Political Economy of Japanese Globalization (Sheffield Centre for Japanese Studies Routledge Series)

The Political Economy of Japanese Globalization The Political Economy of Japanese Globalization reveals the key dimensions of Japanese globalization today by analysing both its inward and outward manifestations. This is the first book to examine fully the issue of globalization in relation to Japan. Organized in three parts, it explores the meanings and implications of the study of Japan’s globalization in the context of ongoing debates about globalization in general. The book demonstrates how, despite the passing of the ‘Japanese model’, Japan can still provide significant insights into the meaning of this phenomenon. The first part of this timely volume examines globalization in politics and international relations: Japan’s particular position in globalization; its recent role in the East Asian political economy; and the relative identities of Japan and Europe. The second part looks at the economy and business at the heart of Japanese globalization: Japan’s globalization in East Asia as part of oriental capitalism; its recent financial reforms; US globalization in Japan; Japan’s impact on Germany and the meaning of ‘Japanization’ and ‘globalization’. The third part of the book assesses social issues in Japan in the context of globalization, highlighting the positive political impact of globalization – seen in the way externally generated pressures have brought into focus ‘universal’ values, such as citizenship, human rights and democracy. Lucidly written, The Political Economy of Japanese Globalization is a major resource for postgraduates and researchers in Japanese studies, Asian studies, international relations, international political economy, as well as for all those dealing with Japan professionally. Glenn D. Hook is Chair of Japanese Studies, and Director of the Graduate School of East Asian Studies, University of Sheffield. His many publications include Japan’s International Relations: Politics, economics and security (co-authored) and Militarization and Demilitarization in Contemporary Japan. Hasegawa Harukiyo is Senior Lecturer in Japanese Studies, and Director of the Centre for Japanese Studies, University of Sheffield. He is the co-editor of Japanese Business Management: Restructuring for low growth and globalization and author of The Steel Industry in Japan: A comparison with Britain.

Sheffield Centre for Japanese Studies/ Routledge Series Series editor: Glenn D. Hook Professor of Japanese Studies, University of Sheffield

This series, published by Routledge in association with the Centre for Japanese Studies at the University of Sheffield, both makes available original research on a wide range of subjects dealing with Japan and provides introductory overviews of key topics in Japanese studies. The Internationalization of Japan Edited by Glenn D. Hook and Michael Weiner Race and Migration in Imperial Japan Michael Weiner Japan and the Pacific Free Trade Area Pekka Korhonen Greater China and Japan Prospects for an economic partnership? Robert Taylor The Steel Industry in Japan A comparison with the UK Hasegawa Harukiyo Race, Resistance and the Ainu of Japan Richard Siddle Japan’s Minorities The illusion of homogeneity Edited by Michael Weiner Japanese Business Management Restructuring for low growth and globalization Edited by Hasegawa Harukiyo and Glenn D. Hook

Japan and Asia Pacific Integration Pacific romances 1968–1996 Pekka Korhonen Japan’s Economic Power and Security Japan and North Korea Christopher W. Hughes Japan’s Contested Constitution Documents and analysis Glenn D. Hook and Gavan McCormack Japan’s International Relations Politics, economics and security Glenn D. Hook, Julie Gilson, Christopher W. Hughes and Hugo Dobson Japanese Education Reform Nakasone’s legacy Christopher P. Hood The Political Economy of Japanese Globalization Edited by Glenn D. Hook and Hasegawa Harukiyo

The Political Economy of Japanese Globalization Edited by Glenn D. Hook and Hasegawa Harukiyo

