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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
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From Our Correspondent: Making Enemies
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Asiaweek Time Asia Now Asiaweek story


Just five years ago, few nations seemed as sure of their destiny as Japan. But the recession has changed all that. Where there once was certainty, there is now doubt. Increasingly, the Japanese wonder where their country is heading

By Steven Frank and Murakami Mutsuko, Tokyo

IT IS A COOL Wednesday morning in the heart of Tokyo. A large group of homeless men are waiting for the free noodles handed out daily by the Shinjuku ward office. Itakura Tamotsu, 52, is there, but not for the food. He is meeting some old friends who have fallen on hard times. "I'm different from them," the Tokyo day laborer tells us. "I'm healthy and strong and willing to work. Recruiters always spot me in the crowd of job-seekers and offer me work. Why? Because they know I'm worth it."

He certainly looks different from the rest of the rag-tag bunch. Itakura is dressed in clean clothes and sports a shiny wristwatch. His accommodation is a step up too. He lives in a nearby "capsule hotel" - a complex of coffin-sized slots that offers a lot more comfort, though not much more space, than the best of the cardboard shelters the homeless have set up close to Shinjuku rail and subway station. Itakura exudes self-confidence and warmth - until you ask him about the recession. Suddenly, anger tinges his voice. He points at the ward office building. "The government and the leaders up there are stupid and incompetent," he says. "These days, no one knows where Japan is going."

Itakura is not the first to get that notion. Across the country, a sense of bewilderment and indecision has crept into the national psyche. "The Japanese were once busy trying to catch up with the Western nations," says Tanaka Shoji, a fiftyish executive drinking with colleagues in a pricey Shinjuku karaoke lounge. "After they did that, many continued to believe that as long as they worked hard for their company, it would be good for Japan and the rest of the world."

Tanaka, a general manager at Taisei Corp., one of Japan's largest construction companies, takes a sip of whiskey and continues: "But in the past 10 years we have been a bit confused, wondering what we are really working for." His tone has changed; there is a quieter, perplexed quality to it. "Maybe we have lost the old devotion we had to the company," he says, shaking his head. "Or maybe we are just sticking to our jobs because we're complacent."

What a difference five years can make. In the 1980s, the world was in awe of Japan. Through perseverance, ingenuity and a common sense of purpose, its people had generated one of the greatest economic surges of our times. Only 40 years after their cities and industries had been flattened by war, the Japanese had practically caught up with the richest nations on earth in terms of per-capita income and output. Their major corporations were among the leaders in dozens of key industries, including electronics, automobiles, banking, shipbuilding and steel production. True, the average Japanese home was smaller than those in America, prices for goods were higher and working hours were longer. But everything would get better, wouldn't it? And, anyway, Japan was getting richer.

Deep down, though, things were already beginning to go wrong by the 1980s. But everybody was too preoccupied to worry about the future. It took the bursting of the stock market and property bubble in 1991 to bring home to the Japanese a devastating reality: that a nation cannot live by economic growth alone. When the growth went, something profoundly troubling happened. Japan, once so firmly anchored by its sense of identity and national destiny, began to drift in subtle ways. Today, with no strong leadership, it still hasn't found its sense of direction. And its people worry where it is all leading.

"For years Japanese people have been working, saving, investing [in industry] and exporting; then working, saving, investing and exporting some more," says Shimada Haruo, professor of economics at Tokyo's prestigious Keio University. "Not importing, not enjoying themselves, not investing in housing, not liberating the market." Just growing economically. By the late 1980s, he says, everyone was so busy that nobody thought to ask an obvious question: Could this now-mature economy keep up the pace? Shimada answers that question. "When you grow old," he says, "your organ functions change, so you can't continue to eat and drink and stay up late. If you keep doing the things you did when you were young, you will destroy yourself."

The effects of the binge years appear daily in news reports. Growth on average over the past four years has practically halted. In that time, real-estate prices have been falling, deflating property values by a third. The banks are still reeling from bad debts estimated at $400 billion or more. The stock market's Nikkei Average has plunged from a high of 39,000 in November 1989 to around 18,000. The unemployment rate is at 3.2% - relatively low for an industrialized nation, but nearly a record high for Japan. To stimulate the economy, the Bank of Japan has pushed interest rates to historic lows. But, with prices in stores still sinking and, more importantly, expectations gloomy, practically giving away money is not working either.

