JAPAN'S BLOODLESS REVOLUTION

The following text is summary version, in English, of the book, "Hitori hitori no Renaissance/Great Power Shift in Japan", written by Kiyohiko Nanao and published in Japan by the Mainichi Newspaper in December 1998. Mr. Nanao had been a former Japanese diplomat for 32 years up until 1998. He is currently active on a civic reform of Japanese society in a free and independent capacity. He can be reached by e-mail at info@civex.org.

Since the end of the Cold War in 1989 and the bursting of Japanese bubble economy towards the end of 1991, a variety of fundamental features which shaped post-war Japan have started to change radically. Although this change is still in motion, its magnitude is immense and comparable only to the period of the Meiji Restoration in 1867 and to the reforms of the American Occupation begun in 1945. Historians may later refer to this change as "the bloodless revolution of the 1990s". The end of the 38-year rule by the conservative Liberal Democratic Party (LDP) in July, 1993, clearly marks the beginning of this revolution. It is still in its embryonic stage, not easy at this point to foresee its final shape. Most observers of Japan have so far failed to grasp the nature and magnitude of this revolution. Established notions of Japan are widely spread abroad and slow to change. This article attempts to correct this situation by conveying the nature and magnitude of the current changes as viewed by a former Japanese diplomat just retired after thirty-two years of government service. It is written in the belief that the international community should have a first-hand account of what is currently taking place in Japan, because both its potential and implications are very relevant in the context of global politics and the world economy in the 21st century.

 

Throughout the post-war period, Japan anxiously portrayed itself as a modern, democratic nation. Combined with the well-known economic success, this was a comforting image for the western world. Japan was welcomed as the first country in the mysterious Orient to become both democratic and industrially successful. Japan itself thought that it had made the conversion to democracy under the guidance of the American-led Occupation.

Alas, history did not exactly proceed as envisioned by the American liberal reformers. During the Occupation (1945-1950), the impoverished and frustrated were attracted to left-wing radicals advocating ideological revolution. Alarmed by this and cognizant of communist threat in North-Eastern Asia, Washington made diagonal shift in Occupation policy in favor of Japan's stability. The outbreak of the Korean War in June, 1950, accelerated this shift.

Initially, the average Japanese appeared to welcome with genuine enthusiasm the tenets of Western political values. They were thrilled by the idea of grass-root democracy in general, and fundamental human rights in particular. Some of these values took firm root in Japanese soil. Probably the most successful reform of Occupation reformers was equal rights for men and women, much to the chagrin of many suspicious Japanese males. Despite the efforts to promote these freshly imported values, many were accepted only conceptually but not practiced in their essence. A case in point is the political and economic independence of the individual, the core concept of what constitutes an individual's civic independence. An individual's civic independence is only possible when each individual is committed to sustaining oneself (through self-help) and to sustaining society (through civic duties).

 

Abraham Lincoln spoke of democracy by the people, for the people and of the people, but in post-war Japan there was undue emphasis on democracy for the people. The other half side of democracy, that is democracy by the people, was largely neglected except occasional exercise of voting rights. Large mass of voters, while being keen on general trend in political affairs and at times getting very critical about the poor performance of politicians and bureaucrats, generally remained inactive so far as participatory democracy is concerned. It was in a way a natural response of the mass because a reasonable degree of social stability and continuous economic growth had been secured under the reign of LDP at least during the 1960s. It can be said that average Japanese took advantage of the situation and limited its role to the perennial demandeur for being serviced well by the government. In short, post-war democracy in Japan has been a half-sided one, as the result of the failure to get the voters active in discharging their civic duties to sustain it.

The Japanese traditionally expected the Emperor's government to be benevolent to its subjects. This tradition fit well to the mistaken post-war democracy as something for the people. In the Emperor's time, this concept was accompanied by a sense of duty which required individual sacrifice, thus, ideally, a balance was maintained. In the so-called Taisho Democracy era (from 1913 to 1926), democracy by the people was working with a proviso that the universal suffrage for men was yet to be introduced until 1925.