London and New York

First published 2001 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2001 Glenn D. Hook and Hasegawa Harukiyo for selection and editorial matter; individual chapters the contributors All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data The political economy of Japanese globalization / edited by Glenn D. Hook and Hasegawa Harukiyo p. cm. – (Sheffield Centre for Japanese Studies/Routledge series) Papers presented at an international symposium sponsored by the Centre for Japanese Studies at the University of Sheffield in collaboration with the International Research Center for Japanese Studies in Kyoto held from 20–22 March 1998. Includes bibliographical references and index. 1. Japan–economic relations–Congresses. 2. Globalization–Economic aspects–Japan–Congresses. 3. Globalization–Social aspects–Japan– Congresses. I. Hook, Glenn D. II. Hasegawa, Harukiyo III. University of Sheffield, Centre of Japanese Studies. IV. Kokusai Nihon Bunka Kenkyu Senta. V. Series HF1601.P654 2001 337.52–dc21 00-045930 ISBN 0-203-64520-0 Master e-book ISBN

ISBN 0-203-67306-9 (Adobe eReader Format) ISBN 0-415-23286-4 (Print Edition)

Contents List of illustrations

ix

Notes on contributors

xii

Preface

xvi

List of abbreviations

xvii

i Introduction GLENN D. HOOK AND HASEGAWA HARUKIYO PART I Globalization in politics and international relations 1 The global meaning of Japan: the state’s persistently precarious position in the world order TAKAHASHI SUSUMU 2 Japan’s role in the East Asian political economy: an emerging region? GLENN D. HOOK 3 Japan in Europe: Asian and European perspectives CHRISTOPHER W. HUGHES 4 Europe in Japan: a growing EU identity JULIE GILSON PART II Globalization in economy and business

1 16

18

38 52 65 78

80 5 Globalization and oriental capitalism: the global meaning of Japan JAW-YANN TWU 96 6 Financial globalization and the unravelling of the Japanese model PHILIP G. CERNY 7 Americanization or Europeanization? The globalization of the Japanese 111 economy KUDŌ AKIRA 8 Japan as a model of the past? Kaizen, ‘lean production’ and the German 126 car industry in retrospect FRANZ WALDENBERGER

9 ‘Japanization’ and ‘globalization’ as metaphors for capitalist rationalization HASEGAWA HARUKIYO PART III Globalization in nation and society 10 Japanese responses to globalization: nationalism and transnationalism HATSUSE RYŪHEI 11 Migration, globalization and the nation state, Japan YOKO SELLEK 12 Political integration of foreign communities in Japan: the right to vote issue ERIC SEIZELET

138

157

159 173 193

Glossary

209

Index

211

Illustrations Figures

8.1 Profitability of German industry, 1983–96

131

9.1 Extent of corporate reforms, by industrial sector

146

9.2 Composition of share ownership

148

9.3 Corporate structure of Sony Corporation, July 1999

152

Tables

5.1

Financial crisis’s impact on the main economic dimensions of the NIES, ASEAN and China (1997–8)

88

5.2

Japan’s balance of payment with the Asian region (1996–8)

90

5.3

Amount outstanding and proportion of loans provided by Japanese banks to other countries in 1997

92

5.4

Change in Japan’s trade with the NIES, ASEAN and China (1998)

93

9.1

Management in Toyota Motor Manufacturing UK Ltd

140

9.2

Comparison of management styles in Daks

141

9.3

Management after the ‘New Deal’

144

9.4

Changes in ownership of listed companies

149

9.5

Comparison of corporate governance between Japan and the US 151

11.1 Trends in the estimated number of overstayers, broken down by 180 nationality (1990–9) 11.2 Trends in the number of registered foreigners, broken down by type of status of residence (1992–8)

183

11.3 Trends in the number of foreign residents who applied to have 185 their status of residence changed from that of college student or pre-college student to a category permitting employment in Japan (1986–98) 12.1 Which rights do you deem necessary?

