在ヒューストン日本国総領事館
Consulate-General of Japan in Houston

It is my utmost pleasure and privilege to be invited to speak here at Texas Women’s University on the subject of the Japanese economy.Your campus has a lovely blend of old and new buildings, and I am sure that its beauty helps to inspire the pursuit of academic excellence.I would like to thank Dr. Paula Hughes, Director of the School of Management, and Dr. Michiko Hayhurst, also from the School of Management, for providing me with the opportunity to share my thoughts on the Japanese economy.In doing so, I hope I will be able to enhance your understanding of my country.

By the way, during my stay in Texas, one of the questions I have most frequently been asked has been:“What is a Consul-General?”So, first of all, in order to clarify exactly what a consul-general is, perhaps I should explain what my job entails.Some people mistake me for a ‘general counsel.’That is to say, when I introduce myself as a Japanese consul-general, I sometimes get the response “Oh, you are?Nice to meet you general counsel!”In my understanding, a general counsel is a senior legal advisor employed by a big company.Well, Houston--where I am based--is a big lawyers’ town, and I have indeed met many lawyers there, but I am not a lawyer.

A consul general is the head of a consulate-general.What is a consulate general?The Consulate-General of Japan in Houston oversees several types of work.We administer consular matters such as issuing passports or visas, and helping Japanese nationals who may be experiencing various difficulties here.We help Japanese businessmen in whatever way possible to more easily or efficiently operate their businesses here.We observe and report on local politics, economy, and business to our government in Japan.We promote Japanese culture as well by organizing concerts, exhibitions, and lectures.In sum, we represent the Japanese government in our jurisdiction, namely, Texas and Oklahoma, and we assume our responsibility accordingly.However, diplomatic negotiations are not part of our responsibility.They are exclusively handled by my colleagues at the Japanese Embassy in WashingtonD.C.

Now that you know the difference between a consul-general and a general counsel, it’s time for me to move on to my topic for today, that is the Japanese economy.

Japan has been experiencing a low-key but steady expansion of her economy for several years now.In April, this period of economic growth became the second longest Japan has experienced since the war.Assuming this trend continues, in October it will set the record for the longest sustained period of economic growth Japan has ever experienced since the war.

Japan’s recent history of economic stagnation has been described as being a lost decade, but Japan has been steadily emerging from this era and is about to make a soft landing on sustainable growth.So today I am going to discuss how Japan’s gradual recovery from her long economic downturn has come about, and also, what role Prime Minister Junichiro Koizumi economic reform policies have played in this recovery.I will sum up my remarks with a discussion of Japan’s economic future.

Japan’s economy has come back.It hit bottom in January 2002 and then experienced a gradual recovery, which has steadily continued for the past four years.Japan’s GDP growth rate was 2.8% for 2005 and 2.3% for 2006.In 2005, the average share value of Japanese stocks rose more than 40%.Japanese companies have been registering record profits for the past three years.However, for the past several years, Japan’s economy has stayed in a deflationary trend, which has dampened its economic performance, but recent figures show that deflation has finally almost come to a halt.Because of this, in March, the Bank of Japan introduced a new monetary policy in an effort to regain normalcy.

What caused the deflation and economic downturn of Japan’s economy?

Back in the 1980’s, Japan experienced an explosive economic expansion.In the mid 1980’s, 1985 thru 1990, after the Plaza agreement introducing new exchange rates among the major world currencies had been reached, the value of the Japanese yen almost doubled.At the same time, the Japanese government kept its interest rates very low.When an economy is booming, interest rates need to be raised in order to check inflation.Keeping interest rates too low for too long led to too much market liquidity.Hence, stock share and land prices soared in Japan.As a result, the economy overheated, and the bubble burst.Stock prices fell to one quarter of their highest value, and land prices were reduced by half.The collapse brought about the non-performance on loans by almost every company in Japan, and led to the downturn of Japan’s economy.

When I say that Japan’s economy has made a comeback, it is a comeback from this economic low point in the early 1990’s that I am referring to.During the lost decade, although ultimately unsuccessful in establishing sustainable growth, the government did try to boost the economy by spending government funds in order to create effective demand in the market.This spending policy caused the accumulation of a huge public debt, which currently ranks amongst the worst of all the world’s advanced economies.It amounts to 160% of Japan’s total GDP.There is some debate as to whether the government’s policy of infusing public funds into the market was a total failure that only worsened the public debt without helping the economy, or instead, as some have argued, that without this spending, Japan’s economy could have gone bankrupt, and so the government’s spending policies actually saved Japan from economic catastrophe.

