Structural Reform in Japan

Structural Reform in Japan: Breaking the Iron Triangle

Eisuke Sakakibara
Copyright Date: 2003
Pages: 167
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  • Book Info
    Structural Reform in Japan
    Book Description:

    In this unusually candid book, Japan's former top financial diplomat asserts the urgent need for wholesale structural reform to revitalize the long-stagnant Japanese economy. Eisuke Sakakibara, whose influence over global currency markets earned him the nickname of "Mr. Yen," envisions a social and economic revolution that encompasses all sectors of Japanese society. Whereas previous analyses of Japanese policies of the past decade focus narrowly on such issues as nonperforming assets and deregulation, Sakakibara provides a new perspective. Japan's economic problems are structural, rather than cyclical, according to Sakakibara. Profitable investment opportunities are hard to find in the dysfunctional corporate sector, where costs are high and income continues to decline. The country's entrenched power elite -the Liberal Democratic Party, the bureaucracy, and vested interest groups -are threatened by reform efforts. It will be difficult to restore economic health to Japan until its political leaders are able to break the grip of this "iron triangle" and implement aggressive, widespread reforms. This book furthers the understanding that structural reform or new institution building in Japan needs an all-encompassing approach that includes the various sectors of Japanese society and the economy. Only with this kind of understanding can pragmatic and meaningful structural reform in Japan be implemented.

    eISBN: 978-0-8157-9626-8
    Subjects: Political Science, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface to the English Edition
    (pp. vii-xviii)
  4. Acknowledgments
    (pp. xix-xxii)
  5. 1 Collapse and Transformation
    (pp. 1-11)

    The rapid advance of globalization, which began at the end of the twentieth century, continues to dramatically change the world in which we live. While fostering democracy and the expansion of markets, globalization is also causing the collapse and transformation of the twentieth century system.

    Both Akihiko Tanaka and Nobuo Noda interpret this phenomenon as the weakening of the nation state and define it as the advent of a new “Middle Ages” in the twenty-first century. Tanaka states that the world in the twenty-first century will experience the waning of the nation state and the rise of competing actors, such...

  6. 2 Japan’s Modernization and Industrialization
    (pp. 12-22)

    As in the case of other Asian countries, Japan’s modernization was externally prompted. Although the first sign of this for thebakufuwas the arrival of Commodore Perry and the Black Ships, the United States had turned its attention inward because of the Civil War.¹ It was England, therefore, that pressured Japan to modernize. The period from the Meiji Restoration to World War I was an age of globalization underPax Britannica. After the institution-building period of the Meiji Restoration, Japan signed a treaty with England in 1902 and solidified its position in Asia.

    In the nineteenth century, after engaging...

  7. 3 Formation and Collapse of the Public Construction State
    (pp. 23-37)

    To appreciate the complexities of the modern Japanese state, one must understand that Japanese civilization went through a period of creative destruction before it became a public construction state. Initially, Japan was a largely agricultural state characterized by lush vegetation. Almost without exception, the beauty of the country and how the Japanese cherished it impressed those who visited Japan from the end of the Edo period through the early Meiji period.

    Sir Rutherford Alcock stated that “such fertility of soil, fine growth of ornamental timber, richness and variety of foliage, or such perfection of care and neatness in the hedge...

  8. 4 From Structural Reform to Institutional Reform
    (pp. 38-57)

    In the 130 years after the Meiji Restoration, Japan had successfully completed the modernization and industrialization of its economy and society, creating a political and administrative system with a public construction state at its core. In a previous book, I analyzed the system of capitalism in Japan and described it as a mixed economy “beyond capitalism”; this system could also be called “Japanese capitalism.”¹

    Global capitalism has now begun a transformation toward a postmodern system. Although it is unclear what the result of this transformation will be, what is apparent is that as global capitalism transforms itself, Japanese capitalism must...

  9. 5 Development of Global Corporations
    (pp. 58-69)

    As mentioned before, Japan’s era of modernization and industrialization can be divided into two stages: from the Meiji to the beginning of the Taisho period, when the classical capitalist system was formed during the shift in focus from Asia to Europe; and from the end of the Taisho period through the Showa period, when the new Japanese capitalist system gradually came into being. Similar to what occurred in much of the West, Japan’s experience with the Great Depression and World War II led to a global shift from classical capitalism to a mixed economy. Yet within this broader trend, Japan’s...