196

Contributors Philip G. Cerny is professor of government in the Department of Government, University of Manchester. His research interests are in politics and the globalization of finance. His publications include Finance and World Politics, Cheltenham: Edward Elgar, 1993 (editor); ‘Money and power: the American financial system from free banking to global competition’, in G. Thompson (ed.), Markets, vol. 2 of The United States in the Twentieth Century, (second edition), London: Hodder and Stoughton for the Open University, 2000; and ‘Embedding global financial markets: securitization and the emerging web of governance’, in K. Ronit and V. Schneider (eds), Private Organizations in Global Politics, London: Routledge (forthcoming). Julie Gilson is lecturer in politics in the Department of Political Science and International Studies, University of Birmingham. Her research interests are in Japan– Europe relations and Asia–Europe relations. Her publications include Japan and the European Union, London: Macmillan, 2000; ‘Japan’s pragmatic role in the Asia– Europe meeting’, Asian Survey 39, 1999; and ‘Japan in Kosovo’, Japan Forum 12, 1, 2000. She is an editor of the Japan Forum. Hasegawa Harukiyo is senior lecturer in Japanese studies and the director of the Centre for Japanese Studies, University of Sheffield. His research interests are in Japanese business and management. His publications include An International Comparison of Business and Management, Tokyo: Chūō Keizaisha, 1993 (in Japanese, co-author); The Steel Industry in Japan: A comparison with Britain, London: Routledge, 1996, and Japanese Business Management: Restructuring for low growth and globalization, London: Routledge, 1998 (co-editor). He is general editor of a new international journal, Asian Business and Management, Macmillan (Palgrave), 2002. Hatsuse Ryūhei is professor of international relations at the Graduate School of Law, Kobe University. His research interests are in international political theory and Japanese peace issues. His publications include International Political Theories, Tokyo: Dōbunkan, 1993 (in Japanese); Ethnicity and Multiculturalism, Tokyo: Dōbunkan, 1996 (editor, in Japanese); Key Words of International Studies, Tokyo: Yūhikaku, 1997 (co-author, in Japanese), and ‘Regionalisms in East Asia and the Asia-Pacific’, in Y. Yamamoto (ed.), Globalism, Regionalism and Nationalism: Asia in search of its role in the 21st century, Oxford: Blackwell, 1999. Glenn D. Hook is professor of Japanese Studies and director of the Graduate School of East Asian Studies, University of Sheffield. His research interests are in the international relations of Japan. His publications include Militarization and Demilitarization in Contemporary Japan, London: Routledge, 1996; Japan’s International Relations: Politics, economics and security, London: Routledge, 2001 (co-author); and Japan’s Contested Constitution: Documents and analysis, London: Routledge, 2001 (co-author).

Christopher W. Hughes is senior research fellow, Economic and Social Research Council Centre for the Study of Globalisation and Regionalisation, University of Warwick, and associate fellow and convenor of the Japan programme, Royal Institute of International Affairs. His research interests are in the international relations of Japan. His publications include Japan’s Economic Power and Security: Japan and North Korea, London: Routledge, 1999; Japan’s Security Agenda: The search for regional stability, Boulder, CO: Lynne Rienner, 2001; and Japan’s International Relations: Politics, economics and security, London: Routledge, 2001 (co-author). He is associate editor of The Pacific Review. Kudō Akira is professor of international business history in the Institute of Social Science, University of Tokyo. His research interests are in international economic relations and the history of international business relations. His publications include Japanese–German Business Relations, London: Routledge, 1998; A History of the Modern German Chemical Company, Kyoto: Mineruva Shobō, 1999 (in Japanese); and Twentieth Century German Capitalism, Tokyo: University of Tokyo Press, 1999 (in Japanese). Eric Seizelet is professor of the National Centre for Scientific Research (CNRS), Institut d’Asie Orientale de Lyon, France, and a member of the French Institute of International Affairs (IFRI). His research interests are in Japanese public law, politics and the legal implications of Japan’s internationalization. His publications include Monarchy and Democracy in Postwar Japan, Paris: Maisonneuve et Larose, 1990 (in French); and Japan: the Decline?, Brussels: Complexe, 1995 (co-editor). Yoko Sellek is lecturer in Japanese studies, University of Sheffield. Her research interests are in migration in Asia with a particular focus on contemporary Japan. Her publications include ‘Female foreign migrant workers in Japan: working for the yen’, Japan Forum 8, 2, 1996; and ‘Nikkeijin: the phenomenon of return migration’, in M. Weiner (ed.), Japan’s Minorities: The illusion of homogeneity, London: Routledge, 1997; and Migrant Labour in Japan, London: Macmillan (Palgrave), 2000. Takahashi Susumu is professor of the Graduate School of Law and Politics, Faculty of Law, University of Tokyo. His research interests are in international history and German political history. His publications include The History of German Reparations, 1920–1924, Tokyo: Iwanami Shoten, 1983 (in Japanese); The Reunification of Germany as History, Tokyo: Iwanami Shoten, 1999 (in Japanese); and A History of the World: Cold war and economic prosperity, Tokyo: Chūō Kōronsha, 1999 (in Japanese, co-author). Jaw-Yann Twu is professor of international and Asian economy, Kokugakuin University, and emeritus professor of Nagoya University. His research interests are in East Asian economy, regional collaboration and development in Asia and oriental capitalism. His publications include ‘The Asian growth triangle: structure, change and perspective’, in H. Itagaki (ed.), The Japanese Production System: Hybrid factories in East Asia, London: Macmillan, 1997; Regional Cooperation and Japan, Tokyo: Ochanomizu Shobō, 1999 (editor, in Japanese); and Ethnic Chinese, Tokyo: Japan Times, 2000 (co-author, in Japanese). Franz Waldenberger is professor of Japanese economy, Japan-Zentrum, and Munich University, Germany. His research interests are in comparative economic systems, corporate governance, labour markets and competition policy. His publications include