A new fear is that if the drifting is not arrested soon, the ties that link Japanese society to its traditional values may snap. Fire-arm offenses, virtually unheard of before, are on the rise, as is the number of shocking crimes. The most spectacular was the poisonous gas attack in the Tokyo subway on March 20, which left 12 dead, 5,500 sickened and an entire nation in shock.

On top of all this, the two principal political parties, the long-ruling Liberal Democratic Party and the Japan Socialist Party, are splintering and realigning themselves. That may be no bad thing. But, meanwhile, the public is becoming increasingly disillusioned by years of big-money party politics - so much so that former comedians Aoshima Yukio and Yamada Isamu were elected in April as governors of Tokyo and Osaka, respectively. Ishihara Hideo, a senior member of Japan's premier business group, Keidanren, isn't laughing. The nation, he says bluntly, has entered an "era of political instability and economic stagnation."

Is Japan heading toward a British-style decline? Unlikely. The Japanese know how to bounce back. Though 1994's record trade surplus of $121 billion may fall this year, it will still be gigantic by international standards. And just-released corporate profit figures for the first six months are relatively strong as big firms continue to expand and invest overseas.

Sitting in one of the ritzy cafes in central Tokyo or strolling through the carnival atmosphere of Osaka's Namba district on a Saturday night, it is easy to forget that this is Japan's deepest and longest postwar recession. Still, as the slowdown wears on, one fact is becoming inescapable: Everything that made the Japanese economy uniquely successful will have to be reevaluated, retooled or scrapped altogether. And, in the interim, a lot of people are going to be crushed between the shifting tectonic plates of past and future.

That's not news to Nakajima Takao. A loyal manager at Nissei Electronics in Tokyo, he was perfectly satisfied to work hard for his company for 28 years. He had few doubts in his mind that one day he would follow his senior colleagues and retire at 60. Then the recession hit. "I was sent to San Francisco for three years, from 1990 to 1992," he tells us, puffing on a cigarette in the cramped offices of the Tokyo Managers' Union, which assists salarymen. "But when I came back to Japan, they didn't have a job for me." His offense: he had turned 50.

That began a year-long struggle with his company, marked by acrimony and humiliation. First he pleaded for his old managerial position, then for a fair retirement settlement. All this time, he went to his office each morning and spent most of the day staring out the window. Finally, in March this year, he settled for a lump-sum payment and left with no prospects for a new job. "I'm bitter because I had a plan for my life," Nakajima says. "They took away my life's work."

Japan's biggest losers are those in the dankai (mass-lump) generation, born in the handful of baby-boom years beginning in l948. With their companies facing ever-fiercer competition from hungry foreign firms - particularly those of Asia's little dragons - cost-cutting is the order of the day. And managers in their early middle ages are the targets. Morita Hiroshi, a twentysomething Osaka-based junior manager, says he observes it every day. In his petrochemical company in the Sumitomo group, manpower is being cut by 20%. He says managers are being farmed out to subsidiaries and affiliates on a "one-way ticket" basis. "People in their 40s and 50s are just disappearing."

Nakajima and his colleagues have some justification for feeling cheated by their companies and by society. One of the not-so-secret secrets of the so-called Japanese economic miracle is that it was no miracle at all; it was built on the backs of a class of modern-day "slaves": the salarymen. These white-collar workers, recruited by the upcoming trading firms, were asked to toil at their desks with a military-like discipline for most of their waking hours. The first war they fought was to back up the troops "liberating" Asia. The second was the trade war with the mighty Western powers.

In return for this loyalty and hard work, salarymen in large firms were often guaranteed a job for life, as well as a wide range of fringe benefits. "Company life was like a religion in Japan," says Fujie Toshihiko, a former salaryman turned professor, author and consultant. "After years of working for a company, you felt you were a part of it. Even I still slip occasionally and call my old company uchi [my home]."