With the strange, but convenient, marriage between democracy for the people and the tradition of the people's expectation of governmental benevolence made the post-war democracy in Japan evolving into the one with serious defects. The Japanese media and opposition parties often accelerated this by solely attacking the LDP and its government for failing to respond fully to the people's limitless demands. LDP governments tried to be benevolent and infallible, providing the people with as many government services as possible. The result was the overly large presence of the central Government through two-wheeled interventions, namely, regulations and subsidies. LDP politicians, bureaucrats and business leaders -- the so-called "iron triangle" -- found this ever-expanding government role a source of pride, power and associated benefits. During the period of double digit economic growth in the '60s, the system worked well because of the parallel growth of tax revenues.

The power structure created in this process was bound to lead to collusion and corruption, since it had neither a moral center (like the Emperor) nor effective civilian control. When the economy entered into moderate growth in the latter half of the 1970s and into stagflation in the first half of the 1980s, the once invincible "iron-triangle" began to degenerate into a machine to conserve the entangled vested interests. When the bubble burst in 1991, neither component of the triangle was able to disentangle itself and take leadership in seeking regeneration. They were by then so tightly enmeshed that they were hostage of the others.

 

Through this process, Japan largely failed to create a truly civic society, composed of independent self-reliant individuals and corporations which contribute to the community through a sense of civic duty. Many nations experienced a process of bloody civil revolution in developing into a modern society. Japan never experienced this. The "civic" dimension of society was never truly understood; it was imported, not earned. Thus, cozy communal harmony was more to the liking of the Japanese people than confrontational concepts born in Western civil revolutions.

Japan preferred basically to remain community- and group-oriented society, in which harmonious cohesion among members is the highest value. In such a society, individuals are often expected to conform to traditional ethical values and normally comply with a uniform code of social behavior. In saying this, it does not necessarily mean that Japanese voters have been docile under some pressure from the authorities. The world witnessed not a few political uproars such as the one materialized in 1960 when the Kishi cabinet was forced to resign after ratifying the revised U.S.-Japan Mutual Security Treaty. The essential point to be well taken here is that Japanese, while practicing a democracy during the post-war days, never dissociated from the tradition of communal environment and its associated values.

Since the inception of the "imported" Constitution in November, 1946 until quite recently, Japanese persuaded themselves and convinced foreigners that Japan had converted itself fully into a Western-styled democratic nation. At heart, however, the average Japanese felt uneasy about some of the most salient aspects connoted by the term "civil society". Originally, in ancient Rome, the word "civilian" said to have meant a self reliant individual who lived harmoniously within the community of a walled-city, as opposed to barbarians roaming the mountains and valleys. In Japan, the Emperor's rule had been always there at least conceptually. Tradition of local autonomy had been basically absent except in such rare case as the Sakai merchant community in the 16th century.

The word "civilian" assumed revolutionary implications during the modern age of the West, as it came to be used in the context of common people revolting against the abuse of power by the ancien regime, civilian control of the powers of government, a social contract based on autonomous self-rule, inalienable human rights, etc. In Japan until the end of World War II, a notion such as "civic revolution" had been a taboo, since it implied rebellion and mutiny to the imperial authority. The power to rule was always subject to the moral authority of the Emperor and it was normally exercised by his appointee, the shogun. It had been the Emperor, not the people, to replace the shogun when the shogun failed to protect and nurture the subjects on behalf of the Emperor. For the average Japanese, there was no need conceptually to create a community by contract.

In the post-war period, the expression like "civic movement" was often used by the left wing in advocating resistance to the ruling conservative LDP. The general public never gave genuine support to the ideological partisan politics of always saying "no", practiced by the opposition parties. Thus, the notion, "civic", has been tarnished by the image of irresponsibility and ideology.

In order to understand both Japan's post-war success and its current failure, it is essential to bear these historical implications accounted above.

 

Another unique feature of Japan's post-war constitution concerns the sovereign powers on war and peace. The constitution's preamble and Article 9 renounces its inherent right as a sovereign nation to have recourse to war as a means of settling disputes with "international society" and entrusts Japan's security and existence to the faith and justice of "peace-loving peoples". This notion embodied in the Constitution remained a source of polemics in Japanese politics. Some feel that it is a divine sanctuary for pacifism and should not be altered. Others feel it was merely a reflection of American interests at the time and should be continually reviewed according to the changing international context.

