy." This was not what I had said, and when I called the journalist in charge, he sheepishly apologized, saying, "I did not dare to write anything negative about nuclear power lest I should invite the wrath of my editor (boss)."

I feel so very sorry for the people who are, right now, sacrificing their future health, and some of them their immediate lives, working to stop the disaster at the Fukushima Daiichi Nuclear Power Station. They may be described as "heroes"—and surely their efforts as such are heroic—but in a wider perspective they are victims of an industry in which the brainwashing of contractors and workers to believe that what they work with is safe has been pervasive.

In its entirety, the present situation in eastern Japan and the Tokyo metropolitan area has revealed the amazing fragility of modern civilization. All lifelines—water, transport, electricity, food supplies—have been severed or disrupted in eastern Japan, and Tokyo, one of the world's largest cities, was in danger of a large-scale, sudden blackout yesterday afternoon (March 17) as a cold spell of weather drove up electricity consumption close to the limit of maximum supply.

A good friend of mine, working at Tohoku University not far from the epicenter of the earthquake, called to tell how he finally, after six days, managed to leave Sendai (a city of more than 1 million on Honshu's east coast), driving to Tokyo in a 16-hour ordeal. No gasoline being available anywhere on the route, he barely managed to reach Tokyo, his gas tank drying up. More frightening than the drive, though, was how food and water were virtually impossible to obtain in the city center of Sendai.

"Emergency supplies have been distributed to the schools where tens of thousands of people take refuge, but nothing seemed to reach the city of Sendai and shelves in supermarkets were almost completely empty. For the first time, I had the feeling of a threat to my life because of an inability to buy food," he told me.

My friend made it, but older and weaker people are dying—or will die—as the crucial lifelines of a hypermodern society have been devastated.

The question, obviously, is what we can learn from this experience, not only in Japan but also in modern society as a whole. It remains to be seen whether we will truly learn anything at all. To me, there seem to be at least three major lessons. The first is the question of how or if lifestyles and values will change. The thing that the Japanese have been praised for throughout the first week of this terrible disaster has not been "technology" or "financial strength"—it has been the strong spirit, the patience, and the human qualities of the people here that have touched many around the world.

Money and shiny goods in temples of consumption have carried absolutely no value for the people here in the last week. Is there a chance that we may, now, see and act on the emptiness of useless consumerism? I hope there is a chance, although I do at the same time fear that once things settle down, Japan and the world will go on as if nothing had happened.

The second lesson is the danger of concentration of population into huge metropolises. Although the epicenter of the M9.0 earthquake was hundreds of kilometers northeast of Tokyo, the city was paralyzed, streets were clogged, subways inoperative, and phone lines dead. The staff at my office could not get home or get in touch with their family.

What if—and this could happen any day—the earthquake had hit Tokyo straight on? I have not the courage to think of the scale of disaster or the number of human lives that would have been lost. As urbanization continues at great speed in the world's population centers, the utter fragility of the 21st century megacity poses serious questions. Is there a way to answer this question in a more humane and sustainable manner than we are experiencing today? There must be.

The third lesson is the folly of making ourselves dependent on energy production from large-scale and extremely dangerous power stations, where no workable plans exist to control worst-case scenarios. Huge costs will be incurred in Japan over the next several decades to clean up Fukushima. Huge costs were incurred to build the plant in the first place. Surely this money could have been used more wisely. Hopefully, the lesson taken from Fukushima will, finally, make the idea of nonviolent, nontoxic, decentralized energy sources the mainstream policy and business choice around the world.

If we can learn the lessons, there is hope for the future.

Peter David Pedersen
Chief Executive
E-Square Inc.
Tokyo, JAPAN

[PHOTO CREDIT: Globovisión. Damaged reactor at Fukushima (CC).]

James Farrer on China-Japan Tensions

We are pleased to publish this guest post below from James Farrer on the current tensions between China and Japan:

It was a bitter pill for the Democratic Party of Japan (DJP), no matter how they swallowed it. By releasing a Chinese fishing boat captain detained by Japan without a trial, Japanese Prime Minster Kan Naoto was clearly bowing under Chinese pressure. The captain had been arrested by the Japanese coast guard for allegedly ramming his boat into Japanese coast guard vessels while in territorial waters claimed both by China and Japan. The Japanese government appeared to buckle and released the captain to China on Saturday. According to an unnamed official in the prime minister's office quoted in the Asahi Shimbun on Sunday (9/26/2010), "The Chinese could have recalled their ambassador, or cut off diplomatic relations. There was no other possible landing point."

Within Japan this was a shocking turning point in bilateral relations, a sudden strategic victory for a rising China that could lead to many scenarios, including the possibility that China would send fishery administration or even military ships to patrol the waters off the disputed islands and back out of an agreement to jointly develop undersea gas fields in the area. An official in the foreign ministry quoted in Sunday's Asahi, said: "There's no telling how overbearing the Chinese are going to be after this. There’s nothing to be done about it, this will go on for the next twenty years."

The Japanese public seems to have reacted three ways to the release of the captain. One group, the sort who usually read the business-economics newspaper Nikkei Shimbun was undoubtedly relieved to see the government release the captain last Saturday. As Chinese sanctions escalated into the economic sphere, including a stoppage of the export of rare metals to Japan, the worry was that this political spat would seriously effect Japan's increasingly important economic relationship with China. It was this economic group that seemed to be making the decisions in Tokyo last week, hoping that pragmatism and mutual economic interests would prevail. The danger of this view, expressed to me by one Japanese reporter I spoke to, is that in thee economic sphere the Chinese now see Japan as needing China more than China needs Japan, and will continually try to push this advantage on various fronts. Recent strikes against Japanese companies in China are a sign that more economic pressure can be expected.

