Is Japan Giving Up?

This article was first published in Huffington Post on March 8, 2010, and is posted here with permission.

Just as the success of Toyota Motor was a symbol of Japan's confidence on the world stage in the 1980s, the automobile company's recent troubles are symptomatic of a nation withdrawing from the world, as I noted this week in a Newsweek article. Avoidance was the Japanese public's initial reaction to Toyota's recent acceleration problems, which resulted in 34 deaths and nearly 10 million recalled cars worldwide. The reaction is typical of a modern Japanese culture wrought with victimization and self-doubt over questions of national identity.

In all likelihood Toyota's slump in sales will recover and the whole episode will fade in the public's memory, blending with many other product recalls in recent history. "Management will correct the problem. Toyota Motors' sales will bounce back; most consumers will soon forget this latest news cycle and remember why they bought the Camry, the Corolla, and the Prius," said Paul Scalise of Temple University in Japan. But Toyota's problems are an essential part of understanding Japan's zeitgeist today. The car company's troubles have compounded Japan's already sour mood. Interviews I have conducted in Japan over the past several years increasingly cause me to wonder: Is Japan giving up?

Toyota not only had a special place in Japan in terms of the country's identity of quality craftsmanship, it will have a short-term impact on Japan's reputation and economic reverberations in its manufacturing sector. Even more, the company's problems partly originated from characteristics that are seen as uniquely Japanese. Culture can change, but the story has further damaged Japan's spirit, which is vulnerable from decades of economic doldrums and China's rise.

Some of the blame for Toyota's woes has been placed on the Japanese value of consensus-building, face-saving, and keeping outliers to a minimum. "The nail that sticks out, gets hammered down," it is often said in Japan. The public relations response was also plagued by Japanese cultural characteristics, such as open communication hampered by formality and a general avoidance of conflict. Toyota's problems may have simply come from the company's over-expansion, increasingly global operations, and cost-cutting, but the cultural explanations are felt in the Japanese discourse. "Japanese companies are generally reluctant to speak in public, both on positive as well as negative issues. This imposes a real cost on their ability to interact with foreign investors, businesses and customers," noted Keith Rabin, an Asia-focused business consultant, echoing a sentiment that appeared in recent Japanese newspaper editorials.

All of this comes against a depressed national mood of in Japan as China is expected to overtake Japan as the world's number two economy this year—a symbolic phenomenon with primarily psychological consequences. At New York University, a Japanese student approached me a few weeks ago after a class I teach to tell me the critical lesson on Japan the other students should remember: "Japan must give up and admit that it is number two in East Asia." What is the origin of this defeatism?

Patrick Cronin, of the Center for a New American Security, recently published an article in Foreign Policy, identifying a link between Toyota's troubles and Japan's global profile. He also sees Toyota's problems serving as a symbol for Japan's malaise. "Toyota's debacle comes at exactly the wrong time for Japan. For the past 20 years, Japan has been in decline: declining population, receding competitiveness, slipping power in Asia. Social strain abounds. Throughout this period, Toyota was seemingly the exception, steadily growing, finally overtaking GM to hold the chalice of number one," Cronin told me. "It was a symbol of the one thing Japan did the best: make things. Now, the dream lies shattered."

"Unless Toyota can repair the damage, however, the Japanese people are left looking at the future through a glass darkly," Cronin continued. "What the Toyota crisis demonstrates is a tight connection between economics and security, and that both are in turn sensitive to the national psyche. If the Japanese continue to doubt their technological prowess in the face of a rising China, especially given Japan's demographic disadvantages, how will they ponder their future geostrategic role and circumstances in the Asia-Pacific region? Soft power loss equals a loss of hard power, and Japan's influence vis-a-vis rising China has been devalued by this blight to a sterling reputation."

A morbid manifestation of this darkness is in the country's suicide rate. It has topped 30,000 per year for 12 years; this means about 100 people per day or one person every 15 minutes will kill him or herself in Japan. Despite government efforts to stop suicide, by funding hotlines for example, the rate has recently increased and is expected to rise. The rate is double that of the United States and second only to Russia among the rich G8. On the other side of the equation, the country's birthrate is the lowest in the world and significantly below replacement, owing partly to a disinterest in sexual intercourse as well as gender inequality. A study conducted by Japan's Family Planning Association found that one-third of couples surveyed have effectively "given up on sex" due to fatigue or boredom with the act, and researchers were surprised that the trend is actually expected to get worse. A 2006 study by the University of Chicago found that Japanese report the lowest sexual satisfaction among the 29 nations polled. According to an Asia-Pacific Sexual Health and Overall Wellness survey last year, Japan ranked lowest in satisfaction of the 13 Asian countries surveyed.

As a consequence of low birth and migration rates, the country's population is predicted to fall from 127 million to 95 million by 2050, creating unparalleled demographic pressures. At 229 percent, Japan's debt-to-GDP ratio is the highest in the developed world as is its level of public debt. It is unclear how Japan, given its poor fiscal health and expected worsening debt burden, is going to provide for a rapidly aging population and a growing proportion of poor.

The country's apathetic attitude is epitomized by a new generation of arasa and arafo (those in their 30s and 40s) and sugomori (nesting) people who prefer to stay at home, seek bargains online, and soshoku-kei danshi (grass eating-men) who avoid going out, taking risks, or trying to find a career for themselves. Even Japan's Olympic hope Miki Ando played it safe and downgraded her triple-triple jump combination in the figure skating competition in Vancouver. More dramatic is the presence of the hikikomori or shut-ins who have given up on social life and number about 3.6 million, according to the Minister of Internal Affairs and Communications Kazuhiro Haraguchi, citing a Japanese nonprofit. This figure is far larger than the previous estimate of 1 million by renowned Japanese psychologist Tamaki Saito. In Shutting out the Sun, author Michael Zielenziger points to hikikomori as well as high rates of suicide, low marriage and birth rates, and low levels of sexual relations among adults to argue that Japanese who have begun to think outside the rigid conformity of Japanese society have made a rational choice to stay home and avoid social life.

While many fund managers are pessimistic about the Japanese economy for the long-term, some are bullish on certain Japanese equities, calling them undervalued. Paradoxically, the companies that are forecast to do well have given up on the Japanese domestic market and have expanded abroad. Successful Japanese companies will either target foreign markets in the United States, China, and Europe or will act as a "gateway" to business in a booming Asia.

A promising strategy for Japan as a whole would be to act as a bridge between the West and East, but that assumes Japan's political relations with the West are harmonious. Unfortunately, the ruling Democratic Party of Japan has decided to complicate its relationship with the United States by reexamining the location of a military base in Okinawa. Meanwhile relations with Australia have moved into rocky waters over Japan's whale hunting; over which Australia has threatened to take Japan to the International Court of Justice.

It would be absurd to give up on a country purely on the basis of its national mood. In fact, Japanese manufacturing output has risen, GDP is picking up, exports have grown their fastest in 30 years, and the trends I have described will all be familiar to any Japan watcher. Moreover, Toyota's sales surged 48 percent last month in Japan. But I have never seen the mood bleaker. Let's hope that this new low provides a rock bottom from which Japanese optimism can rebound.