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Are We Ready For The Japanization Of The World Economy?

Having experienced its economic collapse a generation earlier than the 2008 crisis, Japan has become a laboratory for making the most out of meek growth.

Something in the air?
Something in the air?
Jean-Pierre Robin

-Analysis-

TOKYO — Shinzo Abe has once and for all earned his stripes as a great tactician. For the third time in five years, he triggered early elections to reinforce his hand as prime minister and, once again, it was a winning move. Taking advantage of the rising regional tensions since the summer provoked by North Korea's missiles and nuclear testing, he turned apparent weakness into a strength.

It's also the way he's spinning his economic strategy, Abenomics, a mixture of monetary and budgetary stimulus, and reforms. "Japan may be aging. Japan may be losing its population. But these are incentives for us," he told voters and the rest of the world.

Like his grandfather Nobusuke Kishi, who was prime minister between 1957 and 1960 and invested a lot in bringing the 1964 Olympic Games to Tokyo, Abe threw himself in the organization of the 2020 Olympics in the Japanese capital, casually dismissing the safety concerns after the nuclear disaster of Fukushima in 2011.

And while Fanuc, the world's biggest industrial robot manufacturer, is about to replace Toyota as the symbol for mobility, the Tokyo Olympics will serve as the showcase for the "society 5.0" that Abenomics aims to promote. Beyond Germany's industry 4.0, it seeks to mobilize the Internet of Things, Big Data and Artificial Intelligence to "meet the social challenges Japan is faced with before other countries," as Abe likes to repeat.

Despite "two lost decades," according to the famous slogan brought up ad nauseam, could it be that the Japanese economy has become the laboratory where the answers to the economic and social challenges facing developed countries are being tested?

The West, and particularly the United States, are still struggling to look with serenity at the archipelago, torn between envy and stigmatization. During the presidential campaign, Donald Trump, losing his temper, asked "When did we beat Japan at anything?" in reference to the Asian nation's considerable trade surpluses. The empire of the Rising Sun is still the biggest international creditor, ahead of China, with net foreign assets worth $3.2.

America's obsession with Japan is not new. Without even having to go as far back as Pearl Harbor, Japan's successes have always been looked upon with trepidation. Ezra Vogel's best seller Japan As Number One, published in 1979, had already put it bluntly: was Japan, whose GDP per capita had just overtaken that of the United States, about to overtake America?

The fear turned out to be unfounded. Though he'd investigated for several years, the Harvard professor hadn't foreseen the Japanese shrinking birthrate, nor China's thunderous entry into the forefront of globalization. When the financial bubble burst a decade later, in 1989, it sounded the death knell for Tokyo's ambitions. The disastrous overvaluation of the yen after the 1985 Plaza Accord, then the financial crash of 1998, followed by the budget crisis and the soaring of public debt in the 2000s and finally, from 2011, the Fukushima disaster and the continued demographic decline: each decade has been excessively challenging.

A pioneer in non-conventional ways to fight deflation

"Japan has already experimented with all the challenges the world is now facing," notes Hajime Takata, chief economist for the Mizuho Research Institute, one of Japan's three megabanks alongside Tokyo Mitsubishi and Sumitomo Mitsui.

Japan indeed had to face a stock market cataclysm 10 years before everybody else, which forced it to profoundly restructure its financial sector, and left it relatively unscathed from the subsequent 2008 global economic crisis. The Financial Services Agency, which was established in 1998 independently from the Finance Ministry, was charged with dealing with the issue of the gigantic amounts of bad debt accumulated by financial institutions. The 20 or so banks of national stature had to make way for the three current megabanks.

Similarly, the Bank of Japan (BOJ) was a pioneer in using "non-conventional methods' to fight against deflation, long before the Federal Reserve or the European Central Bank. Its assets purchases have reached unprecedented proportions worldwide (26% of the money emitted by the state), as has Japan's public debt (250% of the GDP), with the great advantage however that it's exclusively owned by Japanese people. What's more, the BOJ in 2001 was the first central bank to cut its interest rates to zero.

