much frustration and crime. In the early 1990s
growth stalled, industrial and banking profits
plunged. The last decade of the twentieth century
brought changes and challenged old customs.
Future peace in Asia depends on the relations
between the US, Japan and China. Japan has had
to adjust to the fact that in the 1990s its economy
was faced with economic difficulties and debt-
ridden banks. Once all that mattered was the
peaceful pursuit of global economic power, which
had replaced Japan’s military aspirations. Concern
for the quality of life and for the environment
took second place and the Japanese accepted that
a benevolent bureaucracy would manage much of
their lives. Education provided post-war genera-
tions with equality of opportunity. But it was the
bureaucrats rather than the politicians who
wielded economic and legislative power. Dealings
between companies, bureaucrats and the politi-
cians of the Liberal Democratic Party (LDP),
which continued to govern Japan, had become
corrupt. Bribery scandals surrounding the politi-
cians became high-profile news, but the bureau-
crats involved largely escaped detection. The LDP
fall from power in 1994 did not mark a dramatic
change in Japanese politics. By the October 1996
general election the LDP was again the leading
party in the coalition government; fundamental
change would prove elusive. The LDP prime min-
ister, Ryutaro Hasimoto, promised ‘administra-
tive’ reforms of the bureaucracy but little was
achieved. Changes in the conduct of politicians
will take even longer; the old party bosses of the
LDP still pull the strings from behind the scenes.
The stagnation, in the 1990s, of Asia’s biggest
economy and the second largest in the world,
still did not look like ending in the early twenty-
first century. The boom of the 1980s turned to
bust, property prices fell to lows not imagined,
the Stock Exchange slumped by three-quarters,
unemployment rose to heights that made the
Japanese fearful. Although, at under 5 per cent,
it was good by European standards, still it meant
that a culture of a job for life in one of Japan’s
large corporations was changing, many businesses
went bankrupt. All at once the greatly admired
‘Japan model’ that had served the country well
since the Second World War was blamed for sti-
fling change and bureaucratic sclerosis. An indi-
cator of Japan’s loss of self confidence in its
managerial skills was the take-over by French
Renault of ailing Nissan especially when
European management turned it around. What
had gone so drastically wrong in Japan?
Politics were dominated by the LDP which
was slow to react to new conditions at home and
in the world. The overexuberance of Japanese and
foreign investors sent shares to unsustainable
multiples of earnings. Investors from abroad
poured in funds. Banks in cosy relationships with
Japanese conglomerates, the keiretsu lent money
recklessly, small businesses were showered with
easy finance, all leading to a huge build-up debt.
But no sector was as unrealistic as property prices- by the close of the 1980s Tokyo’s real estate
was valued as the equivalent of the whole of the
US. When the property prices slumped to a frac-
tion of their former value the banks that had
financed the boom were in trouble, saddled with
bad loans. The Asian economic crisis of 1997 and
1998 did the rest, debts of businesses threatened
to bankrupt them. The government stepped in,
guaranteeing the savings of the people who oth-
erwise would have panicked and caused an eco-
nomic meltdown. Japan began to suffer from
deflation, next year’s prices would be lower than
this year’s, the frightened public more uncertain
of the future, saved more and consumption in
Japan dropped adding further to Japan’s woes,
the currency lost value to the dollar, but exports
of world-leading companies alone were not suffi-
cient to counteract consumer loss of confidence
at home. Japan was caught in a spiral of low
growth. With near zero interest rates even ineffi-
cient companies could ‘service’ their loans and
stay afloat. Then during the early years of the new
millennium, the US was struck by its own ‘eco-
nomic bubble’, world growth slowed, Japan’s
export markets became more difficult. After more
than ten years of such a depressing trend, possi-
bly the main obstacle to any dramatic improve-
ment is the low expectations of the Japanese
people who see no hope in political change.
The Japanese absence of a ‘feel good’ factor
was reinforced by the poor performance of suc-