Which Identity Does Japan Want Back? (2009)

This document was initiated as a result of a report by an observer in Tokyo (Leon Wolff) that the newly-elected Democratic Party of Japan wanted to 're-Japanise' Japan (ie get its 'identity' back).

An exchange of emails about what this might imply is included below, which started from the suggestion that: (a) it is unclear what 'identity' Japan wants back: and (b) the world faces severe economic challenges partly because of features of Japanese economic methods that were the basis of economic 'miracles' in East Asia - but depend on financial imbalances that are now recognised to be significant in causing the global financial crisis..

Some clarification of what reclaiming Japan's identity might mean subsequently emerged.

Japan's new financial Services Minister called for return to traditional business practices, and rejected 'aping of America'. Companies should not be money making tools' to enrich shareholders. Managers need to embrace the social meaning of being corporations. Japan had become No 1 in the world because of a typically Japanese management style - but had since lost the old spirit of unity and cooperation (eg where employees had jobs for life and profits were distributed between business partners, subcontractors and employees). This will cause problems for others because Japanese companies already place shareholders well down their list of priorities [1]

Ichiro Ozawa (secretary general of the DPJ) has been seen as (a) the architect of the DPJ's electoral victory; and (b) a 'dark presence' whose influence is incompatible with DPJ's claims about improving transparency. All public funding requests come through him and he seems to put party interests above those of government. He is referenced as the 'shadow shogun' - and his office is under investigation in relation to a funding scandal [1]

The DPJ has initiated a debate about the value of Japan's alliance with the US - which some see as likely to lead to Japan following its historical policy of adapting to shifts in global politics by aligning itself with great powers, which perhaps implies a special relationship with China in future [1]

• Email 19/9/09 +
• Response 19/9/09
• Email sent 20/9/09
• Response 20/9/09
• Email sent 21/9/09

Email sent 19/9/09

Leon Wolff,
International Centre for Law and Politics,
University of Tokyo

Re: 'Japan wants its identity back', couriermail.com.au, 18/9/09

I noted that your article argued that Australia might benefit from Japan's rejection of 'Americanisation'.

However, I should like to suggest for your consideration that: (a) Japan has been trying to reject 'Americanisation' since 1854, so it is not at all clear what 'identity' Japan wants back; and (b) the world faces a serious economic challenge partly because (as your article noted) Japan's most recent 'Americanisation' was only superficial.

As I interpreted it. your article suggested that Japan's new Prime Minister (Yukio Hatoyama) wants to 're-Japanise' Japan (according to his essay 'My Political Philosophy' which was translated and published in New York Times of August 26). His views strongly parallel those of Australia's Prime Minister (Kevin Rudd) - in arguing that market fundamentalism and excessive capitalism have been a disaster for Japan and the world - though Hatoyama ascribes the cause to American-led globalization rather than Rudd's 'neo-liberal' focus. Japan is being seen as too Americanised (in law, society and political economy). Even the Democratic Party of Japan's (DPJ's) electoral victory is seen as step towards US-style two party electoral system. These claims, however, are exaggerated or false, as Japan maintains many traditional arrangements. However Hatoyama argues that Americanisation went too far. Foreign concerns about this are inappropriate because: Hatoyama's objection to market fundamentalism translate into reducing regulatory power of Japanese bureaucrats; his emphasis on community-spirited Japan opens opportunities for Australia's service industries; and his political philosophy closely mirrors Rudd's social democratic vision - of regulated markets and the pursuit of social justice. Japan and Australia could force a new intellectual partnership in designing regional and global futures.

While its new Prime Minister may wish to make Japan more Japanese, it needs to be recognised that Japan's 'Japanese-ness' (and the economic models that others in East Asia adapted from Japan's methods, in order to emulate Japan's rapid economic growth and development) have arguably::

• played a very significant role in the development of the international financial imbalances that were a key factor in the emergence of the global financial crisis (GFC) - see Focusing on Japan and the Global Financial Crisis;
• been central to a more significant 'clash of civilizations' than that between the West and Islamist extremists - see An Unrecognised Clash of Financial Systems?

In brief East Asian economic models (including Japan's) have involved the allocation of resources by consensus amongst nationalistic elites and their social subordinates rather than by a capitalistic search for profit - and the result has been inefficient use of capital and a consequent need for export-dominated economic strategies in order to generate large cash flows from current account surpluses so as to protect financial institutions with suspect balance sheets (see Understanding East Asia's Economic Models, and Why Japan cannot deregulate its financial system). The result has been the international financial imbalances, which played a significant role in the emergence of the GFC (see Impacting the Global Economy).