Another segment of the public, who are more likely to read the relatively liberal Asahi Shimbun, was relieved, but also dismayed. This more internationally-minded group, including many Democratic Party supporters, had hoped for the past few years that Japan and China were actually improving their relations. Now the DPJ's China policy seems to be in tatters. Talk of an "East Asian Community" and a "mutual strategic relationship" seems naive in this tense atmosphere, to say nothing of the rhetoric of "fraternal love" of the previous Prime Minister Hatoyama Yukio. Now, there is a depressing sense that no relief from Chinese pressure is forthcoming. The Chinese government is now demanding an apology and recompense for the trouble caused in the case of the hapless fisherman. This may be perceived in Japan as a signal that the Chinese government has no interest, or perhaps no incentive, in improving relations with Japan. Most troubling of all to the Japanese internationalists, the recent actions against Japan included halting exchanges between school children, and canceling tours to Japan, acts that inflame tensions between the citizens of the two countries at the societal not simply the political level. Many Japanese China-watchers are convinced that twenty years of anti-Japanese education in China (especially under the leadership of Jiang Zemin) have produced an atmosphere in China in which anti-Japanese rhetoric is all-purpose political medicine that the Chinese government can apply to any problem, domestic or foreign. If this is the case, there will be little chance for true detente.

In general the leftist and liberal segments of the Japanese public are worried that China has reacted only tepidly to the efforts of the DPJ to improve relations between the two countries. One of the most baffling acts involved the Chinese navy conducting exercises near Okinawa at about the time Japan was debating the agreement to shift U.S. forces within Okinawa. The Chinese naval exercises seemed timed perfectly to embarrass both the peacenik and pro-China wings of the DPJ, which subsequently beat a retreat to the relative security of the US alliance. The U.S. bases in Okinawa will stay put, and it seems likely that the hawks within the DPJ (a party which includes an extremely broad spectrum of politicians from socialists to rightists) will have a greater say in foreign policy.

Only one group seems genuinely energized by these events. This is the small but loud, and perhaps growing, right wing in Japan. Right wingers in Japan, like the so-called angry youth in China, thrive on Sino-Japanese tensions of any kind. Much of their online rhetoric is racist and dehumanizing, and aimed at stirring up anti-foreigner tensions within Japanese society as well as in Japan's relations with China and Korea. The more rational right wing sees this as a chance to bash the government of Kan, who will likely pay a heavy price for kowtowing to Beijing. The conservative Sankei Shimbun even went after the Asahi Shimbun for not towing a strict enough line on Japanese sovereignty claims for the disputed islands. The mainstream conservative Yomiuri criticized the weakness of the prime minister’s actions as not standing up for Japan’s territorial integrity.

Read in the Western press these events may seem inconsequential. Westerners forget that China and Japan have one of the largest bilateral trade relationships in the world, and profound mutual interests at the societal and political levels. Living as I do between Tokyo and Shanghai, as so many thousands of people do these days (Japanese, Chinese and others), we can only hope that both governments find a way of managing the seemingly irresolvable territorial dispute, and perhaps even return to the policies of engagement that began between the previous Prime Minister Hatoyama Yukio and Chinese Premier Wen Jiabao.

James Farrer is Director, Institute of Comparative Culture, Sophia University, Tokyo, Japan. Photo from huneycuttaddison.

Kei Hiruta on Japan's Political Philosophy Boom

We are pleased to publish below a guest post by Carnegie-Uehiro Fellow Kei Hiruta.

Observers of Japanese society may be surprised to see an emerging interest in political philosophy in Japan. Mainstream newspapers and popular magazines have been busy interviewing philosophy professors; and bookstores across the country are holding or planning to hold philosophy book fairs. Why is this happening and what is the likely outcome?

The cause of this boom is thanks to Harvard professor Michael Sandel. His renowned lectures at Harvard were recently broadcast on NHK (Japan Broadcasting Corporation) and turned out to be enormously popular. The Japanese translation of his book, Justice: What's the Right Thing to Do? has sold about 400,000 copies since its publication in May 2010, and his visit to Japan in late August was enthusiastically welcomed. Yet the boom is more than a Sandel boom; he may be an academic superstar, but he isn't the only actor in the drama.

The kind of political philosophy Sandel exemplifies is indeed new to most of the populace. The relevant distinction here is not so much between Japanese and Western philosophy but between Continental and Anglophone. Because of the strong and persistent German influence over the humanities and social science in Japan, joined by the popularity of postmodern theoretical literature in the last three decades, the analytical and normatively-oriented mode of philosophizing—so familiar to those based at Harvard, Oxford, St. Andrews, or Australian National University—strikes the Japanese audience as refreshingly down-to-earth. In his lecture at the University of Tokyo, Sandel asked whether it is fair that the Major League Baseball player Ichiro Suzuki should be paid 42 times more than the President of the United States or 400 times more than the average Japanese school teacher. This surprised and excited those who had thought that political philosophers would always ask fanciful and impractical questions such as, "What does Karl Marx mean by commodity fetishism?"

The political philosophy boom, like all booms, promises too much. In a recent special issue of the popular magazine Weekly Toyo Keizai, the discipline is reported to offer guidance on tackling various problems, including Japan's continuously high suicide rate and the uncertain future of capitalism. Yet psychologists are better qualified to address the first problem, and political philosophers are as clueless as economists about the second one.

Does this mean that the boom will be followed by disillusionment? Perhaps. A boom brings opportunities to make money, and bad philosophy is already piling up in the market to drive good ones out. If this trend continues, the boom will turn into a bubble.

That would be an unfortunate end of the story because the Japanese have a wide range of social and political issues that can be illuminated by philosophical reflection. Should we abolish the death penalty? Should we accept more immigrants? How should a country deal with historical injustices? Does gender equality require a legal right for a married couple to have different surnames? How should we control pornography without unduly restricting the freedom of expression? These are but a few samples of the issues that have long been on the Japanese political agenda and yet are still in want of reasoned argument. This, without exaggeration, is what political philosophy is able to offer.

What the current boom shows is that ideas are in demand in Japan to assist people to consider, both individually and collectively, how to live in a society where the "second lost decade" seems like it will be followed by a third one. We have every reason to hope that the demand will be met and the boom will turn into something more enduring. Whether the hope will come true is yet to be seen.

