Japan should identify its real problems, learn from wartime lessons, and reform its structures and diplomatic focuses

The question now being asked by many across the world is will Japan see a decline in its national strength or have enough vitality to move forward after being devastated by the earthquake, tsunami and the nuclear power plant crisis.

Let us check out some facts first. The structural problems in Japan's political and economic framework, which began emerging after its economic bubble burst in the late 1980s, have been constraining its further development.

In a way, Japan's development has been hindered by its political structure and its policymakers' plans. Since 1993, neither the former ruling Liberal Democratic Party nor the Democratic Party of Japan (DPJ), which came to power in 2009, has had a long-term plan for development.

Instead, the top priority for both parties has been to hold onto power. Japan's political parties depend more upon campaign tactics and have been caught in the whirlpool of public opinion, which politicians manipulate and also find themselves manipulated by.

There are two factors behind this phenomenon. First, ideological confrontation in Japan has weakened since the Cold War era, and the ruling and opposition parties both tend to be conservative. Second, the small electoral district system in Japan forces political candidates to focus on rallying public opinion.

When Japan was trying to catch up with the West, its development goal was clear and bureaucrats were executing policies at the national level. But after entering the post-industrial era, Japan didn't adjust its development pattern, making the public disappointed with "statesmen" whose only aim seemed to be winning votes.

On the economic front, fiscal deficits and an aging population are two major obstacles on Japan's development road. According to figures from the Finance Ministry of Japan's in December 2010, the country's national debt balance (including bonds, loans and short-term government bonds) was a record 919.15 trillion yen ($11.12 trillion). The record budget of 92.4 trillion yen for the 2011 fiscal year needs new debt sales of 44.3 trillion yen to finance.

Expenditure on social security, which increases by 1 trillion yen a year, is the heaviest burden on state finances. The reduction in Japan's working-age population caused its potential growth rate to drop from 4 percent in the 1980s to 1 percent last year. And if the population structure continues to deteriorate, it will further strain the country's economic growth potential.

Japan's fiscal expenditure and the state finance's debt burden will increase dramatically because of the triple disaster.

Hence, the biggest problem for Japan now is how to raise the much-needed funds. Should it increase taxes, withdraw funds from abroad, or inject more liquidity?

Japan is likely to adopt an expansionary fiscal policy, and its national debt rating is expected to fall further. The triple disaster has created a situation in which the government has to increase consumption tax, and the ruling DPJ is expected to start tax reform this year and change its earlier promise of subsidizing expenses.

An effective solution to the Fukushima Daiichi power plant problem still is nowhere in sight. This situation could last long. The crisis, for all we know, could snowball into a security problem for the entire human race and question the Japanese government's capability of governance and crisis management.

In contrast to the impressive self-discipline and order showed by Japanese people in the face of disaster, the performance of the government (or the lack of it) has created many doubts. Some questions being asked are: Why couldn't relief and rescue workers be quickly sent to affected areas and relief materials airdropped in time? Why wasn't information on the nuclear leaks forthcoming? Why has coordination between the government and relative parties been so poor? Why has foreign aid not been effectively utilized?

The government's inadequate disaster relief effort can be mainly attributed to the country's political structure.

Japan is a closed society where people tend to be inward-looking, and its structural problems can be resolved only through institutional opening. For example, Japan could lift its restrictions on immigration to change its population structure, encourage immigrants to start businesses and provide more investment opportunities.

Facing its worst disaster since World War II, Japan should have quickly and boldly accepted relief and aid from China and other countries. But it didn't, and relied on the United States. It's time Japan realized that it can no longer get "special war procurements" from the US, because Washington today is more worried about Tokyo's continued holding of US treasury bonds.

If Japan can identify its real problems, resolve to find solutions to them and reform its structures, it can turn the current crisis into an opportunity to revitalize itself. Otherwise, its national strength may continue to decline.

Constrained by its inherent geographical vulnerability, such as relatively small land area, scarcity of resources and sitting above shifting tectonic plates, as well as its aging population, Japan has to choose its development path prudently.

It could start by learning lessons from its wartime mistakes, develop friendly relations with neighbors and promote regional economic integration. And it should be China's neighborly responsibility to help Japan on such a road.

The author is director of the Institute of Japanese Studies of the Chinese Academy of Social Sciences.

(China Daily 04/08/2011 page8)