A History of Japan: From Stone Age to Superpower (77 page)

However, many in America and Japan felt the reforms were too liberal, especially in view of rising Cold War tensions. In particular, there was concern about rising communism. A planned general strike for February 1947, which MacArthur had to ban at the last moment, was a symbol of labour unrest and the communist threat. A continuing weak economy increased that threat of communist takeover.

Washington appeared to lose faith in MacArthur during 1947, and sent a number of advisers who took a harder line. The key aim now was to strengthen Japan’s economy and make it a Far Eastern bastion of the Free World. The dissolution of the
zaibatsu
was stopped, along with the purges. Japan also avoided paying any significant reparations to victim nations. Labour laws, only just introduced, were toughened. Through strict financial policies under the guidance of specialist American advisers, inflation was reduced and the economy started to recover. A major boost to economic recovery came through American procurements for the Korean War, which started in 1950.

The Korean War also led to MacArthur’s dismissal over a policy disagreement with President Truman, and to the signing of a peace treaty and the end of the Occupation. At the same time that the peace treaty was signed, America and Japan signed a security treaty that allowed for American troops to be stationed in Japan. Since America effectively took responsibility for Japan’s security – despite the formation of a Self-Defence Force – Japan had very little defence expenditure, which further helped its economy.

During the 1950s the conservative Japanese government deliberately undid some of the Occupation reforms. Education in particular saw the reintroduction of centralisation and tight government control. However, it did not undo the Occupation’s recent economic policies, but built upon them, combining them with its own tradition of government guidance over the economy. Economic performance was further helped by traditional attitudes such as a willingness to learn and to work hard for the interests of the nation. Some were even determined to re-fight the war, but this time in the economic arena.

Through these and a variety of other economic factors – a mixture of self-help and American help, of authoritarianism and democracy, of cultural predispositions and economic mechanisms – Japan was able to achieve rapid economic growth over the next two decades. In the late 1960s it became the third largest economy in the world after America and the Soviet Union.

Progress was not always smooth. Industrialisation had caused serious pollution. Labour unrest had continued in the 1950s, culminating in a major confrontation at Miike in 1960 between the labour movement on the one hand and government and business on the other. The government-business combination won. It was from this point that many of the policies of so-called Japanese-style management were put in place, notably enterprise unions and ‘lifetime employment’. Fortunately, improvements in the economy led to wage increases and material acquisitions that helped placate the workforce.

Japan’s economy continued to grow during the 1970s despite the Oil Shock. It also cleaned up most of its pollution problems. It seemed invincible. Pride in Japan’s achievements led to the production of self-congratulatory
Nihonjinron
literature that tended to stress Japan’s uniqueness, with strong overtones of innate supremacy. Many westerners seemed to agree, and enthusiastically started studying aspects of Japan such as its management style in order to improve their own nations/ companies. A major accolade came in 1979 when a Harvard professor wrote a best-selling book that referred to Japan as Number One and also to the lessons it could teach America. The pupil had now become the master.

Unfortunately, Japan’s success led in the 1980s to arrogance among many Japanese and to envy and frustration among many westerners. Japanese neo-nationalism, defiance, and clear sense of racial supremacy – exacerbated by comments even at prime ministerial level – alarmed the world, and Asia in particular. For its part the Japanese government-business combination seemed locked into a continued path of economic expansion, even though many of the public were starting to grow angry over the lack of infrastructural reform. Japan was Number One as an economic superpower, but its people often lived in conditions closer to the Third World. International attempts to address Japan’s economic domination by causing the upvaluing of the yen and the release of cheap capital in fact made matters worse, as Japanese ‘Bubble money’ now bought up property around the world. In the late 1980s, Japan’s Establishment was the target of anger among westerners, Asians, and many of its own public, especially when the public learned of major scandals that saw politicians lining their own pockets.

Key developments of the period are summarised in
Table 6.1
.

Table 6.1
   Key developments from end War to late 1980s

Key values and practices of the period are summarised in
Table 6.2
. Most of them are once again continuations of past values.

Through a mix of good fortune, good tactics, and traditional strengths such as education and hard work, Japan became one of the world’s greatest-ever economic superpowers. And yet, for all the effort the typical Japanese worker put in to rebuild the nation and create such an economic giant, there was relatively little improvement in their lifestyle. Along with evidence of corruption in high places, this left many frustrated and angry during the Bubble Economy. Something needed to change.

