Japanification? China would be lucky to have those same problems

The word is often used as a pejorative, a shorthand for low growth, inflation and interest rates. But as the Nobel laureate Paul Krugman notes, “Japan, rather than being a cautionary tale, is a kind of role model.” It’s obvious in retrospect that there were demographic changes that Tokyo could never address: The post-war surge in working age population simply could not continue, regardless of what birthrate or immigration policies the country pursued.

But Japan has, to date, managed a transition away from explosive growth with little social upheaval. Even at its worst, unemployment never rose above 6 percent; the suicide rate has dropped 40 percent in the last two decades; homelessness has been cut by 80 percent; there’s no drug problem that stalks the streets of so many western cities. The pork-barrel spending that was criticised by western economists in the 1990s means the country’s infrastructure is sparkling. Crime is low; healthcare universal.

One key difference is public accountability. When public dissatisfaction sufficiently mounted in post-bubble Japan, voters could dump the long-ruling Liberal Democratic Party from power, as they did briefly in 1993 and again in 2009 (the opposition Democratic Party of Japan, now obsolete, was similarly punished in elections in 2012 that restored the LDP to power.) Much is made of the party’s post-war dominance of the political system, but it needs to stay keenly attuned to the public mood — witness current Prime Minister Fumio Kishida’s current struggles with an unpopular identification card scheme. Can one-party, election-free China find the same pressure valves?

One major challenge facing both countries is demographics. Japan’s low birthrate and graying population have long been on policymakers’ minds. When it was fashionable to deride Japan, subpar fertility was something to be wielded against the country, a sign that a kind of permanent twilight was settling over what’s still one of the world’s biggest economies.

What doesn’t get nearly enough attention is that Japan isn’t doing too badly, relative to the neighborhood and advanced economies: The total fertility rate, the number of children a woman can expect to bear in her lifetime, fell to 1.26 last year. South Korea has it far worse at 0.78, as does Singapore, where the TFR dropped to 1.05. Japan’s is closer to Spain and Italy than to its neighbors. In China, the rate plummeted to 1.09 last year from 1.30 in 2020, according to a study by a government agency reported by Reuters and the Wall Street Journal. Japan almost looks hale by comparison.  

Hard as it is to believe now, as recently as the mid-1990s Japan was the US’s great economic bogeyman. Books like The Coming War With Japan or Zaibatsu America spoke of how Tokyo was set to take control of the western sphere of influence. For long-time skeptics of China’s model, the temptation to think this is a repeat and engage in schadenfreude is immense. How many lectures on the superiority of China’s approach did Western officials and executives visiting Beijing have to endure?

Veering very far in the opposite direction should also be avoided. Japan, with its security dependent on the US, was never going to rule the world, no matter how many times you watched Rising Sun. Still, tales of its demise were over-exaggerated. Just like Japan, China is likely neither headed for global dominance nor set for collapse. If there’s a lesson to take away from this, perhaps it’s how some observers adopt a black-or-white view of countries that have many shades of gray.

Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg