Rebuild Japan Initiative Foundation (RJIF) releases new book in Japanese, Examining Japan’s Lost Decades (Toyo Keizai Inc.)

Edited by Yoichi Funabashi, Chairman, RJIF

The Rebuild Japan Initiative Foundation (RJIF) published its sixth book, Examining Japan’s Lost Decades (Routledge Contemporary Japan Series), on May 29th, 2015.

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Book Summary

What specifically did Japan lose during the so-called “lost decades,” which began with the bursting of the bubble in 1989? Why and how did Japan’s policies fail? Were there alternatives and why didn’t they ripen into practical plans? How should Japanese policymakers have reacted – have they made any significant efforts to revitalize Japan or have they just accepted a gentle national decline? Such questions are tackled head on in Examining Japan’s Lost Decades (Routledge Contemporary Series), which provides insights critical not only to the future of Japan but sheds light on how Europe, the US and Asian countries can deal with common challenges, including demographic shifts, fiscal deficit, free trade and international security. In this two-year project, the international team of renowned scholars and experts critically examined the “losses” in question as well as the perceptions and opportunities that surrounded them, providing an indispensable reference point within the global context. In-depth investigations were conducted, employing a case study framework and incorporating interviews with key persons in charge over the past two decades.

Rather than merely looking back and dwelling on past mistakes, examining the lost decades offers a way of looking forward and discussing how a country can regenerate itself when it comes to a crossroads. Equally as vital as the historical analysis in this book is the focus on future possible policy options as wells as risks to take into account. The authors argue that Japan must not give in to temptations of passively viewing itself as a victim of globalization and rising neighbor states. In order to effectively tackle demographic decline, bottoming economic growth, and worsening public debt, Japan has no option but to take responsibility and pursue reforms. Japan must not lose sight of the deep and mutual interdependence with other nations as well as the deeply held basic principles and ideas that it shares with the rest of the world.

Chapters and Authors

INTRODUCTION — Yoichi Funabashi

1. Japan’s Demographic Collapse and Vanishing Provinces Atsushi Seike (President, Keio University) examines the causes behind the trend of the declining population over the past twenty years in Japan, by focusing on various factors since 1974, the last baby-boom to date.
2. Monetary and Fiscal Policies (Japan’s fiscal policy failure) Adam Posen (President, Peterson Institute for International Economics), Kenneth Kuttner (Professor, Williams College), and Tokuo Iwaisako (Professor, Institute of Economic Research, Hitotsubashi University) explore Japan’s monetary policy over the last two decades, focusing on debt deflation, non-performing loans and inflation targeting. They propose three hypotheses and four specific lessons that Japan and the world can learn, touching upon the potential of expanding monetary policies and government-central bank coordination.
3. The Two “Lost Decades” and Macroeconomics: Changing Economic Policies) Keichiro Kobayashi (Professor, Faculty of Economics, Keio University) argues that reform measures taken in the 1990s after the collapse of the bubble were too late and did not go far enough, resulting in Japan’s precipitous decline in global competitiveness.
4. The Curse of “Japan, Inc.” and Japan’s Microeconomic Competitiveness Kazuhiko Toyama (CEO and Representative Director, Industrial Growth Platform Inc. (IGPI)) compares cases of Japanese businesses which have experienced a “loss” in competitiveness as well as those with stronger performance (both large and small but agile companies) and which have regained competitiveness today in the new game of emerging markets.
5. Making Sense of the Lost Decades: Workplaces and Schools, Men and Women, Young and Old, Rich and Poor Andrew Gordon (Professor of History, Harvard University) argues that changes in the labor and employment structure stemming from both domestic and global factors have been the main cause of growing inequality in Japan. Furthermore, the lack of women in the corporate world has severely handicapped Japan’s ability to compete at a global level.
6. The Two Lost Decades in Education: The Failure of Reform Takehiko Kariya (Professor, Sociology of Japanese Society and Faculty Fellow, University of Oxford) assesses the “lost” opportunity to produce good English speaking human resources who are able to compete in global business settings. The causes behind the “visionless” education policy after achieving its post- World War II goal of “catching up” with western countries are examined.
7. The Fukushima Nuclear Accident: Lost Opportunities and the “Safety Myth” Koichi Kitazawa (President, Tokyo City University, Former President of Japan Science and Technology Agency) focuses on the factors that prevented Japan from learning lessons from previous accidents from both global and Japan-specific perspectives, scrutinizing the political, economic, social causes and lack of a comprehensive approach to such crises.
8. The Last Two Decades in Japanese Politics: Lost Opportunities and Undesirable Outcomes Satoshi Machidori (Professor, Graduate School of Law and School of Public Policy, Kyoto University) analyzes the reasons why political reforms attempted during the lost decades were not achieved by revealing the mistakes and focusing on the critical junctures throughout the era. The lack of a concrete and comprehensive set of plans resulted in inward-looking and uncoordinated policy decisions, leading ultimately to the failure of the reforms.


9. The Gulf War and Japan’s National Security Identity Michael Green (Senior Vice President for Asia / Japan Chair, Center for Strategic and International Studies (CSIS)) argues that despite the portrayal of Japan’s diplomacy during the Gulf War as a failure and “loss” of international prestige due to the criticism of Japan’s checkbook diplomacy, it actually served as a catalyst for incremental change in later crises. Thus, not all was lost during the “lost decades” in the sphere of security and foreign policy.
10. Foreign Economic Policy Strategies and Economic Performance Peter Drysdale (Emeritus Professor of Economics, the Australia National University) and Shiro Armstrong (Research Fellow, the Crawford School of Public Policy, the Australia National University) explore the reasons why foreign economic policy was not used as an instrument of domestic reform in Japan and why the structural reform agenda of APEC was not embraced, despite Japan’s role in founding the regional organization.
11. Japan’s Asia / Asia-Pacific Policy in Flux Takashi Shiraishi (President, National Graduate Institute for Policy Studies (GRIPS), President, JETRO Institute of Developing Economies) reviews the possible ways in which Japan could have engaged Asia in a more effective way had it combined cooperation with trade policy to promote regional economic growth built on “Japan in Asia” rather than “Japan and Asia.”
12. Okinawa Bases and the U.S. – Japan Alliance Sheila Smith (Senior Fellow for Japan Studies, the Council on Foreign Relations (CFR)) questions whether the Futenma US base relocation controversy was a case of failure due simply to Tokyo’s political struggles, arguing instead that broader structural changes must be considered and the current US-Japan division of labor is no longer adequate for Japanese defense needs.
13. Japanese Historical Memory Kazuhiko Togo (Professor, Kyoto Sangyo University, Director, Institute for World Affairs) analyzes why Japan failed to crystalize several key moments to reconcile its historical views, in particular why Japan could not seize the opportunities created by the 1992 Emperor’s visit to China, the Koizumi era debate on Yasukuni Shrine and the establishment of the Asian Women’s Fund.
14. Japan’s Failed Bid for a Permanent Seat on the UN Security Council Nobumasa Akiyama (Professor, Graduate School of Law, Hitotsubashi University) focuses on the case study of Japan’s failed 2005 bid for permanent membership on the UN Security Council, arguing that the lack of a common vision and consensus towards foreign policy goals led to the failure.
15. The Stakeholder State: Ideology and Values in Japan’s Search for a Post-Cold War Global Role G. John Ikenberry (Professor, Woodrow Wilson School of Public and International Affairs, Princeton University) asks how Japan has embraced another “defeat” of the lost decades and started over during these past few years. The political and international implications of Japan’s self-image of decline, which have become a part of the country’s political and cultural fabric, are analyzed.