Table 6.2
   Key values and practices from end War to late 1980s

P
ART
S
EVEN

A S
UPERPOWER
A
DRIFT: THE
H
EISEI
Y
EARS

7.1   The Bursting of the Bubble

The year of 1989 brought an end to an era, for Hirohito died in January. There was hope that under his son, Akihito, there might be some change of direction that would finally benefit the public. The new era was given the name Heisei, literally meaning ‘Achieving Full Peace’.
¹
This had very positive connotations, suggesting that some of the problems lingering from the war – some would say Hirohito himself had been one – were either already overcome or about to be overcome. The hard work of rebuilding the war-torn nation and creating a superpower was seemingly completed, and perhaps now the somewhat frustrated public could begin to enjoy the fruits of their labours.

As it happened, the new period got off to a bad start with the Recruit Scandal and Ishihara’s provocative book that same year. However, perhaps fortunately for Japan, at the end of that year the Bubble burst, and its economy collapsed.

Price escalation in Japan had become so out of hand that, from late 1989, the Bank of Japan was forced to increase interest rates stiffly, choosing to burst the Bubble rather than wait for it to collapse by itself.
²
The years 1990 and 1991 saw Japan plunging into a recession which, in substance, was to stay with it through the 1990s and into the new millennium. Land prices fell rapidly by more than a third. Stock market prices plummeted from their December 1989 high by more than 60 per cent. Bankruptcies and bad debts abounded. Unemployment increased. Overall, economic growth slumped, remaining virtually flat and rarely over 1 per cent. The government and the business world occasionally
interpreted this and that event as a sign of imminent recovery, but this did not eventuate. In one of the quarters of 1997 the economy even experienced an annualised shrinkage of as much as 11 per cent. The late 1990s saw deflation set in, shrinking corporate profits, making debts harder to pay off, and pressuring wages. The Consumer Price Index fell for four years in a row from 1998.

The recession appears to have taken its toll on Japan’s citizens. According to National Police Agency figures released in 2003, suicides in 2002 exceeded 30,000 nationwide for the fifth year in succession, with as high a proportion as 25 per cent being attributed to economic woes (though the ongoing main reason for suicide was health-related concerns). No doubt in line with this economic factor, suicides among middle-aged males – the traditional breadwinners – increased the most.
³

Crime rates too increased according to a Justice Ministry white paper also released in 2003. Excluding traffic offences, the number of reported crimes almost doubled over the preceding two decades, from 1.54 million in 1983 to 2.85 million in 2002. Some of the increase was due to juvenile crime, while among adult crimes burglary increased significantly – again, according to the Ministry, a reflection of the economic situation.
⁴
Expressed another way, with different dates, crimes per 100,000 people in 1990 numbered 1,324, whereas in 2000 the number had risen to 1,925.
⁵

Among other consequences of the recession, Japan’s much vaunted and much exaggerated lifetime employment system (discussed in 6.3), which was dependent on high growth, effectively collapsed. A total of 60,000 managers – supposedly in the most secure of positions – were dismissed in just the two years 1992–93.
⁶
Over the next few years more than one in ten managers were either dismissed or demoted. Worried managers flocked in droves to join rapidly growing independent unions whose existence had once hardly been noticed.
⁷
Lawsuits were lodged by not a few of those dismissed or demoted. An embarrassing event for Japanese managerial and economic expertise came in 1996, when for the first time a major corporation was obliged to have a westerner take over as president at its headquarters in Japan – the Scotsman Henry Wallace (a former Ford employee) filling the top position at Mazda on a rescue mission.
⁸
Others followed, such as France’s Carlos Ghosn at Nissan in 1999.

Lifetime employment had been a bastion of the
Nihonjinron
-style of thinking, in terms of ‘uniquely’ Japanese familialism, group loyalty, harmony and so forth. Its effective collapse – with many major companies abandoning it, as Toyota did officially in 1999 – significantly undermined such thinking. From a managerial perspective the baby was not quite thrown out irretrievably with the bathwater: there has continued to be a recognition that lifetime employment is still a useful goal, though not an absolute or a given. As Ghosn put it, in late 2003, ‘While I acknowledge the value of lifetime employment, Nissan did not have what it took to achieve that goal. The system of lifetime employment is a target, not a hard-and-fast rule to be followed at all costs.’
⁹
Nevertheless, the diminished role of lifetime employment has shown that the ‘Japanese way’ is not always right or sustainable or something to be emulated. On the more positive side, it has brought a greater realism and flexibility into Japanese management.