Japan's global fear: Japan says it's an international country, but its trade record does little to back that claim - Frontline - Brief Article - Editorial

Business Asia, June, 2002 by William Jr Pesek

A sign greets passengers arriving at Japan's second-biggest airport: "Welcome to Japan, an International Country in an International World."

Just two problems with the notice--one minor, one major.

First, it's written in Japanese, leaving anyone who speaks anything else in the dark. Second, the message itself--that Japan, the world's No2 economy, is an international country.

It is, by many measures, and certainly thinks of itself as such. Japan maintains close diplomatic relations in all corners of the Earth, its people are avid world travellers and the yen is one of three truly global currencies. And in times of war, Japan is one of the first allies to which superpowers like the US turn for support.

Yet, looked at another way, the reality is very different.

Closed

For all Tokyo's pledges to open up its economy to a world dying to get inside, Japan Inc is still struggling to keep things as closed as possible. The reason: Japan has more to fear from globalisation than virtually any other nation.

"One cannot underestimate the shock that true globalisation would bring to a social system and economy like Japan's, which depends so much on being cut off from the world," Alex Kerr argues in his book, Dogs and Demons.

When you think of nations vulnerable to globalisation, it's developing ones like Indonesia and Nigeria that come to mind. But Japan's unique brand of financial socialism puts it at even greater risk--or so officials there think. Truth is, Japan has much to gain from opening its economy.

Tokyo has never had much use for competition--certainly not from abroad. Keeping out imports, or taxing them beyond affordability, is how it keeps the whole enterprise together. That way, companies, no matter how monopolistic or inefficient, can employ the masses and pay them handsomely. Unemployment stays manageable and Japan Inc remains in business.

The fear is that letting in the raw forces of globalisation--capital, goods and people moving freely among countries--would disrupt things and hurt living standards. Politicians also fear giving foreigners too much influence will disrupt Japan Inc and lessen it's control over the enterprise.

Protected Industries

It says everything about Japan's fear of globalisation, for example, that its first and only free trade agreement is with tiny Singapore. The island nation of four million has no agricultural sector and, therefore, isn't a threat to one of Japan's most protected industries. Japan's trade policies haven't won it many friends around Asia. To many, the policies of Prime Minister Junichiro Koizumi have been guided by Tokyo's fears of losing ground to an increasingly vibrant China. One recent spat involved imports of Chinese leeks, mushrooms and reeds used to make tatami mats. Japan backed down, giving free-trade advocates an important victory.

The Snow Brand affair is another microcosm of Japan's anti-globalisation stance. The food company, which poisoned 13,000 consumers in 2000, earlier this year was caught cheating the Government. But the real outrage was when some foreign companies expressed interest in buying Snow Brand. Tokyo acted quickly to block.

The episode provided a telling look into Japan Inc's efforts to keep its coughing, wheezing model alive. It's fine for Snow Brand to imperil the health of Japan's children, cheat the Government and seek a taxpayer-funded bailout to stay afloat. But let a foreign company buy a stake in the company? Never--that would introduce global competition where there's none.

Those wondering what happened to an economy that a dozen years ago was the envy of the world need look no further than globalisation. Japan failed to keep up with changes in the global economy, and the bureaucracy that guided its post-war boom--keeping out foreign goods and ideas--is impeding growth.