Organisation und Evolution Arbeitsteiliger Systeme. Erkenntnisse aus der japanischen Wirtschaftsentwicklung, Munich: Iudcium, 1999 (editor, in German); ‘Institutional change – lessons from the Japanese banking crisis’, in Marcus Riekeberg and Karin Stenke (eds), Banking 2000. Perspektiven und Projekte, Wiesbaden: Gabler, 2000; and ‘From corporatist to market capitalism? Japanese and German systems of corporate governance facing a changing environment’, Internationale Politik und Gesellschaft 3, 2000 (in German).

Preface It seems that a day does not pass without the mention of ‘globalization’. While a panoply of pundits and researchers have sought to come to grips with its varied manifestations, few writers have focused on Japan, which still remains the second most powerful economy in the world despite a decade of economic stagnation. It was with the aim of promoting an understanding of the political economy of Japanese globalization that, from 20 to 22 March 1998, the Centre for Japanese Studies at the University of Sheffield, in collaboration with the International Research Center for Japanese Studies (Nichibunken) in Kyoto, held an international symposium on the ‘Global Meaning of Japan’. The chapters making up this volume were originally presented at this symposium. All have been revised in light of the comments made by the participants, the editors, and by Routledge’s anonymous referees. We would like to thank the contributors for revising their chapters in light of these comments and for the participants and referees for making them. We would like to thank Professors Ishii Shirō and Kimura Hiroshi of Nichibunken for their cooperation in the successful hosting of the symposium. For financial support, we owe a particular debt of gratitude to the Japan Foundation, the Japanese Ministry of Education, Nichibunken and Chūbū Electric Power Company. Finally, following Japanese convention, the names in the text and notes are given with the family name first followed by the given name. In writings in English, however, the given name is followed by the family name. Except for place names such as Tokyo and names of institutions translated into English, all long vowels are indicated by a macron. GDH HH

Abbreviations AEEU

Amalgamated Engineering and Electrical Union

AEU

Amalgamated Engineering Union

AMF

Asian Monetary Fund

APEC

Asia Pacific Economic Cooperation

ARF

ASEAN Regional Forum

ASEAN

Association of Southeast Asian Nations

ASEM

Asia–Europe Meeting

ATM

Automated Teller Machine

AUE

Amalgamated Union of Engineering Workers

BIS

Bank for International Settlements

BMW

Bayerische Motor Werke

BOJ

Bank of Japan

CBI

Confederation of British Industry

CCP

Common Commercial Policy

CD

Compact Disc

CEA

Chinese Economic Area

CEO

Chief Executive Officer (President)