Kei Hiruta is Carnegie-Uehiro fellow at the Carnegie Council for Ethics in International Affairs and a research associate in the Uehiro Centre for Practical Ethics at Oxford University.

Alexandra Harney on the Mummification of Japan

Our friend Alexandra Harney has given us permission to repost a piece called "The Mummification of Japan," which she wrote in her blog The China Price during her recent trip in Japan:

I'm in Osaka this weekend to appear on Yomiuri TV's Wake Up Plus, that rare beast: an intelligent TV show. The story of the moment in Japan is the nationwide hunt for missing centenarians, following the discovery of a modern-day mummy in his bed, 30 years after his death. Officials suspect that a relative did not notify the government of his passing in order to receive the man's benefits.

For the moment, the debate in the Japanese media (including Wake Up Plus) is focused on three main elements: the government's failure to detect which of its benefit-receiving citizens are living and which are dead; the Japanese tendency to leave family matters to the family; and the fact that Japan's privacy laws hinder investigations into this kind of fraud. To me, the tenor of the debate itself reflects Japan's self-flagellating tendency to blame the government and politicians in the first instance.

The fact is that these missing pensioners are a reflection of how deeply and painfully Japan's long stagnation has affected its oldest and youngest citizens. Trite as it sounds, I'll recount a conversation I had with a taxi driver here in Osaka yesterday: at 65, he receives about US$1200 a month in pension benefits from the government. His rent accounts for half of this, and after utilities, his cell phone bill and food, there isn't much left. So he continues to work as a taxi driver, taking home about $1800 a month. (One might wonder how he is allowed to work while receiving public benefits, but the benefits, like the minimum wage, were not meant for people to depend on entirely, I believe.) $36,000 a year isn't bad by global standards, but consider that this man might live for another 30 years and this is as good as it will get for him. While he is clearly putting money aside for his retirement, he expects he will have to move into a smaller apartment when he retires. This is not the fancy globe-trotting retirement that I, at least, had imagined for Japan.

While we hear much talk about China getting old before it gets rich, Japanese people are getting poor before they get old. Younger Japanese will not receive the $1200 a month that that taxi driver gets; they will likely receive much less.

Putting aside the fact that pension fraud is a crime, one larger issue behind these missing old people and their mummified remains is that younger Japanese need to rely on their parents' retirement benefits because the economy is not providing sufficient job opportunities.

Every trip to Japan is more depressing than the last these days; I stay in hotels that will, without the help of big spending Chinese tourists, likely lay fallow, listen to music from pianos that play themselves, pass through ghostly tourist districts designed for a wealthier country. Japan is no longer the country it once was. Policymakers in other rapidly aging countries (and those that struggle to create new jobs, like the US) should take notice.

Image by flattop341.

Brewing in Japan: Interview with Bryan Baird of Baird Beer

Earlier this month during a trip to Japan, I traveled to the coastal city of Numazu to visit Baird Brewing Company, one of the country's most innovative new craft breweries. When I arrived, I had the fortune to meet Bryan and Sayuri Baird, who founded the brewery in 2000. Bryan answered some questions about brewing in Japan:

After graduating from Johns Hopkins SAIS, what inspired you to get into the brewing business and why Japan?

I attended SAIS in the Japan Studies program and enrolled with the full intent of returning to Japan in some professional capacity upon graduation. My first job was with the Tokyo office of the American Electronics Association. Craft beer, or ji-biiru as it was called, was receiving great attention in Japan at the time because it was a brand new thing—small-scale brewing was made possible with deregulation that happened during the Hosokawa government in which minimum production requirements necessary for a brewing license were lowered dramatically from 2000 kl per year to 60 kl. I didn't love working as a sarariman (salary man); I always had been a passionate beer drinker; and I respected Japanese society for the reverence it paid to craftsmanship. Therefore, I felt that craft beer was an industry that suited both me and Japan.

Why did you choose to locate your brewery in the city of Numazu?

After attending brewing school in California, my first industry job with a brewing equipment company brought me to Numazu. Our ultimate dream, of course, was to launch our own craft brewing company. For a variety of reasons, we judged Numazu to be a very good place to inaugurate a craft beer business. We thus stayed and here we still are today.

How did your initial brewing learning process take place?

The first thing I did, and the smartest, was to immediately enroll in brewing school. I attended the American Brewers Guild's 3-month intensive brewing science and engineering program, which also combined with a practical apprenticeship. My apprenticeship was done at the Redhook Brewery in Seattle. I thus had very good initial training. Being a good brewer, though, is very much dependent on the interplay of theoretical knowledge and practical experience. To gain more practical experience I cobbled together a tiny brewing system out of re-welded used kegs, set it up on our veranda and began brewing pilot batch after pilot batch. This was the actual system with which we launched our original brewery-pub. It was so tiny (30-liter batches) that I had to brew with great frequency and this helped me to accrue invaluable experience in a very short time.

Who were your inspirations?

My greatest business inspiration is Warren Buffet. The principles and values he espouses I embrace wholeheartedly.

Which breweries do you admire most?

Fritz Maytag of Anchor Brewing in San Francisco (although he just recently sold the business) and Ken Grossman of Sierre Nevada Brewing in Chico, California are probably my two biggest industry heroes. Some of my favorite breweries now include Russian River, Firestone Walker, and Victory. Piece Brewery and Pizzeria in Chicago and the Pelican Pub & Brewery in Oregon are two outstanding brewery-pubs.

What is your beer's concept?

