Index

How Deregulation is Doing in Japan

W.K.

The New York Times (5/12, "The New Japan, Rural Economies Wane as Cities Thrive" by Martin Fackler) reports some effects of globalization and deregulation pushed on Japan by Washington that threaten a new factor in the instability of the Far East.

"Noshiba, Japan Ė A proliferation of national chain stores outside town has already forced the closing of about half the cityís once teeming central shopping district. Now, many in this normally restrained rural community see the mega-mall being built nearby by a company based near Tokyo as the final nail in the coffin of their economy. Said Seiji Yana Gihari, an official with the Noshiba Chamber of Commerce which opposes the mall, ĎTokyo is eating all the goodies, and not even leaving us with scraps from the table.í

"Japanís $4.7 trillion economy has expanded for the past five and a half years. Urban centers like Tokyo and Nagoya, seat of the auto industry, are thriving, as seen in the building boom decorating Tokyoís skyline with glittering new highrises.

"But in regions like Akita, the mountainous northern prefecture, home to Noshiba, down-towns have emptied and factories have closed. An exodus of youths seeking jobs in Tokyo is leaving behind towns that are predominantly for the elderly.

"There is wide concern that these changes are turning Japan into a nation of winners and losers, split geographically between prosperous cities and depressed rural areas. Many here attribute this growing disparity to Japanís embrace of American-style economic liberalization, begun in the 1990s to end the nationís decade of stagnation.

"The measures to open up markets helped revive cities like Tokyo and lowered prices for Japanís long-suffering urban middle class. But elsewhere in Japan, they are seen as bringing unwelcome change.

"And now with signs of a coming slowdown in Japan. divisions could deepen. On Monday, Japanís top central banker, Toshihiko Fukui, warned of Japanís largest overseas markets. He said he was particularly concerned about the impact on Japanís small and midsize companies, many of which are in rural areas.

"The new economic policies are blamed for undoing one of Japanís proudest achievements after World War II, the creation of an egalitarian society that was almost uniformly middle-class. They have also eroded one of the pillars of Japanís postwar political stability, rural votersí stalwart support for the ruling Liberal Democratic Party.

"The changes began during Japanís doldrums. when the government tried to revive growth by slowly but steadily deregulating swaths of the economy like banking, insurance and groceries. As seen in Noshiba, some of the biggest upheavals followed the lifting of restrictions on large stores, a step originally urged by Washington to admit American retailers."

In a country so tightly peopled as Japan, there must be great anxiety about what happens to land values, and considerable difficulty in understanding land price movements in more sparsely settled countries. When in the 1980s Japanese banks were investing heavily in US real estate to keep the yen competitively low, the misjudgments of some of the investment verged on the epic. They contributed in fact to the decade of practical immobility of their banks that constituted the decade-long hiatus in Japanese bank activities.

"Many opposition politicians now talk about halting or rolling back American-style liberalization to protect traditional ways of life."

W.K.

Ė from Economic Reform, February 2008

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