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Change Japan? Perhaps Kan can

Updated On: Nov 25, 2010

Yokohama and the recent Asia Pacific Economic Community (Apec) Summit bring to mind both Japan’s history and its future.

When the United States and Commodore Perry first forced Japan in the 1850s to trade, the fishing village grew into a major port. In Yokohama for this year’s Apec Summit, Prime Minister Naoto Kan spoke mildly but, in substance, gave one of the bravest speeches yet, vowing to again open up Japan.

His speech might prove a landmark. Or it could be another passing hope in the political churn that has seen Japanese premiers come and go since 2006.

Protestors, especially farmers, oppose opening up. Kan’s public ratings, already hit by controversy over the disputed Senkaku Islands, fell below 30 per cent after Apec. We don’t know if Kan will change Japan, or whether the country will again change premiers.

Why does Japan need change and how can change be triggered? What kind of Japan should we hope for?

Visiting Tokyo, there is no apparent need for panic. Even if China has overtaken it to become the world’s second-largest economy, Japan remains rich, with strong companies and a disciplined society. Although the economy has seen decades of no or slow growth and the government deficit is swollen, the yen has surged against the US dollar.

But these strengths disguise problems. The economy has been almost flat for two decades and, in real terms, shares and real estate are just about where they were before the bubble burst. People have little optimism about the future and no appetite to buy, since prices remain flat or slip back with deflation.

Japanese exports suffer from a higher yen. Even famous companies face thin margins and growing competition in design and technology. Politically, Japan has looked on while Beijing’s influence has grown. Looking ahead, many forecast Japan to be weighed down by an ageing and shrinking population.

The idea in the 1980s was Japan as No 1; unless things change, we could in the years ahead be looking at Japan as zero. This rather sharp remark, from my book Asia Alone, has been noted by some Japanese. Some have taken offence. Others see in it an analysis meant to provoke Japan to move from the status quo.

In 2000, I assisted in the study and negotiation of the Japan-Singapore Economic Partnership Agreement (JSEPA). The hope was that JSEPA, the first such bilateral agreement by Japan, might help open the Japanese door to the world. Kan’s call for further opening shows that more needs to be done.

While Japan’s manufacturing sector is world-class, agriculture is uncompetitive — at least on price — and services lag. Opening up the economy is not simply a question of reducing customs and tariffs. Many Japanese regulations meant to address safety and public health issues are cumbersome and costly.

Mindsets, too, need resetting. Even as the higher yen pushes Japanese companies abroad again, inputs and perspectives from outsiders must be increased. The role of Carlos Ghosn in turning around Nissan’s fortunes is the prime example. The next generation of Japanese management will have to be open to taking on a more global mindset.

Yet Japan must remain Japan. This was their approach even when the US opened the country to external trade, and when the Meiji restoration modernised society and the state.

A possible balance seems to be illustrated in the rebirth of Haneda Airport, which has reopened to international flights, having handled only domestic flights since Narita Airport went operational. Kan and his government have urged Haneda to grow rapidly, with more flights and easier access to downtown Tokyo.

Flying through Haneda on the way back from the Apec Summit, I was impressed by the airport, which is modern and relatively small. While there were many Western luxury stores, Haneda also has a cluster of shops specialising in traditional Japanese goods and foods, updated for modern times and international consumers.

Will we finally see a Japan that is open? A port like Yokohama and an airport like Haneda can facilitate this. Foreigners like Commodore Perry can push for it. But in the end, it will depend on the Japanese and their leaders. Can Japan change, and who will trigger change? Perhaps Kan can.

* The writer is chairman of the Singapore Institute of International Affairs and was an invited speaker at the Apec CEO Summit.