While I haven't seen Yukio Hatoyama's political philosophy, that expressed by Mr Rudd in his The Monthly essay (which you suggested was similar) seemed superficial as an explanation of the GFC (see A Social Democratic Alternative to 'Neo-Liberalism'?). Moreover initial discussions by the G20 also adopted an unrealistically narrow perspective on the causes of the GFC (see G20: Peace for our Time'?) - though both the US and Europe have reportedly now started insisting that the imbalances question receives attention (see China scorns focus on imbalances). Furthermore there are strong indications that East Asia's economic models (including Japan's) would no longer be viable in an environment in which large international financial imbalances are prevented (see Unsustainable Economic Models?).

If so, then Japan (and eventually China and many others) will have no choice but to seek a different 'identity'.

Japan has arguably 'wanted its identity back' since Commodore Perry's 'Black Ships' forcefully opened Tokugawa Japan to world trade in 1854. One must wonder which identify Japan now wants back as the false 'American' mask of the post-1990 era is removed. Yukio Hatoyama seems to rule out Japan's post-Pacific War merchant identity, which involved bureaucratic orchestration of the development of consumer-oriented industries behind the LDP's mask of liberal democracy, Might the 'community-spirited' identity that Yukio Hatoyama now advocates be that of the pre-1854 isolationist feudal shogunate, or that of the pre-Pacific War militaristic imperium? If the latter, Japan's neighbours have cause for some nervousness.

Australia will be unlikely to benefit if Japan's future identity is reclaimed from Japan's past,

My guess is that (in the spirit of Shinto) the identity that Japan will find that it has little choice about wanting 'back' is likely to be something entirely new - perhaps becoming more truly Americanised, though the DPJ obviously could not say this to the Japanese people.

John Craig

Email received from Leon Wolff (19/9/09)

Thank you for your comments on my recent op-ed piece in The Courier Mail. I am deighted that someone actually read it let alone critically evaluated my core arguments.

It will be very interesting to see how Prime Minister Hatoyama implements his new strategy to distance himself from the trappings of 'Americanisation'. His stance on 'Americanisation' may simply have been a 'straw man' argument to endear himself to an electorate frustrated with Japan's ongoing economic woes and rising employment instability. Given the whipping his party gave to the Liberal Democratic Party in the last election, this was clearly a successful ploy.

Your response seems to suggest that a 'Japanese' way forward could ultimately be disastrous for a return to global economic health. This is based on the view that Japan is a development state -- rather than a true capitalist economy -- in which a cadre of elite bureaucrats micro-managed the economy. This is a commonly argued position, but its empirical bases are suspect. First, there are no laws authorising bureaucrats to 'direct' companies as to what to do. Second, to the extent that they can manage the economy, bureaucrats have, at best, advisory powers (called 'administrative guidance') which they can use to influence economic decisions. However, companies are free to reject this advice, often do and, if threatened with adverse consequences, successfully sue for damages. Third, there are fewer bureaucrats in Japan per head of population than in most leading capitalist economies in the world, especially the US and including Australia. Those who advocate elite control over the economy have failed to explain how such a small group of people can exercise control over such a large economic order. Finally, even if bureaucrats did have the power, energy and will to control the economy, their concerns would have been directed at larger industries. Yet it is the SME sector -- not large conglomerates such as Sony and Mitsubishi -- that are the primary source of GDP and employment.

You also argue that Japan has been resisting Americanisation ever since the nineteenth century. I actually think the opposite is the case. Walk down any street in Tokyo and you will find McDonalds and Starbucks. Men wear Italian suits; women sport the latest Luis Vuitton bags. The CD shops are filled with Michael Jackson CDS (his death made major news here). Book stores have whole floors dedicated to learning the English language. Even the Japanese language has coined new words from English. A funny one doing the rounds at the moment is 'ara saa' -- a contraction of 'araundo saa-tii" -- meaning "around thirty" (women in their early thirties or late twenties).

Anyway, this is a brief response to your feedback on my article. I would encourage you write a more detailed response on your website or as a letter-to-the-editor. I think it is invaluable that Queenslanders have centres and organisations dedicated to furthering policy discussion and debate.

Email to Leon Wolff sent 20/9/09

Thanks for feedback. It is good to see someone working at understanding Japan. However I suggest that doing this is not as easy as your response implies.

There is an old joke about an Irish farmer who, when asked the way to Dublin, said: 'You can't get there from here'. In some ways the same applies to your journey because you can't get to an understanding of Japan on the basis of the classical Greek thought which is the basis of Western methods for problem solving (via rationality) and social organisation (eg via law).