The absence of sense of "civic duty" is also conspicuous in the field of national security. It has long been a political taboo in post-war Japan to talk about Japan's military role, including such security cooperation as U.N.'s Peace Keeping which is civic duties in the international community. Japan is usually conscious of its international obligations. In fact, it has been one of the largest provider of ODA (Overseas Development Assistance) to developing countries. Japan, therefore, has intentionally refrained from involvement in international security matters, due to internal polemics and lingering suspicion, in particular, of Asian peoples. The idealistic pacifism and intended absent-mindedness concerning international civic duties have allowed Japan enjoy cozy neglect of its duties in international society. This cozy dream was breached when Iraq invaded into Kuwait in August 1991. Although Japan is still very cautious when it comes to considering such dispatch of its forces overseas as U.N. Peace Keeping Operations (PKOs), it is now fairly clear that a new consensus is emerging that it should stand ready to discharge its "civic" duties for the good of the international community. This is the expensive lesson Japan learned from the Gulf War by paying the $14 billion war bill.

In this context, the ongoing debate on military base in Okinawa is very important. It is crucial in the sense that the manner in which it would be resolved will deeply affect the future capability of Japan as a modern civic society in formulating its own security policy. Signs of a nationwide good debates are noticeable, directly involving local communities in Okinawa and the whole of Japan. It is a test case of whether it could be resolved by patient process of civic debates instead of any quick fix by the age-old party politics. The issue at hand concerns Japan 's civic duty to sustain its own security burden and how it can be distributed within the society. This is probably Japan's first opportunity in its modern history to resolve security matter in a truly civic manner. If Japan succeeds in doing so, it means Japan would be a genuine civic society capable of dealing with a grave issue like national security without needing the presence of authority such as the Emperor or GHQ.

During the past half century in Japan, many double standards of kanban (facade) and genjitsu (reality) were necessary to tide over the complex post-war days. As described above, they were meant to bridge such gaps like the one between Japan's traditional communal approach and the Constitution 's emphasis on civic individuals and the other between pacifists' ideal and actual security needs. The opportunity has finally arrived for Japanese to put away these expedient double standards and begin to construct its own version of a truly democratic and civic society based on the active participation of duty-conscious and self-reliant civilians.

 

The main purpose of the latter half of this article is to identify possible course of Japan's bloodless revolution. Two important recent incidents should be mentioned : the opposition of residents in a small town in Niigata Prefecture to a nuclear power plant and the opposition of shareholders to bureaucratic guidance.

In the first incident, residents of Maki, a small town in Niigata Prefecture facing the Japan Sea, went to the polls on August 4, 1996. The issue was whether this small community should accept the construction of a nuclear power plant proposed by the Ministry of International Trade and Industry (MITI) and designed to provide Tokyo with its output. The turnout was a dramatic 88%, even though the vote was not binding. The outcome was a clear defeat for the project, with twelve thousand opposed and eight thousand in favor. This effectively killed the project, since neither politicians nor bureaucrats would dare challenge the "civil assertion" of the will of the community.

The second incident involved the Ministry of Finance (MOF), which attempted to use its powers of persuasion, "gyousei shidou" (bureaucratic guidance of the private sector) to force the healthy Kita-Nihon Bank to absorb the failing Tokuyo City Bank, both with headquarters in Tohoku region, the northern part of Japan's main island. To the dismay of many financiers, MOF failed to achieve this forced marriage, due to the open opposition of Kita-Nihon's employees, customers and shareholders, particularly those of younger generation.

These two incidents carry significant implications for the future of Japan. They symbolize dramatically that the days of bureaucrats are over. They show that at the grassroots citizenry level the seeds are courageously sprouting up to challenge bureaucratic authority. These movements today are clearly different from those we have seen in the past. They are not a part of conventional party politics. Today, like-minded individuals get together on issue without involving political parties. They now challenge the established taboos and the power of the "iron triangle", the mutually supportive complex of bureaucrats, politicians and the businesses. It is true that these individuals are relatively still a few in number, but they are self-reliant politically and economically, having little to fear. While most others are still bound to and subjugated under Japanese ancien regime, these new breed of true citizens will increase in number and expand its role because the failure of the "iron triangle" to self-regenerate is so evident.

