It’s time for Europe to turn Japanese

BY Michael Stott –

The doom-laden warnings rang in my ears as I landed in Tokyo for a six-month assignment. Japan was a “land of stagnation.” It had suffered “two lost decades” and was a vivid example of the slow economic death Europe needed to avoid.

Images of unemployed workers, mass demonstrations, neglected public services, potholed roads, boarded-up shops and rising crime flashed through my mind — familiar from depressed towns in Europe and America.

But Tokyo was … the opposite. A city of roads with billiard-table smooth surfaces, state-of-the-art railways, efficient public services, negligible crime, high living standards, admirable social cohesion and remarkable stability.

Now, as I prepare to return to Britain, a country torn by Brexit chaos; and Europe, plagued by economic mayhem, joblessness and the rise of the far left and the far right, Japan looks more attractive than ever.

The Land of the Rising Sun offers rock-solid political stability — the same party has been in power for 56 years out of the last 60. There is no Japanese Donald Trump or Alexis Tsipras. Instead, some voters fret that Prime Minister Shinzo Abe might be a tad extreme because he suggests changing the constitution to recognize the reality that Japan needs (small) armed forces.

With an eccentric North Korean dictator threatening nuclear war and an aggressive, authoritarian China snarling from across the sea, Abe’s plan sounds more like sensible insurance than political extremism.

So what of Japan’s economy, its supposed Achilles heel? Most of the gross domestic product numbers used in the West fail to account for Japan’s shrinking and aging population. Once those adjustments are made, the numbers show steady, if unspectacular, growth. Anyway, is a falling population really a problem in a century when robots will take most of the jobs?

Japan does indeed run a high fiscal deficit and has a large and growing pile of government debt. But most of it is held by domestic savers and borrowing is extraordinarily cheap. By contrast, many economists have argued that Europe’s biggest problem is its fixation with austerity and its lack of investment.

Longer life

Then there is Japan’s enviable employment record. The jobless rate is 3.4%, according to the Organization for Economic Cooperation and Development, while the eurozone’s is more than three times as high. The Japanese fret about the rise in contract workers at the expense of traditional lifetime employment. But Japanese contracts are ones that many U.K. workers would kill for. The British have to accept “zero-hours contracts” without guaranteed work or pay.

In the education league tables, Japan’s scores on the international Pisa rankings are way ahead of the European average. On the security front, the country is free of the radical Islamist terrorism which has disfigured the Old World.

People live longer in Japan as well — a full extra year on average, compared with the eurozone — thanks in part to a healthy diet dominated by fish and vegetables.

The yawning chasm that has opened up between rich and poor in the U.S. and Europe has no echo in Japan, where ostentatious displays of wealth are frowned upon and company bosses are expected to show modesty and humility in public.

The Western cult of the star CEO, who earns enormous bonuses and stock options because of supposedly extraordinary personal qualities, is shunned. The Japanese bosses who win admiration are those who work hard and plan for the long term, rather than flipping the company to a bidder.

It is not all perfect, of course. Perhaps the biggest blots on the Japanese copybook are the country’s failure to use the full potential of its talented and educated women in the workforce, particularly in senior positions, and the conservatism of some of its biggest corporations.

But overall, the biggest obstacle to Japan setting an example for the world seems to be the downtrodden mood of its own people. Perhaps brainwashed by experts abroad into believing they have failed, they are far more pessimistic about the future than the facts seem to justify.

So what advice did the OECD give Japan in its last report? To cut spending, make it easier to fire workers, encourage venture capitalists and boost immigration, among other things.

That sounds like a recipe for disaster. On the contrary, the rest of the developed world should become a lot more Japanese..

Michael Stott is on assignment from the Financial Times to the Nikkei Asian Review.