"Japan is the leader in crisis response," Hajime Takata declares. The analyst doesn't hesitate to talk of a "Japanization of the global economy" since the financial panic of 2008.

This reactivity can also be found inside Japanese companies themselves, whose profits have grown by 60% over the past five years. "It's the most brilliant aspect of the current economic landscape," read a recent note from the prime minister's Cabinet Office, which has the final say of the economic policy.

Japanese activism is at its most audacious when it comes to demographics, and for good reason. If the population continues to decrease by 885,000 people per year, Japan will have 40 million inhabitants fewer in 2060 than now, a drop of one-third, according to the National Institute of Population and Social Security Research. Faced with this prospect, Shinzo Abe decided in October 2015 to set a fertility rate goal of 1.8 children per women (it currently stands at 1.45).

Elderly survivors of the 2011 Tsunami — Photo: MrHicks46

The country is experiencing a spectacular rise in longevity, so much so that the government recently created a multi-generational council whose mission is to "design a society for centenarians." The starting hypothesis is that a child born in 2007 has a 50% chance to live up to 100.

The immediate, conjugated effects of a longer life and the fall in the birth rate is devastating, especially regarding the active population. According to the prime minister's Cabinet Office, the working-age population (15 to 64) decreased by 3.9 million between 2012 and 2016. And yet, the number of people effectively working has grown by 1.85 million. This miracle happened first of all thanks to a strong increase in female employment. There is now a bigger proportion of Japanese women in work than American women. As for men, retirees are returning to work, so much so that one-third of those aged 70 to 74 are now working.

But are such efforts tenable in the long run? "The use of foreign workers (currently limited to one million people) will be a necessity, even though opinion polls show a strong opposition to it, for fear that it might increase criminality," says Naoyuki Shinohara, professor at the University of Tokyo.

A model for efficiency?

Shinzo Abe prefers instead to bet on robotization and "society 5.0," even if the aging of Japan will lead to ghost cities. The village of Nanmoku, located 100 kilometers from Tokyo and said to be the oldest in the country, has lost half of its inhabitants over the past 20 years. Of the 1,963 remaining inhabitants, half are over 70 and the school has just 24 pupils.

Japan has become, because of circumstances, a full-size laboratory for meek growth. But is it a model for efficiency? The debate surrounding the budget consolidation, which is expected to translate into a rise in VAT from 8% to 10% in 2019, is still ongoing. During the recent legislative election campaign, Shinzo Abe offered to use part of the windfall to reinforce the education system, already the best performing in the world according to the OECD. But employers, who are generally among his supporters, would rather see the focus placed on reducing public debt.

On the social front, the lifetime employment system persists. "Trade unions are opposed to any form of flexibility that would allow companies to gain in efficiency, and prefer instead to compromise on wages," Professor Shinohara laments. Still, it doesn't stop the rise of "non-regular" positions, which represent one-third of the total number of jobs, without causing any stir among trade unionists.

Political and administrative institutions too are very conservative. Japan's METI (Ministry of Economy, Trade and Industry), the symbol of Japanese state planification since the end of World War II, is still as influential as ever. "The METI hasn't evolved a lot, only the environment has changed," one of its directors explains. "Our priority now is to incorporate our small and medium-size businesses into the international production chains."

Trade agreements in the Asia-Pacific region but also with the European Union have indeed become a priority. It's only logical for a country with a shrinking domestic market, where 80% of its financial surpluses come from its foreign investments.

Japan is going all-in on globalization, the polar opposite of Donald Trump's economic populism. And, once again, it's a paradigm of a successful realistic integration. Proud of its culture, Japanese society has understood that "for things to remain the same, everything must change." Strangely enough, the famous quote from the Italian novel The Leopard sounds like a perfect Pacific haiku.

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Geopolitics

How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.


But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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