CFSP

Common Foreign and Security Policy

COCOM

Coordinating Committee for Export Control to the Communist Bloc

EAEC

East Asian Economic Caucus

EBC

European Business Community

EC

European Community

EEC

European Economic Community

EETPU

Electrical, Electronic, Telecommunication and Plumbing Union

EP

European Parliament

EPC

European Political Cooperation

ETP

Executive Training Programme

EU

European Union

EXPROM

EC-wide Trade Promotion Programme

FCI.EOI

Foreign Capital Inducement and Export Oriented Industrialization

FDI

Foreign Direct Investment

FILP

Fiscal Investment and Loan Programme

FRB

Federal Reserve Board

FRC

Financial Reconstruction Commission

FSA

Financial Supervision Agency

FT

Financial Times

GATT

General Agreement on Tariffs and Trade

G-8

Group of Eight

GM

General Motors

GMB

General Municipal and Boilermakers’ Union

GDP

Gross Domestic Product

GNP

Gross National Product

GT

Growth Triangle

HRM

Human Resource Management

ICCPR

International Covenant on Civil and Political Rights

ICL

International Computers Limited

IFOR

Implementation Force

IGM

Industriegewerkschaft Metall

IMF

International Metal Workers’ Federation

IMF

International Monetary Fund

IMF/IBRD

International Monetary Fund/ International Bank for Reconstruction and Development

IT

Information Technology

JANAC

Japan, NIEs, ASEAN and China

JCIE

Japan Centre for International Exchange

JCP

Japan Communist Party

JET

Japan Exchange Teaching

JETRO

Japan External Trade Organization

JIIA

Japan Institute of International Affairs

JIT

Just-in-Time

JM

Japanese Management

JPS

Japanese Production System

JSP

Japan Socialist Party

KEDO

Korean Peninsula Energy Development Organization

LDP

Liberal–Democratic Party

M&A

Merger and Acquisition

ME

Microelectronics

MIT

Massachusetts Institute of Technology

MITI

Ministry of International Trade and Industry

MOF

Ministry of Finance

MOFA

Ministry of Foreign Affairs

MSF

Manufacturing, Science and Finance Union

NAC

NIEs, ASEAN and China

NATO

North Atlantic Treaty Organization

NGOs

Non-governmental Organizations

NIEs

Newly Industrializing Economies

NPP

New Progressive Party

ODA

Official Development Assistance

OECD

Organization for Economic Cooperation and Development

OJT

On-the-Job Training

OSCE

Organization for Security and Cooperation in Europe

PIC

Peace Implementation Council

PKO

Peacekeeping Operations

PMC

Post-Ministerial Conference

PRC

People’s Republic of China

PSA

Peugeot Société Anonyme

QC

Quality Control

QRS

Quick Response System

R&D

Research and Development

ROA

Return on Assets

ROE

Return on Equity

SDF

Self-Defence Forces

SDPJ

Socialist Democratic Party of Japan

SEA

Single European Act

SII

Structural Impediments Initiative

T&G (TGWU)

