Japan Inc. on the Brink

Institutional Corruption and Agency Failure

S. Carpenter

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137469434
• eBook ISBN: 9781137469441
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

This book contends that structural reforms, the essential third arrow in Abe's 'Abenomics', will not happen. As a result, Abenomics is merely a combination of reckless monetary policy and ambiguous fiscal policies which will fail to regenerate Japan's fragile economy and cut sovereign debt.

1

Back to Basics?

Kishi’s legacy is Abe’s legacy

Prime Minister Nobusuke Kishi (1957–60) is credited with being the father of the LDP and, also, the king-pin of the 1955 political system that was based on the collaboration between politicians, businessmen and bureaucrats and banked with huge sums from the private sector. The LDP controlled the National Diet for thirty-eight years until 1993 and from 1996–2009. Abe’s LDP roots and his right-wing political ideology are inherited from his grandfather, the late Prime Minister Nobusuke Kishi, whom he extols in his book Toward a Beautiful Country, published shortly after he entered the executive office in 2006. Now that the LDP once again holds the majority of seats in the National Diet, it is likely that the ‘1955 political system’ will continue. With the exception of a three-year break, from 1993–6, and a five-year break, from 2009–13, the LDP has dominated Japanese politics since 1955, hence the term ‘1955 political system’.

In most Western countries, no single political party has been in power long enough to give bureaucrats consistent support in drafting laws and implementing policies, nor are there democratic societies where ministries can operate unfettered by legal sanction as they do in Japan, despite the well-publicized scandals involving ministerial misconduct. There are three key reasons for this support:

1. Japan’s political economic system can be characterized as pork-barrel and protectionist. Big business and business federations made large contributions to the LDP coffers. The LDP received votes and large donations from traditional support groups, such as small local firms and from businesses engaged in construction, transportation and telecommunications, in exchange for public works projects.

2. The LDP received substantial support from special interest groups, such as industrial associations and federations.

3. There is a network of bureaucrats throughout Japan’s socio-political system. Bureaucrats traditionally have sought political office in both national and local government Diets and as governors and vice-governors in the prefectures. When the snap election was held on September 11 after Koizumi dissolved the Lower House in 2005 ninety-five former government officials ran for seats, fifty-seven on the LDP ticket and twenty-five on the DPJ (Democratic Party of Japan) ticket. Koizumi himself recruited a female elite career official from the MOF to stand in the election.

Toward a Beautiful Country was a best-seller. In it Abe argues that the reporting of events regarding his grandfather’s revision of the US–Japan Security Treaty was misleading and should be corrected. The initial 1951 treaty inhibited the Japanese from prosecuting Americans who perpetrated crimes in Japan (e.g. military personnel). Abe claimed that his grandfather negotiated a revised treaty that gave Japan more autonomy from the United States and gave the Japanese more power to prosecute. Abe also maintained in his book that the history of Japan’s war-time engagement in China reported in textbooks was also incorrect and should be revised as well. An interview conducted with a Japanese civil servant posted in New York in the 1990s included details of his education regarding Japan’s military engagement in Asia during the Second World War. The official spoke about his school’s textbooks.

The textbooks in Japan do not really touch upon the Second World War. How it should be written before it is published is the problem. Historians say that the war should be written about as it actually happened (like Japan’s occupation of China) but the government says that Japan is not a terrible country, so there are conflicting views.¹

Prime Minister Abe, whose uncle Eisaku Sato was Japan’s longest serving Prime Minister (1964–72) and whose father was a career LDP politician who represented Yamaguchi Prefecture in the Lower House (1959–91), was raised from birth in an ultra-conservative milieu. After the death of his father in 1991 Abe succeeded him in the Lower House. Like his grandfather, Abe’s political philosophy is immersed in nationalism and his 2006–7 administration focused on promoting bills that would serve the national interest, such as the reinstatement of the Ministry of Defense and an intended revision of Article 9 in the Constitution, which renounces war, to allow Japan’s military (the SDF) to defend Japan if attacked. Abe is adamant that the US–Japan Security Treaty is at the center of Japan’s defense policy, which was also central to Kishi’s defense policies. However, Abe’s political motivation focuses on the perceived threats from China’s rise as an economic and military power in Asia.

