Japan's political black hole
Reviewed By Hitoshi URABE
"Japan's political black hole"
(by Deepak Lal) Taipei Times
"Japan's malaise was made in United States"
(by Deepak Lal) Daily Times (Pakistan)
The writer of this article, Deepak Lal, is originally from India and currently Professor of International Development at the University of California, Los Angeles, and well known for his work especially in the field of Economic Development.
In this article, Professor Lal analyzes Japan from political standpoint as well as economic, and has come out with some interesting, though not necessarily encouraging, observations.
He sees Japan's political impotence in adopting necessary measures to recover from the slump in elements engraved in the history for centuries. He points to the fact that Japan's political system always had Emperor at its center. While it was not necessarily Emperor himself who had the real power, the true rulers had always used the Emperor as the symbolical head. Before the Meiji era, it was the samurai warriors who received authorizations from the Emperor to rule the land. And after the Meiji restoration, bureaucrats took over, succeeding the appearance that the Emperor was the ruler as a way to govern.
Professor Lal states that the basic framework is still the same. The bureaucrats are the most knowledgeable and powerful, so there could be no room for will, or risk taking, to be exercised by the politicians. This would make it the only way to come to decisions is by 'consensus,' which effectively compels it virtually impossible to adopt strong policies.
Professor Lal's way of analysis may not be popular, but there seems to be some truth in it that deserves careful consideration.
His unique approach is seen also in the Related Article posted above. This article was written in respect for Mr Fukui being nominated for the new Bank of Japan governor last week.
As the title suggests, he places Japan's bubble, then the burst of it, and the inability of recovery from its aftermath, all in the US's policy to keep the yen strong. According to the professor, it started early in the 70's when President Nixon declared abolishment of backing dollars with gold, and soon after major currencies began to float. The US kept on its pressure for Japan to keep the yen strong, because, it claimed, the trade imbalance must be corrected, where it was constantly for Japan's surplus vis-à-vis US's deficit.
This policy of the US, as explained in the paper, had been considered irrational based on modern international monetary theory, which explains trade imbalances to be merely reflections of difference between relative parties' domestic investments and savings. It, however, still had certain political clout for Japan to observe, and had resulted in low domestic interest rates, inducing the bubble with excessive liquidity, and then hindering recovery after its burst by suppressing export.
The two papers view Japan from different angles, and they are both concise and intriguing.