Press Slams Government over Economy
John de Boer (GLOCOM Platform)
The appointment of Toshihiko Fukui as the new Governor of the Bank of Japan last week may have triggered a collective bashing of Japan's political and bureaucratic systems, when it comes to handling the economy. Prime Minister Koizumi's selection of the conservative Fukui was largely interpreted by the press as "a status quo choice" and one that would likely "procrastinate on real reforms" ("Japan jobless back to record high", CNN, 28 February 2003).
Ever since this decision was made public on 25 February, the international media has featured several articles that have slammed the Japanese government for inaction. Most prevalent among them was an article written by Professor Deepak Lal of the University of California (Los Angeles) and published in the Taipei Times and the Korean Herald under the headline "Japan's political black hole" and in the Singapore Straits Times under the title, "Paralysis breeds timid Japanese leaders" (all published on 2 March).
Prof. Lal accused Japanese leaders of "skirting the problem as if avoiding a mud puddle". After starting his article stating that, "from a purely economic point of view, pulling Japan out of its long slump would be simple", he went on to blame Japan's economic ills on a political system, inherited from the Meiji period, that is based on an opaque power sharing structure designed to evade responsibility. He also charged bureaucracy by challenging its sense of accountability in stating that it was "immune to political meddling". According to Lal, these structures, which make possible the "unholy alliance between government agencies, large industries and the financial system", prevent Japan from getting its house in order.
Howard French and Ken Belson of the New York Times also struck a similar note last week. In his article of the 28 February, French explained Japan's lack of progress by blaming it on denial. In his words, "over the last half century, Japanese have grown so accustomed to success that what comes easiest now is denial of the need for urgent measures" ("Behind the paper doors, a Japan in turmoil", NYT, 28 February 2003). Ken Belson reinforced this point when he remarked that, "economic policy making here (in Japan) can often give the impression of a merry-go-round run amok. The arguments are circular, endless and tend to move in fits and starts" ("Did he fiddle while Japan burned?", NYT, 26 February 2003).
In addition to these criticisms of the Japanese government there were a number of articles that ignored government ineptness and jumped straight to the market. George Wehrfritz of Newsweek tried to exploit opportunities present in what he called Japan's "irrational lack of exuberance". He claimed that there were hundreds of profitable businesses in Japan that could be bought up at ridiculously undervalued prices. He cited "experts" who pointed to between 500 to 700 "hidden gems" out of 3,000 small caps in Japan. As for the remaining 2,300 - 2,500 small caps, significantly, nothing was said.
On the 27 February, Brian Bremmer of Business Week tried to provide some perspective by writing a spirited article that urged Japan to awake from nightmares about the economic threat posed by China. He claimed that, "Japanese are loosing their collective marbles … Not a day passes without the press publishing something about the economic threat China poses". He then concluded by stating that China is "not an economic threat. Rather, it just may be a godsend for a Japanese economy looking to get its groove back".
The overall tone suggests a sense of exasperation and hopelessness with the Japanese government among media sources. In terms of Japan' market performance, reports try to reflect a balance between negative and positive signs. Some, like CNN, are satisfied to report that the situation is "not getting worse", despite headlining with "Japan's jobless back to postwar high of 5.5%". George Wehrfritz speaks of "gems". However, this again must be understood in the context of an "irrational lack of exuberance" produced by over a decade of turmoil and inaction. And, no doubt, the use of the word "gem" was purposeful in its sense of rarity considering that such companies are hard to find. Which brings us to the arguments posed by Deepak Lal, Ken Belson and Howard French. Unfortunately, judging from past performance and future prospects they may be right about the government.