Abe, whom Koizumi had hand-picked to succeed him as Prime Minister in 2006, staunchly defended Koizumi’s six pilgrimages to Yasukuni Shrine where not only Japanese military dead are interned but also Class A war criminals. The Shinto shrine was founded in 1869 and run by the military until the end of the Second World War, when the United States outlawed Shintoism. Infuriated by Koizumi’s apparent glorification of Japan’s military past and disregard of the suffering incurred by the Chinese and Koreans during Japan’s wartime occupation, China and North and South Korea lodged vehement protests. Despite angering important trading partners and Japanese pacifists, as well as businessmen whose ventures in China and South Korea were vandalized by Chinese and South Korean protesters and who were extremely concerned about the ramifications for future Japanese–Chinese economic relations, Koizumi continued his visits to the shrine. Abe and members of his cabinet also continue the tradition despite protests from China and the ROK. He states in his book that Class A war criminals are not regarded as criminals under Japanese law.

Abe supported Koizumi’s education bill in June 2006 that for the first time revised the education law that had been written in 1947. The new bill included the promotion of ‘patriotism’ as part of compulsory education, which had not been addressed in the 1947 education law. Although members of the DPJ voted against the bill because it might promote nationalism, the bill was passed into law in January 2007 during Abe’s administration. The Basic Education Law calls, for the first time since the Second World War, for singing the national anthem and saluting the Japanese flag at school ceremonies. The law also gives the Education Minister more power over local education boards and requires that teachers renew their licenses every ten years.

On May 23, 2008 government again defied opposition to the promotion of nationalism among schoolchildren by voiding a 1949 ban on public school trips to Yasukuni Shrine. The reason given for restoring the excursions was that they would serve to educate students about Japanese culture and history.

My earlier books (2008 and 2012) included discussion regarding Abe’s hands-on promotion of the New History Textbook for high schools which ignores Japan’s Second World War military atrocities in Asia. When he was re-elected Prime Minister in 2013, Abe emphasized the need to revise Japanese history textbooks further to be less apologetic about Japan’s military engagement in Asia. In January 2014 Abe’s ministers announced that textbooks will be revised to emphasize that the Senkaku and Takeshima Islands are Japanese territories in order to teach Japanese children to ‘properly understand our territory’, an announcement which further exacerbated the already heated relationship with China and the ROK.

Deputy Prime Minister Taro Aso: Abe’s side-kick

Aso’s roots are directly connected to the Meiji period. His great- great-grandfather was Toshimichi Okubo who was a samurai in the Satsuma Clan and instrumental in the overthrow of the military ruler (Shogun) and one of the key planners in the Meiji government (1868–1912). Aso succeeded Yasuo Fukuda as Prime Minister in September 2008. He left office a year later when the DPJ won a landslide election to gain the majority in the Lower House. Aso wears a coat of many colors in Abe’s current cabinet. Besides serving as Deputy Prime Minister, he is also Minister of Finance and State Minister for Financial Affairs.

By Japanese political standards Aso’s birthright is sterling. His maternal grandfather was Prime Minister Shigeru Yoshida who was Japan’s 45th Prime Minister (1946–7) and Japan’s 48th Prime Minister (1948–54). Aso’s wife was the third daughter of Prime Minister Zenko Suzuki (1980–2) and one of his sisters was the wife of the first cousin of Emperor Akihito. His father was the chairman of Aso Cement Company and his son joined Aso Mining where he served as president for four years before entering politics in 1979.

Compared to his deputy, Abe could be considered a ‘dove’. Aso’s right-wing ultra-conservative ideology and glorification of Japan’s colonization days in East Asia replicates Abe’s and his opinions have been well publicized in the press during his political career. Despite his frequent public outbursts espousing his neo-nationalist sentiments, he remains as Abe’s second-in-command. In 2005, he touted Japan as a mono-culture with one race, one language and one civilization, excluding other ethnic groups such as Chinese and Koreans.

