More Freedom, Less Security for Japan

For Masatoshi Nakajima, a bankrupt fish importer, there is no going back. The same is true for Michiyo Taki, a frugal housewife who worries about her husband's job and despairs over the government's policies. Even Shigenobu Sakama, a pseudonymous and imperious bureaucrat, can't will himself back to a time when Japan prospered quickly and shared the wealth evenly.

The clearest evidence of the future shape of the Japanese economy is in individual lives - and individuals are finding themselves in a system that is less secure, but more flexible.

What Mr. Nakajima, Ms. Taki, and many other Japanese have begun to do is look out for themselves. Their newfound concern for self comes not because they have been won over by Western individualism but because economic change has touched them personally and forced them to alter their outlooks. When the rising tide stops lifting all boats, to use an old economic metaphor, people have to get out and swim on their own.

The people profiled in this series are by no means a representative sample of Japanese society. One has only to walk around the Omotesando district of Tokyo, a neighborhood of full restaurants, refined boutiques, and the occasional Rolls Royce, to know that Japan's recession isn't affecting everyone at once.

But rising unemployment and a growing tendency for companies to make their workers compete for raises and continued employment - in the manner of computermaker Fujitsu Ltd. and other companies - are multiplying the Nakajimas and the Takis.

These are people burned or discouraged by the existing system who are ready to invent a new one and eager to protect themselves in the process. Also increasing is the number of people like financial entrepreneur Takashi Yoneda - Japanese inclined to break the bindings of corporate loyalty and hop from opportunity to opportunity.

Not too long ago, says one of Mr. Yoneda's former colleagues at the Industrial Bank of Japan, joint general manager Taka-Aki Kawashima, "one chap came to me and said he'd decided to leave for Merrill Lynch Japan." Mr. Kawashima wished him well and told his junior, "If you are really good, in the future I'm going to hire you back." A little more than a decade ago, the banker muses, "you never thought of leaving the organization at all. You never thought of valuing yourself in the market."

Japanese have always been wary of the market, particularly the country's self-confident bureaucrats. Even today, says Naoki Kajiyama, the senior Ministry of Finance official, "We all know ... that the market will not be able to solve all the problems" of the economy.

Realities of recession

The reality is that despite the bureaucrats' best efforts, the pink slips are coming, and firms are failing. "The economy has entered a vicious spiral of recession," said Teikoku Databank Ltd., a private Tokyo-based credit-research agency, in a report last month. In June, Teikoku says, more than 1,700 companies went under, a 29 percent increase over the same month last year, the biggest surge since World War II. The unemployment rate is 4.3 percent, which is low by Western standards, but high in Japan, where the calculation leaves out many workers who would be counted as jobless elsewhere.

Mr. Sakama and his allies in political, bureaucratic, and even corporate circles will attempt to soften the impact of this ever-so-gradual downsizing. A "concern for parity, [a] sensitivity to equality will remain even if we become a liberalized, competitive society," says Naoki Tanaka, a prominent economist. "In this society, the executives in big companies will earn 20 times a new employee's compensation" and no more, he suggests, alluding to some Western chief executives who are paid hundreds of times what their factory workers earn.

"Discipline will remain," Mr. Tanaka insists.

Fair enough, but Yoneda says that last year's collapse of Yamaichi Securities was a seismic shift. "People will realize that 1997 was the year that market forces really forced the Japanese economy to change drastically," he says.

Even Japanese economic bureaucrats say they have realized they must advise more, make policy less, and give way, however fretfully, to what Mr. Kajiyama calls "mass democracy." But is the tendency of Japan's officialdom to control the market really finished?

"I think so," Yoneda avers, at least in his line of work. "The nature of finance has become too complex and too global for a small number of people to monitor. Small elites cannot cope with financial engineers coming up with new products all the time."

So here come the Western bankers and investment managers who are wedging their way into Japan, thanks to a program of deregulation called the Big Bang. The name may be hype - many economists are skeptical about how far the Western firms will get - but the results are not. Merrill Lynch now brokers 8 percent of all the transactions on the Tokyo Stock Exchange, more than any other firm.

Adjusting a country's self-image

On a national scale, the Japanese have always thought of themselves as exceptional, not quite like everyone else on planet Earth. This attitude comes from being an island nation and from centuries of isolation during a history when leaders veered between welcoming and rejecting foreigners and their ideas.

Indeed, the economy of the past few decades has been exceptional. Fast growth ensured an accumulation of wealth that few, if any, other nations have experienced. Key managers in government and business made sure almost everyone benefited.

Japan is nominally a capitalist democracy, but commentators are fond of using other labels. "Japan had the most successful form of communism in the entire world," says labor economist Haruo Shimada, citing an income distribution that has created a middle class that constitutes about 80 percent of the population. "Now we're moving from communism to a market economy. Unemployment attitudes are changing. Young people see it as less shameful. The labor movement has changed too. They know if they demand higher wages they'll be out. As far as the economy goes, we're terribly injured. Business relationships have been cut, [and] people are beginning to distrust each other."

Despite this grim analysis, Professor Shimada also says "the fall has stopped."

Japan undoubtedly will rise again - its highly educated and dedicated work force will ensure that much - but on different terms. It won't be such an exceptional place anymore. Without embracing the ways of the West, Japan is becoming a more Western place.

This process is bringing dislocation and turmoil. More alienation, more crime, more social anxiety - these themes are daily fare in the country's media. But it also brings more freedom, more flexibility, even more fun.

Economy isn't the only change

Take Masahiko Yamada, a dental student at Tokyo's Nihon University and the son of two doctors who operate their own clinic in the southern city of Nagasaki. "My parents worked in order to work," says Mr. Yamada, describing the atmosphere of his childhood.

An avid sailor and budding saxophone player, Yamada already evidences different values. "I will work in order to have leisure," he says. The end of exceptionalism in the economy mirrors what is happening in other areas. Japan's stance as a nonnuclear, pacifist power is gradually waning as it seeks to cooperate more closely with the United States in guaranteeing the security of East Asia.

The nuclear explosions of South Asia are still reverberating here. Even Kenzaburo Oe, Japan's Nobel-winning novelist and an anti-nuclear thinker, recently wrote in a public letter to the Israeli writer Amos Oz that Japan would eschew nuclear weapons for only another half century.

Proponents of a Japan that exercises its strength more conventionally argue that their country should be a "normal nation." Whether one says that Japan is adapting to "global standards" or westernizing as it modernizes, this process is well under way economically. Japan is becoming a normal nation.

"Japan as No. 1," was one American professor's attempt to capture the essence of this country's ambition two decades ago. But the slow-motion economic collapse of recent years suggests a reevaluation is in order. How about: "Japan as no big deal"?