You suggested that bureaucrats can't control the economy because no 'law' authorises them to do so. However Confucianism (which is the basis for bureaucratic governance traditions in East Asia) is a system of inter-personal relationships without any concept of law. Moreover bureaucracies (comprising the top performers in the education system) are the top of the Confucian pecking order and have effectively controlled countries like China and Japan for thousands of years (behind the facade of emperors in the past, and political parties / 'democratic' governments now) using their superior abilities to access and manage information - and thus their ability to influence what others think.

An old story concerns an invading force coming to a Chinese region - which encounters an old bureaucrat on the road who invites the invader's leader to become emperor. This suits him fine, so he is installed with great pomp and splendour and given 100 concubines to keep him amused. Periodically he decides on some law or other that he thinks should be enacted. Patiently the old bureaucrat explains why this would not work, so the new emperor (like the old one) goes back to his concubines and forgets about the complex business of government.

An account of the way in which cultural traditions which are radically different to those which underpin Western societies in a section on East Asia in Competing Civilizations. This includes a brief account of how I got involved in the subject.

Inventions such as law and money are useful ways of simplifying the decision-space that individuals face and have been immensely important to the progress of Western societies - because rationality (ie the notion that abstract concepts usefully model reality) only works for simple systems (see Cultural Foundations of Western Strength). The failure of rationality in complex situations is well recognised: in management theories; in public administration (in terms of the counter-intuitive responses to policy initiatives which were particularly demonstrated by Great Society experiments in the 1970s); and in the need for a market economy because of the inability of central planners to acquire the detailed information needed to make appropriate decisions.

However if you reject the notion of individual decision making (and indeed the notion of individuals) because what you see is 'community' as a whole, those inventions (eg law and money) are inconsequential because there is no need to simplify issues so that individuals can decide.

A few things to consider are:

• what is the sound of one hand clapping? [Message: words can be meaningless / have no reality]
• what is meant by the core precept of Daoism: 'The Dao (way / truth) that can be known is not the true Dao' [Message: there are limits to abstract ideas as a way of understanding]. Daoism is closely related to Shinto, to Zen and was the component which was added to Confucianism to create neo-Confucianism which was the basis for rapid economic progress because it didn't simply look to history for wisdom;
• what is meant by: 'The only things that are truly Japanese are the things you can not see' [Message: What is Japanese is the relationship between things. The things themselves (including individual people) are unimportant];
• the emphasis on 'community' as a whole (which Hatoyama advocates) from a Japanese viewpoint implies viewing individuals as nothing (which has been the basis for practices such as ritual suicide and kamikaze attacks);
• Hatoyama was a member of the LDP before moving to form the DPJ. The LDP included a diversity of factions (essentially being all political parties in one - within which policy questions were resolved by consensus rather than by public debate). In the 1980s I encountered an Australian who had spend decades in Japan under the patronage of a yakuza boss who was able to provide an account of the 'missions' which various Japanese prime ministers had been selected to perform which was said (by a left-wing Japanese professor) to be the best he had ever heard. The point is that Japan's political system is manipulated.
• what is meant by 'The Oyabun does not dance on stage' [Message: Those with real power are never visible]
• power in East Asia is associated with having social subordinates who make decisions for you, not with making decisions (see Pye, Asian Power and Politics). As noted above, the bureaucracy is the top of the social pecking order;
• 'administrative guidance' was a process to accelerate economic learning - which involves applying the classic role which bureaucracies play in accelerating communities to learn about anything. Economic Solutions Appear to be Beyond Politics contains a diagram which shows what is involved - ie accelerating the way in which the feasibility of addressing new opportunities / technologies is assessed. It is noted also that
  • on the basis of a systems approach to economic development. I have applied related methods in Australia (see Developing a Regional Industry Cluster for an account of the general process - which worked though did not go down well politically at all);
  • in running such a process, the second last thing that you want to do is make the decisions about the outcome (with politicians making those decisions the only worse outcome) - because what you are doing is putting the people with the best ability to make them into a situation where they can and overcome the 'chicken and egg' constraint that exists because of the constraint on any enterprise acting when success depends on simultaneous actions by other economic players;
  • another thing that is vital is that you don't have a lot of people involved - because your goal is to change the way the real world behaves, not simply to do things within government organisations. A small bureaucracy can be far more powerful than a large one;
  • Probable Breakthrough in Understanding Economic Development presents suggestion on what is wrong with economic growth theory - namely the fact that knowledge (which is widely recognised to be the key factor in economic growth) is treated as an input to a production function, rather than a way of changing the production function. The conventional growth theory derives from assuming economics should be like physics (ie seek to find laws which relate causes to effects). However my speculation (which I suspect Japan would understand) is that information can be used to change the relationship between causes and effects - once again invalidating the notion of 'law';
• Sakakibara ('Mr Yen' a very prominent MOF official) was very clear in stating that Japan was a non-capitalist market economy - as indeed I suspect that it is. The banking system and the major business groups are essentially 'owned' by the bureaucracy - and also controlled by them though not in the sense of giving instructions in the way ownership would give the right to make decisions under Western traditions. It is the obligation of subordinates to make decisions on behalf of their superiors within the social order;
• while SMEs are the major part of Japan's economy, they are highly inefficient and unproductive. It is the banks and conglomerates that are strategically significant;
• part of the Art of War is to: (a) get close to your enemies; (b) hold up a mirror to others so that when they look at you they see a reflection of themselves; and (c) never let others know your true 'shape';
• the most popular folk tale in Japan is 'The Tale of the 47 Ronin'.