Already fading, lifetime employment will almost certainly not survive the changing times. "Many salarymen have awoken to the reality that the old promises are no longer being kept," says Fujie. "They have worked hard, often doing overtime, they have played golf with business associates and have had little time to spend with their families - all on the assumption that the company would take good care of them for life. Many now feel betrayed." Fujie, who offers courses to salarymen on how to cope with life after the miracle, says the changes are having long-term effects. Some, he says, "feel they have lost their reason to work and live."

Other traditional clauses in the old Japanese social contract are disappearing. Many managers can no longer expect automatic promotion on the basis of their age or length of service. They find they are being bundled out of the way by younger people. In this new environment, many baby-boom salarymen have become "postless," meaning they no longer get an office title, such as bucho or kacho (department or section chief). Nor do they get the special expense accounts, privileges and, most importantly, the social respect that go with them.

White collars are not the only ones feeling the pinch. Large manufacturers are moving into hi-tech and service industries; many of the leading exporters are shifting their labor-intensive production abroad. Workers who once saw a lifetime's trouble-free employment ahead of them are increasingly forced to acquire new skills, change jobs and shift to different parts of the country or even overseas.

The figures tell the story. Japan's annual domestic auto production, for example, will drop from 10.55 million vehicles to 9.3 million by 2000. About 210,000 jobs will be shed, says the Asahi Research Center. Japan's telecommunications giant, NTT, is reportedly planning to cut its workforce by 50,000 by the end of the decade. And in one of the more symbolic recent announcements, electronics giant Sony said it will virtually stop manufacturing color TVs in Japan for the overseas market. At the peak, in 1985, Sony shipped out 100,000 a month.

Where is this "hollowing" of the Japanese economy leading? For a glimpse into the future, we took the express train from Tokyo to Zama. The city, one hour from the street-sleepers of Shinjuku station, was once known as "Nissan Town." When the production lines were shut down in March - the first such closing in postwar Japan - many local businesses and residents were forced to look elsewhere. But some, like Miyazaki Masayoshi, 64, were not so lucky. His Ranpou Teishokuya restaurant depended on the plant across the street.

"It's very hard now," he says, peering out at us warily from a window in his restaurant. That is his all-purpose answer to anything we ask him about the town and the recession. But when we mention Nissan, he opens up a little. "I have no relations with Nissan any more," he says. "All those people who worked the night shift, they're gone." Does he plan to move his business or shut down? He falls silent and stares off into the distance. "It's very hard now," he says finally, before apologizing and sliding his window shut.

Indeed, business at the Ranpou that night is lousy; only one customer shows up. It's a little better next door at the Ozawa Teishokuya restaurant. But the proprietor, Ozawa Seiichi, 62, doesn't want to talk much about Nissan either. Around the corner, easy-going Shibata Sachi, 60, is happy to chat, but her news is glum. She says her noodle shop has been in decline for the past two years, like a lot of other local businesses. "Small local contractors used to get a lot of orders from Nissan, everybody worked overtime and people came here to eat after work or called us for deliveries," she says, wiping the sweat from her face as she fries dumplings for the sole customer in the restaurant. "Now," she says, "business is down to a third of what it used to be."

Despite the quiet desperation in this corner of Zama, local officials insist things are not so bad. Sitting in the new city hall, Kagawa Naoyoshi acknowledges tax revenues are down, but says it is hard to tell whether that is because of the plant closing or the recession in general. Of the 4,000 employees at Nissan's Zama plant, once a showpiece in the use of robotics, only 1,900 are still working there - mostly in the machine- and tool-engineering division. The only bit of good news - and here is a sign of the times - is that Ford Motors is to open an inspection plant in a corner of Nissan's vacated complex. The purpose? To check the American manufacturer's vehicles before they are sold on the Japanese market.

Japan's young are not spared. Last month, Recruit Research reported that one in two female college graduates will not get a job next year. Of the estimated 400,000 new job-seekers who will hit the labor market this year - a record number - about 100,000 probably have no hope of finding full-time work. The Japanese media, which likes to attach a cutesy catchphrase to every trend, uses weather-report terminology to describe the job-hunting situation for young women. Last year it was "heavy rain," then it became "the ice age." Now it's "the super ice age."