When he ran for president of the LDP in his bid for the office of Prime Minister in 2005, Aso’s platform regarding foreign relations was ‘Arc of freedom and prosperity: Japan’s Expanding Diplomatic Horizons’, which may also be interpreted as a reiteration of the Meiji slogan, ‘Prosperous Country, Strong Country, Strong Military’. In 2006, Aso admonished the Japanese that China, with a population of one billion people, possessed nuclear bombs and had expanded its military budget by double figures for seventeen consecutive years.

During Aso’s term as Prime Minister in 2008, the Western media reported that Aso Mining had forced 300 Allied prisoners to work without pay in the Aso Mining Company in 1945 and that two Australian prisoners had died. Furthermore, 10,000 Koreans were recruited to work under cruel conditions, many of whom had died. Although former laborers requested an apology, Aso refused to reply.²

Aso continued his nationalist rhetoric at an ultra-conservative conference in Tokyo on July 29, 2013. He criticized the lack of support for revising Article 9, stating that the Japanese should follow the example of the Nazis who, in order to avoid protests, secretly revised the Weimar Constitution to the Nazi Constitution. Aso recommended that the Japanese should learn from these tactics. He also encouraged secret visits to Yasukuni Shrine in order to avoid diplomatic outbursts. He refused to apologize or resign from office but retracted his statement, blaming misinterpretation by Kyodo News the newspaper which reported the event.

Birds of a feather

A number of key politicians in the DPJ share similar ultra-conservative ideologies and nationalistic sentiments. Former Prime Minister Yoshihiko Noda served as Finance Minister in Naoto Kan’s cabinet (2010–11). Although he did not visit Yasukuni Shrine on August 15, 2011, marking the 66th anniversary of Japan’s surrender in the Second World War, at a press conference held on the same day he reiterated Abe’s contention that Japanese Class A war criminals were not regarded as criminals under Japanese law and that he saw no reason for a Prime Minister not to visit the shrine. Incensed by Noda’s rhetoric, the South Korea Foreign Ministry issued a statement pronouncing Noda’s words as a denial of Japan’s past history of aggression.³

Noda, who vigorously supports the US–Japan Security Treaty, also has strong anti-communist sentiments and views China’s economic expansion overseas and growing military budget as a signal that Japan is losing its competitive edge in outward investment in global markets and that China is fast becoming a military superpower in Asia. On August 29, 2011 two days before he was elected DPJ president, at a news conference Noda alluded to China as ‘a nation that is mixing economic growth and nationalism’. A week later, as the newly elected Prime Minister, he vowed to strengthen Japan’s defense capabilities to protect territorial rights. Noda also pledged on September 11 that his government would continue the effort to bring all of the Japanese who were abducted by North Korea back to Japan.

Seiji Maehara was the DPJ policy chief during Noda’s administration. A defense hawk, he gave a keynote speech on September 7 at a symposium for Japanese and US security experts in Washington, DC. Maehara’s speech addressed exactly the same issues that Abe, his heavily right-wing cabinet and political allies were addressing. The speech, entitled ‘Japan–US Alliance in Multinational Cooperation’, called for a review of the five principles that strictly limit the use of weapons by the SDF in order to enable Japanese to support the United States and other foreign forces if they come under attack. He also sought a review of the three principles that formally banned the export of weapons and advocated the relaxation of regulations to enable Japan to develop and produce weapons with the United States and other countries. Maehara referred to China as ‘a game changer’ and a nation trying to revise international affairs.

Towards the end of Noda’s administration the government purchased the Senkaku Islands from the owner, a Japanese real estate developer.

Abe’s political agenda

There were major concerns among the electorate that Abe was not focusing his energy on economic recovery and his ‘third arrow’ of structural reforms but on establishing a solid ultra-conservative right-wing political landscape. Kishi’s ideology was reflected in Abe’s agenda which included the revision of the Pacifist Constitution’s Article 9,⁴ allowing Japan the right to collective self-defense by amending the interpretation of the Pacifist Constitution which renounces the right to wage war. Central to Abe’s defense policy was the US–Japan Security Treaty (which Kishi had attempted to revise as a prelude to revising the Constitution) and the expansion of military capability in response to the Senkaku Islands dispute with China. Prioritizing the defense of the islands, Abe’s cabinet approved his defense plan in December 2013 which called for a $235– $245 billion budget to cover a four-year period for beefing up Japan’s military hardware. Abe also wanted the formal ban on the export of weapons lifted, which was expected to be included in the revised Constitution.