With each and every Baird Beer we seek to craft a full-flavored beer of character. We define character simply: Character is the interplay of balance and complexity. Industrial beer tends to be well balanced (i.e. it can be drunk in quantity without inducing palate fatigue) but fully lacking in complexity (i.e. the flavor is one-dimensional and you pretty much know everything about the beer upon the first sip). Poorly made craft beer tends to be complex but it lacks balance. Great craft beer possesses both. For us, the key to achieving this character is minimal processing. Therefore, we begin by selecting ingredients that are minimally processed (e.g. traditional floor-malted barley, whole flower hops, fresh whole fruit, etc.). Then, we strive to brew with these ingredients in as simple and unprocessed a way as possible (e.g. we do not filter Baird Beer and we secondarily ferment and naturally carbonate it in the package from which it will be dispensed—much like Champagne).

How is the beer Japanese?

We enjoy lovely soft water in Numazu that really contributes a round and balanced house character to our beers. In the Japanese esthetic, harmonious balance is greatly prized. I think Baird Beer is a liquid embodiment of that Japanese esthetic value.

What were some of the initial challenges you overcame as a microbrewer in Japan?

Japanese ji-biiru (craft beer) boomed out of the gate in 1994 but was already turning into a bust by the time we were getting into it around 1997. There was, and still is, simply too much bad craft beer in Japan and not enough really good stuff. Thus, we had to overcome the largely negative image that the industry garnered for itself in its initial years. The other major challenge was simply that we were brewing a kind of beer that had never really existed in Japan before and people really didn't know what to make of it and us. The key to growing sales in a nascent market like craft beer in Japan is, in addition to great product, constant consumer education. The more that consumers understand about beer and about how and why we approach it the way we do, the more open they are to the experience. This sort of education, though, takes time and requires persistence.

Is it easier for a foreigner to introduce a revolutionary product like microbrewery beer to Japan?

That's a good question. My answer is yes, so long as it is the right foreigner. By "right" I mean someone who comprehensively understands Japan, who can deal with Japanese people with cultural, social and lingustic understanding, and who genuinely likes and respects Japan. This is the type of foreigner that places like Johns Hopkins SAIS help to nurture. When you are this type of foreigner you get to participate in Japanese society on a deep and meaningful level but without having to face the same sort and degree of social and cultural constrictions that the Japanese themselves must often deal with. This kind of social liberation can be turned into a very valuable business asset.

How did your business start to take off?

The initial turning point for our business happened 2–3 years into it when we realized there was a definite market for what we were brewing, only it wasn't in Numazu but rather in Tokyo. This led us to purchase larger brewing equipment and begin bottling and kegging our beer for distribution in the Tokyo market. The more we sold in Tokyo, the more frequently Tokyo beer enthusiasts would make the pilgrimage to our pub in Numazu. This eventually led us to open pubs in Tokyo itself. By doing well in Tokyo and selling throughout Japan, the local market then began to wake up. Finally, ten years into it, we seem to have gained real traction and achieved that magical sort of critical mass. Our three gold medals in the 2010 World Beer Cup certainly didn't hurt things either.

What is the current state of the Japanese big beer and microbrewery market?

The big industrial brewers in Japan are in for some dark years, I am afraid. The simple fact is the overall Japan beer market is shrinking. This is because the population is both aging and not growing. As one gets older, one drinks less. I would not want to be an industrial brewer in Japan. As for craft beer in Japan, there are still way too many sub-par players. These poor performers need to be weeded out and this is happening gradually.

What do you see for the future of beer in Japan?

For good Japan craft brewers, as well as importers of excellent world craft beers, I believe the future is bright. People seem to be wanting more quality if not more quantity, and there seems to be at least a partial movement away from purely mass-produced and mass-marketed goods to premium niche goods crafted by shokunin (artisans). Currently in Japan, craft beer does not account for even 1 percent of the overall beer market. U.S. craft beer, on the other hand, accounts for more than 4 percent of the U.S. market by volume and more than 7 percent by dollar. I can see Japan craft beer achieving similar numbers in the Japan beer market within the next 10–20 years.

What advice do you have for aspiring entrepreneurs in Japan?

My advice is quite simple: Possess abundant reserves of passion, persistence, perseverance, integrity, and guts. Also, possessing sufficient "Japan skill" is critical to succeeding in business in Japan. Frankly, these Japan skills take longer and are harder to acquire than most industry-specific skills. Most foreign business people who do not do well here fail because of insufficiency on the Japan skill front.

Will a Rudderless Japan Drift into Crisis?

Japan Needs a Captain

The upper house election in Japan last Sunday dealt a huge blow to the ruling Democratic Party of Japan (DPJ), leaving the country with a "twisted" parliament and no clear path forward. In contrast to the previous decades of nearly uninterrupted single-party rule, the new, messier political environment is a positive sign for Japanese democracy.

But this difficult transition to a new mode of governing comes at a time when strong leadership is needed to address a possible sovereign debt crisis that could hit within five years. Ironically, the DPJ's defeat last Sunday was partly the result of Prime Minister Naoto Kan's flip-flopping over a consumption tax that was meant to help stave off any problems emanating from its exceptionally large debt-to-GDP ratio (near 200 percent). Most voters support the tax but the prime minister buckled under criticism on the issue, fostering the impression that he is simply an opportunist. The party's loss may have made prospects for reform "an uphill battle."

I had the chance to talk with people from media, politics, government, business, and academia in Japan during the week leading up to election day. Consistent with the polls, many of the people I spoke with were undecided about which party to support, and the murky election result may delay financial reforms. Rating agencies Standard & Poor's and Fitch have warned of possible credit rating downgrades due to Japan's expected political gridlock, which may hinder the country's ability to reign in its sovereign debt.

Hatoyama's Parting Gift

Yet there is good news. While the lower house election last August was a rejection of the long-ruling Liberal Democratic Party (LDP), last week's upper house election was about real issues while also serving as a referendum on the DPJ's 10 months in power. A political monopoly has been replaced by a period of what Japan expert Gerald Curtis calls political "creative destruction." One DPJ staffer told me that the current, more pluralistic public debate over policy issues was the legacy of former Prime Minister Yukio Hatoyama.