During the 1990’s, while Japan was struggling to make changes without much success, important changes were taking place elsewhere.China became a vibrant economic power, and the globalization of the world’s economies began.Globalization has exerted a substantial influence over all the economies of the world.Another important change has been the major role that IT or information technology took in the world economy.

Junichiro Koizumi became Prime Minister in 2001, and the two primary goals of his economic agenda at that time were to get Japan’s huge public debt under control, and to effect the privatization of government owned organizations and enterprises as much as possible.It is fair to say that in the last five years, he has gotten only half way towards realizing these two goals.However, he has been successful in reducing non-performing loans in the business sector.

Beginning in 2002, Japan’s economy did begin a steady recovery.The driving forces behind this comeback have been the efforts of the private sector in the 1990’s and onward; the role played by the economies of China and other Asian countries, and Prime Minister Koizumi’s reformist policies.

Japan’s private sector saw a resurgence after restructuring their business mainly by cutting labor and wages, and thereby improving their profit structure.Also, even in the midst of their business slump, they kept investing in research and development or R&D activities, and as a result, they were able to stay competitive in the international industrial community.Painful restructuring and streamlining in the 1990’s have slowly paid off and led to improved productivity and profitability.Japanese businesses modernized, and they enjoyed a hefty boom in exports to the Chinese marketplace.They also benefited from very cheap imports from China.This made it possible for Japanese companies to recover by improving their balance sheets.With consumption on the wane due to wage and labor cuts, capital investment has become the primary driver of Japan’s GDP growth.

China as well as other parts of Asia have also played a direct role in Japan’s recovery.In an effort to streamline the supply chain of their production, Japan’s manufacturing sector has moved its production bases out of Japan and over to China and to some degree, other Asian countries as well.As a result, Japan’s manufacturers are able to count on foreign suppliers, and have thereby developed an effective supply chain beyond the boundaries of Japan.Japan can import very inexpensively from China, and China also offers Japan a huge export market for Japanese goods including machinery.In other words, Japan has benefited from what could be termed as the regional division of labor in manufacturing that has emerged in East Asia.

Some economists have argued that Prime Minister Koizumi’s reform policies have not contributed in a positive way to Japan’s economic recovery.After all, they argue that Japan is experiencing a recovery before it has made the necessary fundamental changes to its economic structure.They believe its recovery has been made possible by exports and government spending--Japan’s traditional growth generator--and not by consumption.Perhaps, it is not totally wrong to argue that way, but Prime Minister Koizumi’s reformist policies deserved a more positive acknowledgement.

Prime Minister Koizumi has attempted to address several issues including curtailing Japan’s public debt and promoting privatization.As I stated, I believe his policy was successful in helping banks curtail non-performance loans.

Moreover, Prime Minister Koizumi should be recognized for sending a clear message to the private sector that he would be serious about economic reform, and that there were no exceptions or loopholes for special interests.He gave a clear message to them that they would have to take care of themselves, and to not depend on government spending or protection.They would have to remodel and restructure, and Prime Minister Koizumi was correct in believing these efforts would bring new energy into the Japanese private sector.

The question has become whether Japan will continue to make the changes necessary in order to thrive and compete economically in the 21st century, and what forms should these changes take.Will the traditional Japanese business model be replaced by the U.S.’s model of market capitalism?While it is true that Japan is facing big challenges, please remember the traditional nature and/or character of Japan or Japan’s DNA.After opening up its society from self-imposed isolation in the mid 19th century, Japan successfully went through a bloodless revolution called the Meiji Restoration.Japan conformed to the international order and pursued western-style economic growth while at the same time maintaining the fundamental aspects and values of the traditional Japanese culture.She managed to overcome her difficulties by blending her traditional ways with those of the west.I think that the challenges Japan faces in the 21st century will be met through this approach.That is to say, globalization will never eliminate Japan’s traditional business model, but we will seek a new amalgam.Japan has an aging and shrinking population, but it is unlikely that she will ever accommodate a sudden and massive influx of foreign workers into her labor market.

The longevity of the Japanese people illustrates the success of Japan’s eclectic approach to change.Japanese people enjoy the longest life expectancy among all the peoples of the world.Our longevity has been attributed to our diet, and perhaps this is true.The Japanese diet is healthy, but the traditional Japanese diet was not ideal.It lacked protein and fat.After WWII however, the Japanese adapted the western eating habits of including more protein and fat in our daily diet. Our diet became a well-balanced mix of Japanese and Western influences, and it has made us the longest living people in the world.

