A History of Japan: From Stone Age to Superpower (75 page)

On the negative side, Japan continued to ignore its underdeveloped infrastructure, preferring to plough its wealth back into further growth instead of improved housing and roads. When it did build, it often seemed to do so not on the basis of proper planning but rather with consideration to providing benefits to the owners of certain land or construction companies. In the background was a network of cosy relations between big business, the underworld, and the government. Corruption scandals in government and big business have long been commonplace in Japan, and the Ministry of Construction has a particularly bad record.

Ironically, when a broad national plan for infrastructural development was finally proposed, it came from a man forever associated with scandal, Tanaka Kakuei. In July 1972, as he became prime minister, Tanaka promoted his master plan ‘Rebuilding the Japanese Archipelago’. Among other things he envisaged the elimination of regional inequities, by relocating industries away from their concentration in the Pacific coastal belt to the interior and the Japan Sea coast. The plan was greeted with some cynicism, for his own constituency of Niigata happened to be one of the Japan Sea regions designated for development and Tanaka had a long record of pork-barrel politics, but at least it was a plan.

The plan was never to come to reality. Not only was Tanaka forced from office just two years later following some particularly serious scandals,
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but also the Oil Shock hit in 1973. Arab oil-producing nations suddenly increased the price of oil five-fold. Most countries were hit badly, and experienced double-digit inflation and severe reduction in economic growth over the next few years. Japan used oil for more than three-quarters
of its primary energy, and was virtually 100 per cent dependent on imported oil, 90 per cent of it from the Middle East (this having displaced American oil). Being proportionately so dependent on Arab oil, it was hit particularly badly. In 1974 it experienced negative growth for the first time since the war. That year the wholesale price index leapt 31 per cent, and the consumer price index 24 per cent.
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Under the guidance of the Ministry of International Trade and Industry, Japan immediately put in place measures to reduce its reliance on oil. It improved efficiency, especially in energy-saving techniques. It rationalised industries, transferring some of them overseas, and it increased emphasis on the development of low-energy-consumptive industries, particularly service and ‘hightec’ industries. Over the next ten years or so it was able to reduce its overall dependence on oil by about a quarter, and by diversifying its suppliers it also reduced its relative dependence on Middle Eastern oil by a further fifth.

Despite – or perhaps because of – its vulnerability, Japan recovered faster than other economies. In 1975 it was able to record growth of 4 per cent. Apart from a small slump following a second and lesser oil shock in 1979, it was to maintain this average well beyond the 1970s. This rapid recovery was another source of respect from the west, and seemed to suggest Japan the economic superpower was invincible.

Other evidence of Japanese efficiency was seen in the way that pollution had been successfully tackled in the 1970s, as Vogel pointed out. Government and business had only started to address the problem seriously after massive law-suits from victims of pollution-related diseases, which threatened to become a national embarrassment.
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Nevertheless, once they set their mind to it, results were fast and effective. It was impressive. The phoenix had not only risen from the ashes, it had soared, and was staying aloft.

Around the same time as the Oil Shock, America had also given Japan a shock or two. These were known as the Nixon Shocks. In July 1971, without any prior consultation with Japan, Nixon announced his plan to visit the People’s Republic of China. It was the start of a US-PRC rapprochement that caused great difficulty for Japan’s own foreign policy. Japan had followed the American line and favoured Taiwan to this point. It now had to make rapid and sometimes embarrassing adjustments. Then just a month later, again with no consultation, Nixon announced his New Economic Program. This included a 10 per cent surcharge on many of the goods Japan exported to the United States (about a third of its total exports went to the US). It also meant an abandoning of the gold standard, in effect forcing the Japanese yen to be taken off the fixed exchange rate that had applied since the war. The yen’s value increased greatly, making its exports more expensive. But Nixon was still not finished sending cold messages to Japan. In the summer of 1973, fearing a shortage of soybeans in the domestic market, he abruptly embargoed soybean exports. This badly hit Japan, where American soybeans were an important commodity.
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The Nixon Shocks were not as damaging as the Oil Shock, but they were disturbing to the Japanese. They clearly signalled a cooling in American attitudes and goodwill towards Japan. Nevertheless, Japan rode them all out, and by the end of the 1970s many Japanese were starting to wonder if they needed American goodwill anyway. After all, Japan was now the master, and if America turned its back on Japan then it would be America’s loss, not Japan’s. Hadn’t a Harvard professor told them so?

6.4 A Superpower under Siege – and a Bubble

Japan’s economy continued to grow at around 4 per cent during the early 1980s. Its trade surplus with America, which had started to develop since the late 1970s, became massive, typically in the order of US$40–50 billion. Japanese products were everywhere.