Whether or not by design, the two administrations of Kan and Hatoyama have put on the table thorny issues, including the logistical details and strategic importance of the U.S.-Japan alliance and the previously unpopular idea of a consumption tax, which led to the downfall of the Ryutaro Hashimoto administration more than ten years ago. I was told the DPJ expression for this expanded public square is "the new public."

Meanwhile, the new smaller parties actually stand for something other than an unbridled thirst for power. In particular, Your Party, analogous perhaps to American libertarians, seeks an inflation target and to shrink the government thus unleashing Japan's entrepreneurial spirit and creating jobs. Your Party did quite well, gaining ten seats. It appeals to a common frustration in Japan with government in general and is populated with stars from Tully's Coffee Japan, JP Morgan Chase, and the Ministry of Economy, Trade and Industry (METI).

The outcome is a real multi-party system. But contrary to hollow calls for a revolution last fall, this is the new reality: the slow democratic politics of compromise.

Drifting into Troubled Waters?

Nevertheless, the slowness of Japan's new politics could launch the country adrift into a debt crisis. Although 95 percent of Japanese government bonds are held by domestic investors, several factors could create risks. First, with Japan's low savings ratio and low economic growth, if its aging population starts to draw on its savings, the government may be forced to rely on foreign funders who will demand higher interest rates. Second, a deteriorating Japanese current account, due to a stronger yen or weaker global demand for Japanese products, would also reduce a source of debt funding. Reuters has quoted one analyst as predicting a current account deficit by 2016. Finally, it isn't clear whether a consumption tax would generate enough revenue or whether the tax would only dampen an already stagnant economy.

But whatever happens, five to ten years seems to be the critical time horizon. The next lower house election will take place in 2013 and by 2015 Japan is expected to shift toward external funding of its debt and will therefore face higher interest rates.

"Three to four years from now I expect a sovereign debt crisis to hit Japan and long-term interest rates to surge," former Bank of Japan board member Teizo Taya said in a May interview with Reuters. Taya also believes that the five percent foreign holdings of Japanese debt would be sufficient to trigger a crisis if there were a sell off.

One government official echoed these views when I visited Tokyo last week, saying the current account was the figure to watch. But interestingly he said that while some had hoped the election of the DPJ would have provided the "shock" to the Japanese system to bring about economic reform, the DPJ's failures over money scandals, mishandling the U.S. alliance, and the consumption tax have killed that hope. Instead, he and his colleagues are looking to a debt crisis to provide the necessary shock for economic reform. Changes could occur in Japan's tax structure (reducing corporate taxes and increasing consumption taxes over time) as well as in its industrial policy to spur growth. Can't change occur without the need for a crisis?

"The Deadlocked Japanese Economy"

Underneath the sovereign debt risk is an economy that is in irons. Just as its political system faces drift, so does Japan's economy, according to a METI report released last month.

METI minister Masayuki Naoshima puts it this way last month when he unveiled his ministry's new industrial vision: "Some people say that the Japanese economy is recovering from the economic and financial crisis triggered by the Lehman Shock the year before last. However, in reality, many Japanese people probably find no improvement in the sense of stagnation they feel in their everyday lives. They even seem unable to see any new light for the future. I believe the reason for this lies in the uncertainty about 'what will drive Japan's revenue and employment in the future.'"

Naoshima goes on to underscore the economic conundrums Japan faces: People think that Japanese people save too much, thus dampening demand, but actually the household savings ratio is one of the lowest among major economies; on the flip side, domestic consumption is stagnant since wages haven't risen in the past decade; an export-led recovery may seem appealing but Japan's export ratio is low by international standards and stagnant wages in the past 20 years call into question the country's industrial structure; specializing in high tech products would also seem logical but Japan's global market share "has rapidly declined" and low levels of profitability suggest that the business model for Japanese industries that has "caused them to lag behind the world."

In response to these challenges, government officials told me last week that the broad strategy is to globalize Japan, making its social systems, ports, and infrastructure attractive to businesses that create value and jobs. Naoshima puts it like this: "If Japan wants to save itself from decline, Japan has no other choice but to aggressively push forward with globalization. However, if Japan pursues only globalization without taking action to stop the decline in its international competitiveness as a business location, Japan will lose both domestic jobs and added value."

A major element of this strategy will be to "globalize human resources." This means the country's education system must be modified in order to create a more worldly mentality among the next generation of leaders, thus slowing the inward-looking direction or "Galapagos syndrome" as I have called it. One of the most creative proposals I heard last week is to encourage university students to study abroad by offering a ten-year income tax break to those who take advantage of the program. As these more cosmopolitan leaders enter the job market, they must find companies with a more globalized governance structure, diverse board of directors, and global business strategy, one official told me.

Japan Needs More Mavericks

It's nearly a cliché to say that in Japan, the nail that sticks out gets hammered down. Harmony and conformity are prized in big organizations. But these qualities can also lead to stagnation. Entrepreneurship requires a bit of rebelliousness.

During my trip last week, I traveled to Numazu for a day to visit one of the most innovative breweries in Japan. Baird Brewing Company is a joint partnership company that was founded in 2000, and in recent years has received much acclaim for its high quality, creative beers. I had the great fortune to meet the company's founders Bryan and Sayuri Baird, a husband and wife team. Bryan graduated from Johns Hopkins SAIS in the early 1990s and came to Tokyo to enter the corporate world but had another calling. "I didn't know much about brewing at the time but I knew how to study," he said. Using passion and determination, he founded the company with some friends. For the first few years, his beers were dismissed as too challenging. His customers were initially afraid to try something new. For the same reasons, Bryan's competitors in Japan were brewing up pale, uninspired, safe lagers. Bryan stuck to his principles and kept making a great product that emphasized Japan's proud tradition of craftsmanship (monozukuri) until his customer base caught up with him.

"The Japanese people need to overcome their fears and be the nails that stick out," Bryan told me. Bryan is an entrepreneur who embodies what Japan needs—globalized human capital creating a business that adds value and jobs. Another notable maverick who has been globalizing Japan includes Rakuten CEO Hiroshi Mikitani who is making English the official language at Japan's biggest online retailer. Fast Retailing, Nissan Motor, and Toyota Motor also are moving in the direction of adopting English at the workplace.

