Struggling to rise again

Ask anyone in Europe what they know about 1989, and their reply will probably be something like this: “That was the year the Berlin Wall fell — and the year communist regimes in Eastern Europe started to collapse, eventually bringing democracy to millions of people.” And they would be right.

A few thousand kilometres farther east, however, 1989 had extra resonance. In January of that year, Japan’s Emperor Hirohito died. Around 200,000 people lined Tokyo’s streets in February for his funeral. A controversial figure, Hirohito had reigned from 1926 until his death at the age of 87. He lived through periods in Japan’s history that included incipient democracy, authoritarianism and militarism, a murderous war and catastrophic defeat, before Japan’s transformation into a fully functioning democracy and leading economic power.

While Hirohito’s death was hugely symbolic, 1989 also marked something that would have a much longer-term effect on Japan. It was the year that problems in the Japanese economy started to show, ending a period of remarkable economic growth. By 1991, the country’s economy had hit the buffers and the following ten years has become known as the “Lost Decade”. The country is still struggling today with the consequences of this difficult period.

Transformation

Although the comparison shouldn’t be exaggerated, Japan’s post-war experience mirrored that of Germany in some ways. Devastating defeat in 1945, destroyed cities, a hungry population and then the gradual embrace of democracy under American tutelage. Not unlike Germany, Japan had its own 1950s Wirtschaftswunder, partly as a result of the Korean War.

Japan’s economic transformation was reflected in growth rates of around 10 per cent between 1955 and 1960, later reaching more than 13 per cent. A consumer society was created. And along with a population boom came better educational opportunities and an improved system of social welfare. Just as significant, however, was major investment from 1959 onwards in high-quality, high-technology products and equipment, which gradually earned Japan the reputation of being a manufacturing leader. By 1960, Japan was the world’s leading shipbuilder and companies such as Nissan, Toyota, Hitachi and Matsushita/Panasonic were helping the country become the world’s second-largest economy, after the US.

The 1964 Tokyo Olympics and the bullet train (“Shinkansen”) network showcased the country’s high-tech modernity and its development into an economic powerhouse.

Economic success was followed by rapid social change. The rural population decreased from 50 per cent in 1945 to under 20 per cent in 1970 as people left for work in urban centres. Japan’s workers gained a reputation for being extremely loyal to their companies, and lifetime employment in a single firm was usual.

This, however, was only one side of Japan’s post-war economic miracle. Disputes about the “Americanization” of Japan started in the immediate post-war years, linked to debates about how “Western” or “modern” Japan should become and the extent to which Japan’s traditions should be preserved. Such discussions continue to the present day.

The nature of work also started to be questioned during the boom years. Japanese workers, writes historian Christopher Goto-Jones, worked on average “a full 12 weeks more a year” than their European counterparts. Half a century later, working hours in Japan, though decreasing, are still very high. Japanese children often lead the world in literacy and numeracy, but they, too, work long hours, attending cramming schools. And they have a depressingly high suicide rate. In 2016–17, child suicide hit a 30-year high, totalling 250 deaths. And while the total suicide rate in Japan is falling, it is still higher than in most other countries.

The Lost Decade

After a slowdown following the 1973 oil crisis, Japan made a strong recovery and, from 1986 and 1989, underwent another period of extraordinary growth.It cemented its place as a world leader in new technologies, with cutting-edge televisions, cars, high-quality optical equipment and many electronic products. Japan became the world’s largest lender nation. Exports were booming and the nation’s confidence appeared sky high.

Was this all too good to be true? Some economists have called it “the age of the bubble”, which consisted of easy credit, runaway speculation and overblown markets. The bubble burst, the economy stagnated and recession followed. In 2002, unemployment went above five per cent for the first time since the Second World War. A succession of governments largely failed to turn the economy around, while an ageing population and rising inequalities signalled even greater challenges ahead. Little wonder the 1990s became known as the Lost Decade.

Abenomics

This experience led to deep soul-searching in Japan. Firmly in the US sphere of influence during the Cold War period, it was easy for a flourishing Japan to largely ignore a divided Korean Peninsula and an economically weak China. By the 1990s, however, South Korea had emerged as a high-tech, innovation-focused competitor. And once China began to loom large as an economic powerhouse in the 2000s, Japan’s self-confidence fell further. After decades of high growth, China overtook Japan in 2010 as the world’s second-largest economy.

Since 2012, when Shinzo Abe won a second term as Japan’s prime minister, the country has implemented economic reforms known as “Abenomics”, with its “three arrows”: “aggressive monetary policy”, “flexible fiscal policy” and “growth strategy”. The hope of creating a stronger economy is accompanied by the aim to increase Japan’s national security. In recent years, Japan has become less close to the US and more robust in its relationship with China.

Abe won support for his policies with a fourth election victory, in 2017, and by 2019, could point to 73 months of growth and unemployment had fallen below 2.5 per cent. Economic challenges have remained, however, including deflation and an astronomically high national debt. Also, rising income inequality, over-worked employees, a falling birth rate and an ageing population seem to be intractable societal problems.

A summer postponed

The prime minister could also do nothing to prevent the coronavirus pandemic hitting the country. In response, a state of emergency was called in April and billions were pumped into the economy. Summer 2020 was supposed to be very different. Japan was to be the centre of the world’s attention, with Tokyo hosting the Olympic Games from 23 July to 8 August. Japanese cuisine, anime, manga, video games and traditional culture were all to be showcased. Superb stadiums, high-tech know-how and excellent public transport systems were to provide the infrastructural underpinning of this sporting celebration. At the end of March, however, the Games were postponed for a year.

Doubts about the long-term efficacy of Abenomics, the impact of the coronavirus and the postponed Olympics make the country’s immediate future unclear. One thing is certain, however: Japan, still one of the most affluent and technologically advanced nations on earth, has overcome bigger problems since 1945.