There had been some criticism of Japan’s seemingly narrow focus on economic growth during the 1970s, but in general the praise had predominated. The balance was now tipping the other way. Backlashes were starting to become serious, not just in America. The Japanese were increasingly criticised as ‘economic animals’ who lacked any values other than making money. There were anti-Japanese protests in which Japanese products were destroyed by sledgehammers. Books were appearing that openly denounced the ethics of certain Japanese trade practices.
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Some of the criticism was justified. The Japanese were at times undoubtedly guilty of ‘dumping’ (selling below cost in a targeted market) or erecting non-tariff barriers (disadvantaging imports by non-economic practices such as time-consuming testing). However, the criticism was expressed in increasingly emotional language. It was almost like war brewing – an economic war that was threatening to get out of hand.

To try to remedy the situation a meeting was convened in 1985 in New York’s Plaza Hotel, attended by the financial leaders of the United States, Britain, France, Germany, and Japan. In the so-called Plaza Accord they
agreed effectively to devalue the dollar relative to the yen. The yen duly rose, in what is known as ‘
endaka
’ (‘high yen’). One result was an increased transfer of Japanese business operations overseas so as to make use of cheaper labour. However, contrary to American expectations, American goods did not make significantly greater inroads into Japan. Japanese goods – now often produced abroad – continued to loom large in the American market.

The Japanese now tried, with some ‘success’, to stimulate domestic demand by releasing cheap capital. Loans were made available at remarkably low interest. Prices of land in particular, which was used as collateral against loans, were allowed to escalate to absurd levels. The land in the immediate vicinity of the Imperial Palace theoretically had the same price tag in 1988 as all of California. Japan’s total land assets at the time were equivalent to no less than 60 per cent of the entire land value of the planet – 200 times the 0.3 per cent of the planet it occupies in geographical terms.
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Stock market prices also became grossly inflated, with some companies worth more on paper than the entire GNP of many countries. This was the infamous Bubble Economy.

Japan had become the second largest economy in the Free World in the late 1960s. However, it was during the Bubble Economy of the late 1980s that, in terms of per capita income, the Japanese became officially the wealthiest people in the world – at least on paper.

The money inevitably flowed overseas. Japan seemed to be buying up the world. By this stage it was the largest net overseas investor nation in the world. It controlled 4 per cent of the American economy, and Japanese companies even bought up bastions of America such as the Rockefeller Center and Columbia Film Studios.

Equally inevitably, this stirred up anti-Japanese feelings even more. The Japanese called this ‘Japan bashing’, and felt it was all unfair. To their way of thinking they were simply playing the western economic game of capitalism, and they were winning. Westerners were just poor losers, beaten at their own game by a better team.

The rising tensions between Japan and the west during the 1980s had two main inter-related causes. One was criticism from the west, which was in part justified, but was also in part – as the Japanese claimed – an emotional expression of frustration at being bettered.
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The other was that Japanese national pride crossed the line into nationalistic arrogance, then went even further into nationalistic chauvinism.

One early indication of this intensification of attitude was in 1982, when the Ministry of Education tried to substitute, in the school texts which it vetted, the word ‘advance’ (
shinshutsu
) for ‘invasion’ (
shinny
) to describe Japan’s prewar actions on the Asian mainland. It also tried to delete or tone down references to Japanese atrocities. This caused outrage among Asian nations, and not a few Japanese.
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Japanese neo-nationalism became an increasing concern to the international community, particularly because it seemed to be endorsed by leading government figures. In August 1985 Prime Minister Nakasone Yasuhiro, a former military officer noted for his old-style nationalistic views (including his wish to revise Article IX of the constitution), broke with postwar convention and paid homage to Japanese war dead at Yasukuni Shrine not in a private and personal capacity, as had previous prime ministers, but in his official role as head of government. This clearly suggested a revived link between religion and the state – banned by the constitution – and aroused fears about the revival of State Shint
. Around the same time he also made a number of comments to the effect that Japan, being peopled by a pure race, was more successful than multiracial societies. His most famous speech in this regard was in September 1986, at a gathering of young LDP leaders, when he remarked that Japanese were smarter than Americans, because intellectual levels in America were lowered by blacks and Hispanics.
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As a result of strong western reaction Nakasone had to apologise for his speech. Yet he had made his speech just weeks after international criticism had forced him to sack Education Minister Fujio Masayuki for publicly playing down the Nanking atrocity, and for also stating that Japan’s 1910 annexation of Korea was partly Korea’s responsibility because it had agreed to a merger.
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It was as though Fujio’s fate had taught Nakasone – and others who made similar remarks – nothing.

But Nakasone was openly called soft and a Reagan yes-man by the Diet member and novelist Ishihara Shintar
, who in 1989 co-wrote a controversial book entitled
The Japan That Can Say ‘No’: Why Japan Will Be First Among Equals
.
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The book expressed strong resentment at complaints and requests (for technological cooperation) from a second-rate America, and also clearly showed a strong nationalistic belief in Japan’s supremacy. Japan is the key to the future, the book proclaims, and America should get wise to this and stop expecting Japan to play second fiddle. Japan should take a firmer line against America, and stop dancing to its tune.