In politics, LDP star Taro Kono recently published a book on how he is going to revive his party. The main message is: As a nail that has stuck out in the LDP, he knows how the party can revive the economy. Japanese culture is famous for its perseverance and the country's history proves it. The country needs some major changes in order to prosper. For it to create real change, Japan needs more mavericks. And to pilot away from the rough waters, it will need a bold leader; it needs a captain.

Photo by quatro.sinko

Obama Did Not "Take Down" Hatoyama

Hatoyama brought himself down.

Last night I was interviewed by Jim Swanson of Progressive News Radio. We talked about U.S.-Japan relations after Japanese Prime Minister Yukio Hatoyama stepped down from office last week, and about what we might expect under the new Naoto Kan administration. You can listen to our conversation here.

One of the topics we covered during the interview was a narrative that appeared in several publications immediately after Hatoyama's resignation advancing the notion that somehow U.S. President Obama was responsible for Hatoyama's political demise. Never mind the distasteful samurai references to Hatoyama "falling on his sword" and committing "ritual suicide." Blaming Obama for Hatoyama's fall not only ignores the facts, it is patronizing to Japan.

The argument I take issue with essentially says the following: The United States had developed a cozy relationship with the Liberal Democratic Party during that party's decades of nearly uninterrupted rule in Japan. After the Democratic Party of Japan defeated the LDP in the August 2009 general election, the U.S. government got nervous that it no longer had a vassal in East Asia that would obey U.S. wishes and advance U.S. policy—even though the DPJ and the Obama Administration shared many philosophical views and the U.S. and Japan share many core security interests. Hatoyama's move to renegotiate an agreement that the United States and Japan had made in 2006 over the relocation of a U.S. marine base in Okinawa convinced Obama, the argument goes, to greet Hatoyama in international forums with an "icy posture," causing Obama to "lose face," eventually forcing the Japanese leader to resign. (Variations of this argument can be found in The Huffington Post, The New York Times, Slate magazine, Foreign Policy in Focus, and elsewhere.)

If only it were that easy. Wouldn't it be nice if President Obama were able to take down leaders of countries just by being "icy" toward them? Imagine the power. The United States could simply shape international politics through sheer will. If Obama had such supernatural powers, wouldn't he use them to eliminate troublesome figures like Kim Jong Il instead of allies like Japan? Perhaps like any superhero he must keep them secret to avoid unintended consequences. But that is also part of the Obama-is-to-blame narrative: The United States should be careful when using its power for it may face unnamed "consequences." At least this whole notion dispels the dubious "America in decline" school of thought.

The blame-Obama narrative also assumes no independent agency in Japan and therefore sounds U.S.-centric, narcissistic, and uninformed about what has actually been happening in Japan over the past eight months. Since the day Hatoyama came into office Japanese people have poked fun at the politician, calling him an "alien," "a professor," a "momma's boy," and a "pigeon"—a play off his name (see the video above of the prime minister during his last days in office imitating a pigeon).

Meanwhile, Hatoyama was wishy-washy on other things, including pocketbook issues like highway tolls and cash subsidies for families with children. Other money problems included Hatoyama's own campaign funds scandal and a ballooning budget deficit. Hatoyama's failed attempt to renegotiate the relocation of the Okinawa marine base demonstrated to Japanese voters that he lacked leadership skills and failed to appreciate Japan's security needs. It is understandable that Hatoyama would want to reopen the Okinawa base issue, but I believe he could have done so with much more tact, leaving himself room to maneuver in case things didn't look good. At the least, he should have sought a viable political alternative domestically before announcing to his ally that the 2006 agreement was off. As Obama's Asia advisor Jeffrey Bader put it this week at a meeting in Washington:

Secretary Gates visited Japan in October and made clear that the FRF (Futenma Relocation Framework) remained the best option, that walking away from it would damage the alliance. There was criticism of Secretary Gates' so-called "confrontational" approach. In fact, someone on the Japanese side chose to leak virtually the entire transcript of Gates' first meeting with FM Okada to Kyodo News, giving the appearance that Gates was seeking a public confrontation when he was in fact speaking frankly in a private meeting.

As we all know, PM Hatoyama decided in December Japan would not implement the FRF as agreed upon. He said Japan would reach agreement with us on a new proposal by the end of May and made clear his preference was to relocate the MCAS Futenma off Okinawa--if not off Japan altogether.

We thought this was a mistake, for various reasons. We made clear our disagreement to the Japanese government. At the same time, we did not reject Hatoyama's proposal to talk. We would have preferred to stay with the option so arduously negotiated over 15 years, and continued to say it was the "best" option, but we did not insist that it was the "only" option. Rather, we showed respect and understanding of the politics of Japan and the needs of the new government. We were frankly skeptical that delay would produce more positive results. But, that is how allies should treat each other, particularly in the "alliance of equals" about which Hatoyama spoke and which President Obama has accepted.

Hatoyama's mishandling of Japan's relationship with the United States and his flip-flopping on domestic issues precipitated a steady decline in his administration's public support from percentages in the 70s to below 20 at the end of his time in office. People I interviewed in Japan were predicting Hatoyama's undoing and Naoto Kan's ascent as early as November 2009, just a couple of months into Hatoyama's term.

The Japanese people's attitude toward security is paradoxical. Most Japanese understand that the alliance is important for the security of Japan (America and President Obama have been quite popular in Japan since Obama took office). Many Japanese want a more independent foreign policy but they are also reluctant to devote more funding to making that a reality given the country's extremely high levels of government debt. Making things worse, Japan is facing a declining population and is unlikely to open its borders to large numbers of immigrants. So the default position is to rely to a large degree on the United States, a proven, trustworthy ally.