When Shinzo Abe’s ‘State Secrets Law’ was pushed through the National Diet with little public debate on December 6, 2013, the Japanese media, expecting to receive gag orders from the government and to be subjected to barriers to accessing information, protested vigorously. Also known as the National Security Act, the law defined ‘special secrets’ as sensitive information on diplomacy and counter-espionage. Over 60 percent of the electorate, comparing it to the pre-war and war-time Peace Preservation Act which was implemented by government to quell political opposition, objected to the law because of its lack of detail of what constituted ‘state secrets’ and because it indicated that the government would have more control over the population.

People who are arrested on suspicion of leaking ‘state secrets’ can be detained in prison without trial. Those who are found guilty can be imprisoned for up to ten years and journalists who are convicted of trying to obtain classified information can be imprisoned for up to five years. Although politicians denied that the law would be used to restrict the press or the public’s ‘right to know’, Justice Minister Sadakazu Tanigaki, the former LDP president who was defeated by former Prime Minister Yoshihiko Noda in the 2011 election, did not rule out the possibility of police raids on newspapers suspected of breaking the law.

Abe’s law harkens back to his grandfather Prime Minister Nobusuke Kishi’s attempt to centralize police power and restore to the police some of their former authority such as the right to search suspected criminals. In 1960 the Japanese were still enveloped in a shroud of war-time suffering and public protests erupted against what was regarded as the resuscitation of war-time ‘thought control’. There were strikes and demonstrations supported by labor unions. Socialist law-makers rioted in the Diet and tried to kidnap the Speaker to prevent a vote. Three members of Kishi’s cabinet resigned, forcing him to shelve the bill.

In March 2014 Prime Minister Abe’s administration relaxed the law that banned the manufacturing and exporting of weapons with the intention to revise the Constitution to allow the formal manufacturing, sale and export of weapons. The United Nations approved of the use of Japanese produced weapons in countries where UN troops are stationed on condition that the weapons are not used by internal forces. Previously, Japanese firms were prohibited to sell arms to communist countries, countries that were sanctioned by the UN or countries engaged in war. The relaxation allowed Japanese industry to produce certain products related to military use such as mine-sweepers or parts for military hardware such as tanks and fighter planes. Japanese companies could also engage in joint ventures with foreign firms in the development of new weapon systems. Several reasons for loosening the law were to support Japan’s defense industry to enter new markets and to beef up Japan’s military spending. On July 6, Nikkei Business reported that Japan would approve the first arms export under the new guidelines. Mitsubishi Heavy Industries is exporting to the US its high-performance sensor used in the Patriot Advanced Capability-2 (PAC-2) surface to air missile, which the US is delivering to Qatar.

Abe’s reinterpretation of the Pacifist Constitution’s Article 9 would give Japan the right...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Foreword by James Clunie
• Annual Average Exchange Rates
• List of Acronyms and Abbreviations
• Introduction
• 1 Back to Basics?
• 2 The Sign of the Times: Japan Inc. (1955–1974)
• 3 The Route to Heaven-on-Earth
• 4 Pork-Barrel Politics in the Prefectures: The Winners
• 5 The Japanese Economic Miracle: Japan Inc. on Center Stage
• 6 The Roaring 80s: The Bicycle Economy Out of Control
• 7 The Metamorphosis of Sanraku Inc.
• 8 The Martini, Glenfiddich and Babycham Marathons
• 9 Marketing and Advertising Strategies: What’s it all About?
• 10 Bubble, Bubble, Turmoil and Trouble
• 11 Special Corporations: Insatiable
• 12 The Skill at Disguising
• 13 The Price of Pork-Barrel Patronage: Beggars Can’t be Choosers
• 14 Still Bubbling
• Conclusion: The Third Lost Decade
• Notes
• Select Bibliography
• Index