 

While Japan gives the impression to outside observers of having been bogged down in seemingly endless and directionless struggles over political, economic and social reforms to resolve the present mess, there are good reasons to predict that these still sporadic civic movements can grow up to an unprecedented scale of revolution. There are two main reasons why this is inevitable : (1) The first reason is the end of the Cold War. Thanks to the relaxation of international tensions with the end of the Cold War, a variety of factors started to disappear, which thus far prevented Japan from substantially disintegrating overly-communal cohesiveness, and (2) The second reason is the advent of a slower economic growth all over the world. Under this environment, the traditional communal system can not anymore satisfy all with the dividends of continued growth.

Japan is now not only able to afford, but also obliged to introduce, experimentation of time- and toil-consuming democracy and often wasteful and restless system of economic competition. Given an environment as such, both individuals and private corporations are responding. They are forced to act defending themselves in fact of the mounting vagaries of undependable politics and unpredictable economy.

 

First politically, voters started to change from being conformists to accepted orthodoxy and traditional common sense into active and independent thinkers. It is the turn for politicians and bureaucrats to conform to the changing voters. Genuine base for civic society is in the making. The salient question is how to effectuate this new trend of civic consciousness into actual politics. The following is an indicative list of actions to be introduced.

  1. The need to secure procedural opportunity for those who will be directly affected by a decision to express their views and interests prior to the decision. Should there be request for polls-taking from a required portion of voters, it should be made mandatory to take place.

  2. Clear demarcation of such national issues as national security, macroeconomic and financial policies. (Nuclear power plant issue is clearly a part of national energy policy but the national Diet should not force its will without the consent of the residents concerned.) All of the rest should be, a priori, under the prerogatives of the newly rearranged local community unit (which should be probably larger than the current unit), unless the communities explicitly delegate a matter to the national Diet. Accordingly the national Government should relinquish most of its current transfer of tax revenues to local government.

  3. Each local community should decide whether the current level and quality of administrative services and programs should be maintained or not. Each community should, in principle, self-finance the costs to be incurred. Only in this way, active attention by tax payers can be secured. Voluntary services and donations by residents and corporations should be encouraged to reduce budgeted costs.

  4. In order to secure nationwide leadership when required, Prime Minister of Japan should be elected by national direct voting.

Due to the fundamental change in global economic environment into a slower growth, the key strategic words are now "quality and efficiency", instead of "volume and growth" as it used to be. Both households and corporations in Japan are adapting to this change accordingly. Japanese housewives are obliged to maximize net value of the earned income by her husband (or vice versa) because income has ceased to grow. Housewives are now much wiser consumers, keen on prices relative to the real value of goods they buy. Corporate management are getting keen on the credibility, accountability and overall efficiency of their corporations in view of watchful eyes of their shareholders and general public.

As was demonstrated by the recent scandal of the Yamaichi Securities, single corporate wrongdoing could easily wipe out the company out of the market in this era of rigorous selection. Reports of questionable management practices in Japan have made overseas bankers and investors more cautious in financing the needs of Japanese corporations. In international markets today, there is a "Japan premium" for funds lent to Japanese corporations, a stern international financial verdict to them, by raising their cost of funds, directly affecting their survival. In fact, some of the latest bankruptcies of big Japanese corporations were due to the difficulty of financing their operations overseas.

Question should be asked again that, with what concrete ways and means, the economy of Japan could be revitalized structurally. An indicative list of actions Japan should take is the following:

  1. Young and future-promising businessmen should be encouraged to risk ventures. As one way to do this, those able businessmen of established big corporations should be encouraged to spin off to create truly independent and venture-taking company (A). The big corporation (B) could cooperate with A by outsourcing a tiny part of B's business at least for initial several years if A would remain competitive and viable. After the agreed initial several years if A would remain competitive and viable, A could exercise an option either to remain independent or be bought back by B if B is inclined to. To secure true commercial independence of A from B, B's capital share in A from the beginning should remain relatively minor, rest of the required capital be raised in the market based on the merits of A's venture.

