October 12, 1995
Has Japan Hit the Wall?
Some newspaper headlines are recycled year after year. For example: "Parents concerned about teen morals." A similar evergreen favorite has reappeared lately. It's the headline that says, "End Of the Miracle For Japan Inc."
Repeatedly since World War II, Americans have concluded, amid crocodile tears, that the good times have ended for the plucky Japanese. In the mid-1970s, when the price of oil soared, American experts were certain this would devastate energy-poor Japan. In the mid-1980s, when the yen's value soared, similar experts said this would surely price Japanese products right out of the export market.
Both assessments turned out to be completely wrong. Yet in the mid-1990s -- as Japanese investors have taken a bath on Rockefeller Center and other trophy purchases; as Japanese banks have been swamped by bad loans; as even the mighty yen has weakened in value -- American commentators have said that this time Japan has finally hit the wall.
It is true that Japan's stock market and banks face serious trouble, and its government is so paralyzed in setting policy that the troubles could get worse. Still it is remarkable how much of the economy's real productive structure is robust and unharmed. This year, in their doldrums, Japan's companies will export more to the world than they did five years ago, during Japan's boom. Through the giddy decade of the 1980s Japan piled up stupendous trade surpluses -- yet its surpluses in the first half of this decade already amount to more. We know that China is booming and so are its neighbors from Korea to Vietnam. Yet Japan's economy is more than twice as large as the rest of Asia's combined. With half as many people as America, Japan saves five times as much money each year, which gives it a huge cushion against economic shocks. When a rogue trader hit England's venerable Barings Bank this year, the bank collapsed -- but Japan's Daiwa bank will cover its billion dollar trading loss out of this year's earnings.
Perhaps most important, the Japanese economy still excels at the task that matters most to its leaders: providing secure jobs in Japan. America's stock market has kept rising largely because corporate payrolls have kept shrinking; the "downsizing" has made companies more profitable. Japan's trade-off has been the reverse: lower corporate profits but more secure jobs. Boeing, one of this country's most successful firms, has laid off 15,000 people this year. That is more than all the official layoffs from all of Japan's "troubled" manufacturers through all its recent downturn.
Rushing to write off the Japanese once more is silly. It sets us up to be "surprised" by their competitive vigor all over again. If we need a familiar headline, let's stick with those Immoral Teens.
Copyright © 1995, by James Fallows. All Rights Reserved.