In the West, which has known youth unemployment for longer, similar circumstances have sired sullen alienation, even rage. Not in Japan - at least not yet. More often than not, it is complacency that characterizes today's young people. And that may be a key reason for the national drift. Take Sunohara Masahiko, a third-year student at Tokyo's respected Waseda University. He admits he is not optimistic about getting a job in Japan in his profession of choice: publishing. But if that doesn't work out, he shrugs, he can try something else, or another country. One thing Sunohara is certain of: he is vastly different from his salaryman father. "He is strong-minded, opinionated and pushy," the undergrad says. "I am easy-going, flexible."

Fujiwara Mariko, 46, a research director at the Hakuhodo Institute of Life & Living, has helped compile several studies on Japanese society. "I don't know what it is about young people that they can be so optimistic and so unaffected by what's happening in their own society or community," she says. Fujiwara is particularly critical of young women, who are far less likely to graduate from university than men. "You are not born a victim: you grow into one," she says. "Japanese women have to grow up if they want equality."

Increasingly, Japanese are becoming tired of the old order. Many are turning their back on Japan and heading overseas, for such places as the U.S., Hong Kong, Singapore and Europe. Others continue at their jobs, but, bereft of the old patriotic spirit, are simply waiting for their chance to move on. Suzuki Shigechiyo, 39, represents the new breed. The talented interior designer and architect has spent a decade at the promotional firm, Nomura Co. Like others, the company is now feeling the bite of the recession. Shigechiyo, as he prefers to be called, says the number and size of projects has dropped to about a third of the boom-time bubble years. And revenues are down about 30%.

But Shigechiyo has done well; he is busier than ever. One of his recent "challenges," he says, was to add his magic to the delightfully whimsy Cirque de Hagen-Dazs, an ice cream parlor in Osaka where the furniture includes benches that have human-looking legs that sway. But, for all his success, Shigechiyo believes his future lies outside of Japan. His desire is to travel and live in different parts of the world. "Like Matsuo Basho, the [17th-century] poet who traveled around the country reading haiku, I could go from place to place and draw design sketches inspired by local people, their cultures and environment," he says. Others have already left the country. Suzuki Hisae, 28, joined a Japanese construction company in 1993, specifically so she could work in Southeast Asia. Once in Singapore, she switched to a local Japanese bank, where she is now a business-promotions officer. Suzuki feels she made the right decision. "The biggest difference is that in Singapore, it is easy for women to find work and continue to work, even after having children," she says. "Women and men are equal."

What is the solution to Japan's woes? Many economists say everything will have to be rethought. "I think we need another Meiji restoration," says Keio's Shimada, referring to the massive social and political restructuring that transformed Japan in the late 19th century. "The truth is that we've been following the same old policy of bureaucracy-led developmental capitalism for 130 years," Shimada says. "But it just doesn't work any more."

Respected economist Kusaka Kimindo, 64, agrees. He is calling for a radical restructuring of the economy on the scale of the Soviet Union's Perestroika. Part of that process will involve dismantling the bureaucracy, which has its tentacles in all aspects of daily economic life. That will only become politically possible, Kusaka says, when younger politicians representing urban voters push out the seven- and eight-term dinosaurs now in Parliament. Kusaka is optimistic. "Wait for next year's general elections and see what happens," he says.

But for those who have already drifted beyond the pale, the waiting might be tough. Hundreds have ended up living in the cheap hostels of northern Tokyo's Sanya district, where the shops are worn and dingy and where the ordered ways of the city center don't reach. Some men in this old working-class district sleep on the asphalt in front of a Shinto shrine. Others sit on the streets, staring vacantly ahead or stagger around drunk.

One such man is weaving his way through the crowd. "Gaijin-sama," he slurs, using a noble honorific for the only foreigner in sight. "Welcome to Japan." As we watch, he proceeds jauntily to the intersection, as if in a hurry. But when the traffic light changes, he doesn't move. It turns from green to red, then back to green again. But he just stands there, seemingly paralyzed by indecision.

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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