  2. Central Government taxes on corporate profits and individuals' income should be substantially cut in accordance with a mandatory schedule to be instituted by the Diet to free resources of corporations and households increasing their investment and consumption. This medium-term tax reduction should proceed with equivalent reduction initially and elimination eventually of heavy fiscal support by the central Government to programs which should be by definition financed by the local governments. This measure not only forces the local entities to decide whether to increase local taxation or to cut their expenditures, but also at the same time allows them becoming truly self-reliant both financially and politically.

  3. A mandatory program should be instituted by the Diet to oblige the Government to reduce and eliminate, in the shortest possible time span, such "economic" type of market interventions as those on prices, quality and, demand and supply. Unwanted bureaucrats could be productively converted into ODA technical assistance programs to developing countries, if necessary, with interpreters. Priority should be given to such sectors as telecommunication, distribution, transportation, and financial services. Deregulation of these sectors are strategically important in reactivating the economy by allowing easier movements of information, ideas, goods and services, money and people at cheaper costs.

  4. The Diet should substantially strengthen the Fair Trade Commission and the related investigative and judiciary authorities to secure the accountability, disclosure and fair competition of corporations. Each corporation is required to self-discipline by activating the role of its Board.

In many ways, the current economic crisis and political confusion in Japan is equivalent to its defeat in World War II. Viewed from international context, it is the result of an economic contest between Japan 's overly-communal approach and a Ricardo model of the United States which emphasizes competition among free and independent economic actors, economic version of civic approach. Luckily, no blood was shed in the latest contest.

The Japanese model seems to work well when national economy is growing steadily, because, under such conditions, the direction to be followed is clear to all and communal approach exerts its full advantages. Should the economy get stagnated due to structural causes and selection in the market is called for between the viable and non-viable players, the U.S. model seems to function better. The latter situation is exactly the one we are in now. The U.S. model has clear advantage in eliminating failing companies. It is very difficult in the Japanese model to let the invisible hand of God deliver its merciless but necessary and timely verdict on failing company, since the company in question, having been rival to other Japanese companies, has been also a good comrade in common cause battle to enhance the fame and wealth of Japan. Its workers have been almost like family members who can not easily be thrown out into cold because of market stagnation. The U.S. model also excels when epoch-making technological breakthrough is required. Individual creativity and venture taking new ideas can be experimented in the market far more boldly in the U.S. In Japanese model, a corporation is usually concerned more in keeping pace with its rivals in order not be left out in the market than in what it can do creatively on its own merits and ingenuity.

 

When I bought a Cadillac in 1994 upon arrival in Washington D.C. as economic affairs Minister in the Embassy, the salesman in charge told me that his company was interested in the long-term satisfaction of his customers, not anymore in a hit-and-run one time deal. Before departure from Tokyo, I disposed of my Toyota car to the dealer from whom I originally bought it. They charged me, for the first time ever, car collection fee, saying they were then under strict instructions from its parent company to make ends meet at dealer level. Both of these incidents show that two different economic approaches, the U.S. and Japanese, are always evolving and could never be perfect. There should be incessant process of mutual learning between the two approaches across the Pacific Ocean.

The politico-economic reforms that Japan needs to make are clearly structural in nature. More the delay in undertaking them, the process of reform will take longer. The key question is to what extent Japan should weaken its overly-communal approach and strengthen civic factors. The traditional virtues of Japan's communal society will never disappear. Rather, the basic strategy of this bloodless revolution is to find a best policy mix between the communal and the civic approach. Overseas community should not expect Japan to attempt simplistic photo-copying of a particular foreign model. It is neither possible nor appropriate.

No doubt, substantive correction should be made, to start with, to the overly-communal and collusive aspects. Then on, it is essential to enable young and venture taking businessmen to play radically enhanced roles as well as to count on the initiative and leadership at grass-root level of those self-reliant individuals voters conscious of their civic rights and duties. Conventional politicians, businessmen and bureaucrats cannot be expected to impose reforms on themselves, but their quality will only be enhanced by the reform-initiating others.

Japan is certain to succeed in this revolution, since so much is at stake. The result will be good for the larger international context, because it will add another healthy and active participant in the global framework of cooperation in the next century. It will also be good in a regional context, since the process of structural change in Japan will provide an important frame of reference to other Asian nations, which have much in common with Japan and are thus vulnerable to the similar difficulties as their recent financial crisis demonstrates.


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