On a hot Friday evening in Osaka, Japan, street musician Jun Fukuda is channelling Bob Marley on a downtown bridge. Not the feel-good, party-hearty Marley, but the mortality questioning ballad Redemption Song.
As the 20-year-old belts out the lyrics, “emancipate yourself from mental slavery”, he scans the gathering of 20 or so Japanese hipsters to be sure they’re getting the point. “There is no future in Japan for people like me,” Fukuda says. “Our leaders are useless, our economy is bad, there’s nuclear stuff in my food. There is nothing out there for my generation.”
Herein lies Japan’s biggest problem as growth wanes, deflation deepens and radiation leaks in Fukushima. Economists predicting a recovery expect rebuilding after the March 11 earthquake and tsunami to drive growth the way it did in Kobe in 1995. Yet they ignore how the events of the past five months shook the Japanese psyche in ways that bode poorly for the world’s third-biggest economy.
What Japanese of all ages see is a political culture overwhelmed by a combination of crisis, generational change and forces of globalisation. Their economy has been overtaken by China, and no one knows how to catch up.
They know Naoto Kan’s days are numbered, and Japan, perhaps by the end of August, will have its sixth prime minister in five years. They realise no strong candidates are waiting in the wings to put the country on a firmer footing.
All this means less household consumption in a nation that even before March 11 was saving too much. It means less business investment in an economy that was struggling before the ground under the northeast Tohoku region shook and the seas rose. It means greater uncertainty than Japan has seen in decades.
There’s still hope the events of the past five months will catalyse Japan to reinvent itself. Yet I haven’t found a smidgen of evidence that real change is afoot.
Rather than taking steps to enliven growth, politicians are, as usual, relying on the Bank of Japan to take the lead.
Instead of encouraging fresh alternative-energy research, lawmakers are digging in to protect the primacy of nuclear power. Bickering in Tokyo is delaying rebuilding efforts.
Neither bold thinking nor heavy lifting is in the DNA of today’s Japanese leaders. There’s still no serious discussion of an alternative to adding to a debt that’s more than twice the size of the economy. With Standard & Poor’s yanking away the US’s AAA credit rating, Japan should brace for its own downgrade. In January, S&P lowered Japan to AA-, the same level as China’s.
The absence of new ideas can be seen in Japan’s recent currency intervention. That ill-fated exercise was the handiwork of Finance Minister Yoshihiko Noda, who is tipped to replace Kan. Noda doesn’t seem to understand what everyone else does – that the yen is surging because of panic in global markets, not because of anything going on in Japan.
The yen will get even stronger as the dollar and euro lose favour. The lack of vision in Tokyo is affecting confidence as world events darken. Hong Kong’s slide towards recession shows things are about to get worse. Its export-led economy is a highly reliable barometer of global growth.
We need to stop talking about Japan’s “lost decade” and begin mulling lost generations. Even before Fukushima there was the “Lehman shock”, a phrase that has great resonance among Japanese who watched contagion rush from Wall Street to Tokyo. Its effects were still being felt on March 10. Japan’s economy was already contracting and on the verge of its third decade of stagnation.
Forecasters mulling the countless knock-on effects from leaking nuclear reactors and Tokyoites fretting about the “Big One” following the recent quake, is putting a damper on consumer and business spending.
Japan’s leaders have spent far too much energy in the past decade preserving entrenched ways of doing things. It’s time for economists and investors to emancipate themselves from their own kind of mental slavery. Japan’s best hope of a strong rebound requires fresh thinking about labour, energy, capital and the government’s role. The average 20-something Marley fan can tell you that. Why can’t Japan’s leaders?
William Pesek is a Bloomberg View columnist. The opinions expressed are his own.