Japan has been a world leader in conservation efforts and environmental protection since it experienced visible environmental degradation due to rapid economic development in the 1960’s, and suffered an energy crisis in the 1970’s and 80’s.We are now facing a low fertility rate as well as aging society, which places a great strain on our economy.We have to come up with creative solutions to this problem, and I believe our conservation and environmental protection efforts will be a part of this solution.

Farming is an important part of Japan’s DNA.Japanese have been farmers for thousands of years and have developed a lifestyle that is harmonious with our environment.We have learned to live with nature.As we look towards our future, conservation and environmental protection will become the most important challenge for our society as well as all others.Business opportunities will arise for finding ways to conserve energy as well as for finding environmental friendly methods of acquiring more natural resources.Although, Japan lacks petroleum and natural resources, the wisdom she has gained from her symbiotic relationship with nature mightbecome one the most important resources she can have in 21st century.

The inclination of the Japanese DNA towards conservation and respect for nature is also at the heart of the current widespread success of Japanese anime.When it comes to animation, the most powerful and successful company in the U.S. for many, many years has been the Walt Disney Company.When you see a Disney movie, its most distinctive characteristic is that there is always at least one element in any scene that is in motion or animated.In order to make these scenes work concurrently, you need lots of pictures, and that means a lot of money is also needed for employing the required number of animators.Disney’s vast financial resources make this possible.However, the original Japanese anime companies could not afford to produce a movie with continuous animation in every scene.So the anime producers had to compensate for the more static nature of their films and think of an alternative way to attract an audience.Their solution was to give their movies more sophisticated storylines.This proved to be very successful, and Japanese anime has become very popular and has flourished throughout the world.Therefore, as a direct result of the Japanese inclination to “make do” or to conserve resources--in this case, financial resources--a new style of animation was developed.

One of the favorite themes of the famous Japanese anime director, Hayao Miyazaki--whose film, “Spirited Away,” won the 2002 Academy Award for best animated feature film--is the co-existence of people with nature.The philosophical eastern concept of nature differs from the western concept.In our concept, nature is not seen an object or challenge for humans to overcome, but rather as an awesome existence that surrounds us, and with which we can commune.Even if humans try to fight against it, we won’t win, nature is too big, and we’re too small.All humans can hope to achieve is to learn how to live with nature.This is the very traditional thinking of Japanese towards nature.In his films, Miyazaki depicts nature as though it is a living being with a heart and soul and with whom humans can have a dialogue.Not only do Miyazaki’s films demonstrate the Japanese respect for nature and the environment, but also, by dealing with such abstract philosophical themes, he has added a new dimension to animation.

The last aspect of the Japanese DNA that I would like to introduce to you is the view of our culture towards material wealth.In our culture, poweror authority traditionally has not necessarily correlated to wealth.The Japanese imperial family is the oldest royal family in existence in the world.They have maintained authority and can trace their history back at least as much as sixteen hundred years.Despite the longevity of their reign, they are not the richest family in the world or even in Japan.Japanese emperors never monopolized the wealth of Japan.

The Shoguns of Tokugawa were the rulers of Japan for more than 260 years.They also did not accumulate wealth like their western counterparts.In the Bushido code--the ethical code of the Samurai--simplicity or frugality was emphasized, and money or being rich was seen as being vulgar.Respectable samurai were supposed to lead a very rigorous and austere life absent excess wealth or material possessions.I greatly admire this ethical code that prevented those with power from seeking to use it to increase their own wealth, and it reminds me of the western concept of noblesse oblige.

In the Tokugawa era, there were four clearly defined societal classes in Japan.Samurai composed the first class, farmers were the second, craftsmen the third, and the last and lowest class was composed of merchants.Although the merchant class was considered the lowest class, it actually enjoyed the greatest abundance of material wealth since they were the businessmen of Japanese society.These traditional samurai ethics still exist as an undercurrent in today’s Japan.Even now, having great wealth does not automatically correlate with being held in high regard by society.We are uncomfortable with the coexistence of extreme wealth with extreme poverty.We cannot disregard the extreme poor of our society.Our great ethical tradition, which values simplicity and dignity above wealth, is part of our national character.

Some critics of Prime Minister Koizumi say that in his pursuit of globalization, his attempts to restructure the Japanese marketplace have led to the worsening of disparity.They believe that his reform policies have encouraged a money first attitude over the time-honored Japanese ethics of egalitarianism or social justice.As I said, we have a long established history of separating of money from power, and I believe that tradition is still there, and that this widening of disparity will be short-lived.Disparity may worsen while there is an adjustment of the labor market, but as the economy improves, this disparity will be automatically mitigated.We look forward to the realization and harmonious coexistence of economic dynamism and social justice.That should be our goal.