On top of that, the blame-Obama sound bite is mostly an English press phenomenon, and has little resonance with the Japanese media. Foreign pressure (gaiatsu) can have a role in advancing change in Japan, but it needs a domestic constituency for it to actually work. The Japanese have been expecting Hatoyama's resignation for months given his poor performance in office. As a democracy, Japan was able to move on to a more promising leader. To blame foreign leaders for Hatoyama's fall would belittle Japanese democracy.

Slowing Japan's Galapagos Syndrome

Enjoy, a play by Japanese playwright Toshiki Okada, opens with two characters working at a comic book cafe in present-day Tokyo who spend nearly the first act solely ruminating about the etiquette of public toilets. The brilliant drama reveals the world of a Japanese generation of self-centered but lovable slackers who are accused by their peers of "destroying the future of Japan." While watching this play in Manhattan this month, it occurred to me that like these characters, who were lost in the minutiae of their own lives, Japan too has turned inward.

It's true that shyness is so common in Japan that it almost considered a virtue. Where else would one find DVDs for sale to practice "just looking" at people or "Miterudake," as the product is called? But given its cultural proclivity for and historical experience with isolation (during its policy of sakoku), the last thing Japan needs is a reason to curl up inside its shell. An isolated Japan would be especially unfortunate as it would further erode the country's relevance in international politics as well as its economic competitiveness and prosperity.

Amid economic doldrums and deflationary mentality, a declining population and growing anxiety about Japan's place in the world, and an enormous letdown after high hopes in the governing Democratic Party of Japan (DPJ), there is a danger that Japan might further withdraw. Japan's "Galapagos syndrome," a phrase originally coined to describe Japanese cell phones that were so advanced they had little in common with devices used in the rest of the world, could potentially spread to other parts of society. Indeed signs suggest it is happening already.

The first sign is the current generation of Japanese in their 30s and 40s who have been distinguished by market experts for their adeptness at online shopping and generally avoiding the rest of society. More dramatic is the number of hikikomori or shut-ins who have given up on social life. According to a Japanese government website, the figure may stand at 3.6 million or about 3 percent of the entire population. This figure is far larger than the previous estimate of 1 million by renowned Japanese psychologist Tamaki Saito.

As I argued earlier this year, Japan as a nation seems to be withdrawing and giving up on the world. Akiko Ikeda-Wei, a Japanese sociologist based in New York told me recently, "I am saddened by Japan's economic slump that has caused misery: the record-high unemployment rate and extremely unsettled and insecure feelings among thousands of Japanese employees."

Echoing many of the Japanese professionals I have met in New York, Ikeda-Wei advised her countrymen to look for opportunity away from home--and don't look back. "If I were one of them, I would forget about seeking employment in Japan and leave, and look for a volunteer job somewhere in Africa or in the Middle East and try to use this opportunity to explore something new and innovative that can help others who are in great need."

The problem is that the attitude of Japanese younger people today results in just the opposite. While her advice might be apt for many Japanese, "The fact is actually the other way around. Young people especially have become more inward-looking than ever, totally not interested in going abroad to work or to study," she said.

An odd expression of this phenomenon is in the puzzling decision this month by Japan's largest business newspaper Nikkei to dissuade readers from linking to its website. As part of its strategy to require readers to pay for access, Nikkei has stipulated that people who wish to link to its website must fill out a written application. Nikkei's print circulation surpasses that of the New York Times and even The Wall Street Journal. But in the Internet world, the move looks as if the company were saying, "We are doing just fine with our print edition, so go away, Internet."

Jean-Pierre Lehmann, a Japan expert at IMD Business School in Switzerland, has noticed a shift in attitude at companies such as Toyota Motor. In the 1980s, Lehmann would accompany Western managers to Japan to learn about its venerable production techniques. But over the course of the decade, he noticed "a subtle change." As he wrote this month in the Taipei Times, "Western management delegations continued to be politely received, but more often than not professional guides were appointed to show them around, and there was no dialogue with the Toyota managers, who previously had been keen to teach and learn. On the contrary, there was an undisguised sense of condescension toward the visiting foreign executives."

Most distressing is that, like the creatures of Galapagos, the products of Japanese research and knowledge generation are becoming increasingly evolved yet nonetheless separate from global society. As recently chronicled by Japanese economy experts Hajime Ito and Jun Kurihara, Japan leads in number of patents in solid waste management and is number two after the United States in air pollution control, water pollution control, medical technology, pharmaceuticals, and biotechnology. Yet despite these impressive accomplishments, the country lags in cited research or core articles in the same fields, not even making the top ten. Why is this the case?

Ito and Kurihara point to one possible cause: Japan's lack of international cooperation in the area of knowledge creation and the falling number of Japanese students attending U.S. universities.

At elite American universities like Harvard and Berkeley, the number of Japanese students is falling and relatively small compared with their counterparts from South Korea and China. Japanese enrollment at Harvard has been declining for 15 years while enrollment from China and India has more than doubled. Only five Japanese students attended Harvard as undergraduates in 2009, and only one of them matriculated as a freshman. According to a study by the Institute for International Education, overall India is the leading sender of students to the United States, and while Japan was the fourth largest sender, its number was down by 4 percent to 33, 974 in 2008, down for a third straight year. Since 2000, undergraduate enrollment in U.S. universities has dropped 52 percent. These are figures incommensurate with the world's second largest economy.

In March, Harvard President Drew Gilpin Faust even made a special trip to Japan to encourage more Japanese high school students to apply to the university. Faust met students in Japan who preferred to stay in the comfort of their own homes rather than going abroad. A Washington Post article this month featured students from Japan who passed up degrees from top U.S. universities to stay in Japan.

To be sure, Japan's population is shrinking and the number of children under 15 has declined for 28 consecutive years. But these trends don't entirely explain this more inward-looking attitude, which comes from a combination of domestic political dysfunction and economic malaise that has crept into popular culture. While Japan was once a larger consumer of American degrees, "an international degree is not as valued" in Japan, Faust is quoted as saying in the Washington Post article. While U.S. college degrees are becoming ever more expensive, enrollment from developing countries India and China have nevertheless led the pack and have risen in 2008 by 13 and 20 percent respectively.