I will add this exchange to my website - if this is OK with you - as I agree that the issues are important.

Email from Leon Wolff 20/9/09

I am happy to have you incorporate my original article and my emailed response as part of your analysis of Japan.

Due to the urgency of other commitments, I cannot respond to your detailed comments. However, I will say this: I do not share your view of Japan as a 'Confucian' state where law, politics and economics do not assume the same significance as in the West. Anecdotes are all very nice -- so too aphorisms -- but they are no substitute for empirical analysis. Of course, culture matters (in Japan, in Australia, anywhere), but your definition of Confucianism is too lose and all-encompassing. If "all" of East Asia is Confucian, how do you explain the radically different political, legal and economic systems in Japan, China and SE Asia. Asia is far more complex and diverse than this suggests.

Nevertheless, I readily accept that the Confucian angle is highly popular with some academics and most journalists. But there is a growing body of scholarly literature that contests its explanatory power. One of the more trenchant critics -- and I admit he goes too far, but he is very entertaining to read -- is J Mark Ramseyer. (See his book on Japanese Law: An Economic Approach co-authored with Nakazato.)

Incidentally, law is not a Western invention; it has an equally long, if not longer history, in Chinese tradition.

Just some thoughts.

Email sent to Leon Wolff 21/9/09

There is no doubt (as you suggested) that culture matters - and it is for this reason that 'you can't get there from here' in seeking to understand Japan (or any country in East Asia) as a state in which law, politics and economics have the same significance as in the West. The differences in assumptions about the nature of reality, knowledge, social organisation etc that I referred to must be taken into account.

It was, for example, often noted in the 1980s that economists (who had a central role in public policy in Western societies) had no government role in Japan - but worked only in universities. Economists believe in understanding how an economy works. Japan's bureaucracy was involved in changing the way it worked - which is inconsistent with Western-style assumptions about the role of the natural and social sciences.

I am not suggesting that Japan (or any other country) should be viewed as a 'Confucian' state. Traditional Confucianism (which involved seeking the wisdom to guide society from a study of history) failed, and was arguably responsible for China's incredibly slow adaptation to Western influences. I suspect that the key ingredient was Daoism - which was added to Confucianism to produce neo-Confucianism, and allowed a much less rigid bureaucratic approach to stimulating communitarian learning.

Differences in political, legal and economic systems are not a big issue. Different nominal power structures (eg democracy or dictatorship) can be constructed on similar cultural and social frameworks, just as has been done in societies founded on Western cultural traditions. For example, while Japan's characteristic has apparently been to apply 'Asian' cultural frameworks at the level of society as a whole, China tended to do so at the level of families - so while China was equated with a 'tray of sand', Japan was seen as a 'block of stone'.

Ramseyer and Nakazato's Japanese Law: An Economic Approach is interesting but not instructive. It starts (p1) by effectively assuming its conclusion (ie that Japanese and US legal traditions are similar) because it involves a study of the legal systems in isolation (ie ignoring the cultural contexts which other analysts see as important in understanding them).

Moreover its understanding of economic growth theory (p2) is out of date, It suggests that growth results from creating incentives - through institutional arrangements and property rights - which channel individual efforts into productive activities. The latter is necessary but by no means sufficient. For example:

• knowledge has been recognised as the key factor in economic growth since Solow's work in the 1950s - a recognition which was given increased emphasis by 'new growth theory' in the 1990s. Furthermore the significant difference between Western and Japanese economic models is how knowledge is gained - whether from individual rationality or from group learning stimulated by social superiors;
• law is only part of the institutional framework for productive activities - as culturally-determined social relationships are also part of the equation (and radically different in the US and Japan).

Unfortunately Ramseyer's contribution seems seriously misleading, and has the effect of reducing (rather than increase) understanding of the Japanese legal system.

There is no doubt that law has a long tradition in China. There is also no doubt that it is used (by selective enforcement of regulations as Eamonn Fingleton suggested) mainly to ensure the success of activities promoted through social elites (ie those connected with the Communist Party).