  10. 6 The Japanese Banking System and Its Nonperforming Loan Problem
    (pp. 70-86)

    In a market economy, a bubble can develop, and when it bursts, it can cause balance sheet problems, or worse, a crisis of the entire financial system. Both the United States and Western Europe suffered these effects from the latter half of the 1980s through the 1990s. However, compared with Japan, the duration of the economic crisis was relatively short. By the mid-1990s balance sheet problems had been resolved and the financial instability had ended. At issue is why Japan has suffered from the effects of the burst longer than the United States and Western Europe.

    One reason could be...

  11. 7 Reopening Japan and Reforming the Foreign Policy Regime
    (pp. 87-100)

    Japan during the Edo period was described in chapter 3 as a nation of beauty and prosperity. Equally important, it was a nation of peace. The 265 years of peace that characterized the Edo civilization were deeply related to the isolationist system at the time. Internal and external peace were maintained in Japan, while much of the rest of the world was engaged in various conflicts, including the Seven Years’ War in Europe, the U.S. War of Independence, the Napoleonic Wars that followed the French Revolution, the Spanish-American War, the Crimean War, and the French-Spanish War. This peace was possible...

  12. 8 The Formation of the Japanese Meritocracy System
    (pp. 101-110)

    By establishing a thorough meritocracy and an education system based on equal opportunity, the Meiji leaders sought to actualize the revolution of social hierarchy. The meritocracy created and established in Japan was one based on academic background.¹ During the hundred years after the Meiji period, this academic-background meritocracy became the foundation of the Japanese social system, thereby planting the ideology of self-advancement—even among ordinary citizens.

    It was Takato Ōki who set up the real education system during the Meiji period. In August 1872, he wrote the following in the official document promulgating the fundamental ideas behind the education system:...

  13. 9 The Central versus Local Government Debate
    (pp. 111-128)

    Nearly half a century has passed since the Japanese Constitution mandated the decentralization of authority to local governments, and twenty years have passed since the government decided that the “age of the local community” would be one of the government’s policy objectives. At least on the surface, the decentralization of authority has continued as one of Japan’s postwar ideologies and, as such, has very seldom been criticized.

    There is now a need to revitalize the provinces and rebuild local communities, and opportunities for this are finally beginning to appear. Before acting upon these opportunities, there is a need to revisit...

  14. 10 Fundamental Change in Agricultural Policy
    (pp. 129-141)

    The agricultural revolution took place between 1600 and 1720, and during that time the population increased from 10 million to 30 million, while agricultural productivity grew an estimated 300 percent. In contrast with Great Britain’s industrial revolution, Akira Hayami calls this the “industrious” revolution.¹

    The traditional agricultural methods established during the middle of the Edo period were highly productive and supported Japan during the Meiji Restoration as it moved toward modernization and industrialization. Shinzaburō Ōishi states that viewed from any angle, the Tokugawa system was a substantive and unique civilization with vitality and originality.² Although agricultural productivity increased further with...

  15. 11 Health Care Reform
    (pp. 142-151)

    Until recently, the debate regarding the Japanese health care industry centered on the health insurance problem and the policy response with regard to its deficit. For example, a recent white paper on public health stated the following about the reality and problems for the Japanese health care system: “In recent years, in the context of increasing medical costs due to the rapidly increasing number of elderly people, medical industry finances have gone into deficit, and in spite of the improvement resulting from the revision in the Medical Insurance Law in 1997, the situation continues to be serious.”¹ In 1996, health...

  16. 12 Building a New Nation
    (pp. 152-160)

    The terrorist attacks in the United States on September 11, 2001, occurred while I was writing this book. Since then, I have reread the book to see if anything needed to be revised. I found that everything I had written was still applicable, because the recent terrorist attacks and “war” are incorporated into the phenomenon of the great collapse and transformation that I refer to in chapter 1.

    First, it should be stated clearly that the terrorist attacks that have been perpetrated by Osama bin Laden, al Qaeda, and the fundamentalist cells of the Mujahadeen are hateful crimes. Having stated...

  17. Index
    (pp. 161-167)