Pointing to the falling enrollment of Japanese in U.S. top universities, Ikeda-Wei told me, "Economic difficulty is already sad enough but I am even more saddened by this very short sighted, pessimistic, and unproductive attitude of young Japanese." She concluded, "If young people's attitude remains as such, it is very difficult to hope for Japan's bright future."

Okada's play Enjoy whose endearing characters brought the world of Japan to audiences abroad was made possible by support from Japan Foundation and Japan Society, as well as the U.S. National Endowment for the Arts. With a declining population and exploding government debt, the future of Japanese military or "hard" power is uncertain. That is why for Japan to remain relevant, prosperous, and influential, institutions like the Japan Foundation, which is supported by the Japanese foreign ministry and promotes international exchange, and the Japan External Trade Organization (JETRO), which is supported by the economy ministry and promotes international trade and investment, have become increasingly important. (Full disclosure: I have worked with both institutions.)

"Isolation hurts Japan's economy, especially in services," Robert Dujarric of Temple University Japan has recently noted. "If so few Japanese conglomerates have managed to establish themselves in the premier league outside of manufacturing, it is partly due to their mono-cultural and exclusively Japanese management. It puts them at a severe disadvantage when competing with foreign rivals run by multinational and multicultural staffs." Japanese language, which is considered by experts to be among the most difficult to learn, is highly adaptive to the Japanese high-context culture but irrelevant in most of the world outside this island nation.

Institutions like the Japan Society in New York can act as powerful vectors of positive influence, coalescing Japanese innovators abroad to bring change to Japan. Unfortunately, just as the role of these cultural and economic institutions has become more critical, the mood in Japan for spending has unsurprisingly turned sour. While the government's approval rating has fallen to 24 percent, the one bright spot for Prime Minister Yukio Hatoyama has been the public spectacle he has made of the budget review process or "shiwake." Like corporate restructuring or "risutora" years ago, "shiwake" has become a word laden with controversy in Japan today--to some it is the democratization of the country's spending process, bringing openness and transparency; to others it is a sign of the country's decline and malaise. The fears were epitomized by a now-infamous comment downplaying scientific spending by a Japanese lawmaker who asked, "What's wrong with being number two?"

For Japan to slow its Galapagos syndrome, it will need to support its soft power and foreign engagement institutions. The question mark in my mind is: Do the majority of Japanese want to slow their country's withdrawal from the world or would they prefer a comfortable decline? That's to be determined.

Reposted from the Huffington Post.
Photo by Strana.

Why Japan Doesn't Innovate in ICTs

I moderated an excellent panel last week at Japan Society on "Obama's Internet Initiative & Social Reform in the U.S. & Japan" (listen to the audio here) with Josh Fouts (Dancing Ink Productions), Kazuya Okada (NTT Data Agilenet), Kevin Werbach (Wharton business school), and Toshihiro Yoshihara (CSIS). If I had to sum up the conclusions of the panelists, it would be that "culture matters" in the spread, use, and impact of information and communications technologies in various societies.

Werbach, who has advised the Obama Administration on IT policy, emphasized the "C" in ICT--communication. Echoing senior officials in the administration such as Anne-Marie Slaughter, Werbach said that ICTs must allow people to communicate, connect, and collaborate toward achieving national ends. ICTs should allow people to connect to people, government to connect to its constituents, and the United States to connect to the rest of the world. I recalled the mantra of the administration: convene, connect, and catalyze. This sense of the United States as a credible and trustworthy convener has been a common theme I have seen in the Obama team's thinking.

Fouts similarly argued that constructive use of ICTs must be a sincere dialogue or an exchange. He reminded the audience that in reaching out to new audiences and cultures, cultural norms don't change on social networking websites. He also eased some potential worry about the Internet and social trends: The use of technology cannot replace human contact; online outreach and human contact is not a binary choice, it is a matter of integrating the two. Fouts contributed a future idea for the group--U.S.-Japan cultural exchanges through virtual worlds.

The two Japanese panelists seemed concerned about Japan's use of ICTs. As Okada put it, the reason Japan lacks innovation in ICTs is that there is a gap between its IT infrastructure and its IT literacy or attitudes. Japan is stuck in old traditions, not taking advantage of ITC's potential. For example, few people telecommute to work and few meetings are conducted virtually. In Japan, Okada said, people have a "farming attitude" in contrast to America's "hunting" mentality. The result is that Japanese people avoid disruptive change, work hard rather than work smart, and make only incremental improvements (kaizen). Okada's remarks reminded me of my graduate school thesis on U.S.-Japan negotiations; one theory that described Japanese negotiating style related to its rice farming culture. Perhaps more disturbing for Japanese innovation, Okada noted that in Japan, there is little incentive to take risks but huge disincentives to not fail. In other words, the punishments for failure outweigh the potential gains from success. Many people point to Japan's high-tech robots as areas of innovation. But Okada said Japan is automating, not innovating.

Yoshihara was slightly more optimistic but also criticized Japan's narrow use of ICT in policymaking. He said that while the U.S. approach toward establishing a broadband policy was open and inclusive, public comments through online surveys in Japan were limited. Reflecting a concern I have heard elsewhere, Yoshihara was also concerned about recent Japanese attitudes toward the Internet: In the United States, people feel the Internet is generally a healthy exchange of ideas he said while in Japan, a growing number of people feel that the Internet is a "dangerous" place, citing the vicious attacks on people in Internet forums such as 2channel. It was noted, however, that Japanese cultural "bads" present a low-hanging fruit for positive change.

To me this panel demonstrated that the Japan Society in New York City has a vital role to play in helping push for positive change in Japan--from the outside. I hope Japanese communities in New York City, a hub of innovation, will continue to exchange ideas at this historic institution and foster a stronger U.S.-Japan relationship through creativity and innovation.