Transport and General Workers’ Union

TMAB

Toyota Members Advisory Board

TNC

Transnational Corporation

TQC

Total Quality Control

TSE

Tokyo Stock Exchange

UK

United Kingdom

UN

United Nations

UNESCAP

United Nations Economic and Social Commission for Asia and the Pacific

UNHCR

United Nations High Commission for Refugees

UNPROFOR

United Nations Protection Forces

UNV

United Nations Volunteers

US

United States

USSR

Union of Soviet Socialist Republics

VERs

Voluntary Export Restraints

VW

Volkswagen

WEU

Western European Union

WTO

World Trade Organization

Introduction Glenn D. Hook and Hasegawa Harukiyo During the latter part of the twentieth and at the beginning of the twenty-first century, an extensive debate has emerged centring on the meaning, process and consequences of globalization as witnessed today. As a natural corollary to that, questions have arisen as to why such concepts as globalization should be used in order to make sense of changes in the world today. Kilminster (1997) found the first appearance of the word ‘globalization’ in Webster’s Dictionary in 1961, which indicates that, already forty years ago, attention was being paid to globally integrative phenomena in the political, economic and social dimensions of life. At the beginning of The Modern World-System, Wallerstein quotes Marx as a key for his own world-system approach: ‘On their heels treads the commercial war of the European nations, with the globe for a theatre’ (Wallerstein 1974: xv). This suggests that the emerging dynamics of capitalism have encouraged a global perspective for some time, but the current interest in ‘globalization’ as such dates from the last twenty years of the twentieth century. It is this phase of globalization, whose implications have even affected the concepts of time and space, that will be explored here, with particular reference to Japan. The recent debate on globalization in the West covers an area ranging from international relations and politics (Held 1995; Mittelman 1996; Kofman 1996; Gray 1998; Falk 1999; Gilpin and Gilpin 2000) to political economy and business (Kay 1993; Albert 1993; Hirst and Thompson 1996; Korten 1999) and sociology (Featherstone et al. 1995; Scott 1997; Giddens 1998, 2000). It is generally assumed, whether the term ‘globalization’ is used or not, that a fundamental transformation is taking place in the world today, and that the result has been to raise the levels of interpenetration and interdependence among nation states and societies, positing the possibility of convergence in some social institutions, practices and values. Opinions on this process differ, depending upon the ‘where’, the ‘how’ and the ‘when’ of the commentators as much as on their political, social or economic allegiances. For example, from a political angle Held (1995) argues for a ‘cosmopolitan’ model of democracy as a new concept for a new world order, while Gray (1998) rejects any idea of global ‘democratic’ capitalism arising from the alleged globalization of today. Gilpin and Gilpin (2000), on the other hand, emphasize the need for a strategic approach, suggesting a global capitalism stabilized by a globally integrated politics, with the United States (US) at its centre providing the initiative. In political economy and business, Hirst and Thompson (1996) critically examine the process and nature of what has come to be known as ‘globalization’ and argue the importance of national governance and domestic economic policy. Kay (1993), conversely, argues that the success of firms will be determined depending upon how they select and manage their environment under globalization. In sociology, Scott (1997) identifies not only the limits of globalization but

The political economy of Japanese globalization

2

also countervailing forces, while Giddens (1998) regards globalization as a process of transforming institutions, generating the rise of a ‘new individualism’. The opinions above express normative judgements about the processes and consequences of globalization: while advocates extol the benefits of globalization and globalism, opponents highlight the potential side-effects of the process and its supporting ideology, pointing out the need for vigilance to avoid the negative effects imposed on most of the world’s societies. In this way, the study of globalization has become entangled in a debate about its merits and demerits. In terms of markets, Adam Smith’s ‘invisible hand’ is raised high by the champions of free-market ideology or crushed beneath the weight of the state by those who support market intervention. At an individual level, too, globalization is seen as generating benefits, such as the internet and digital television, which are in popular demand, as well as negative side-effects, as in the cases of global financial crises and environmental degradation. In addition, many nonAmericans express concern about the loss of identity as the ‘Americanization’ of other cultures takes place as a result of US-led globalization. Thus, the idea of globalization has become a kind of obsession, leading us into a situation where it seems to have acquired an independent existence of its own. At one extreme, indeed, it seems to have achieved an influence on human society, its creator, with an authority like that of capital. Perspectives on Japan Since the ending of the war, Japan has so far undergone four major stages of socioeconomic transformation: namely, the period of reconstruction and revival (1945–55), the high growth period (1955–73), the period of low growth and internationalization (1973– 90), and the current period of recession and globalization (1990–2000). In each of these periods, the meaning of Japan has changed in Western eyes (Hook et al. 2001), but the overwhelming focus has been on economics and business. Allen (1958, 1967, 1981) was something of a pioneer, remarking on Japan’s burgeoning economic development as early as the 1950s. However, the nation first attracted major attention as a result of The Economist’s 1962 articles, ‘Consider Japan’ (The Economist 1 September; 8 September 1962), with focus on the country as an alternative model of capitalism attracting increasing attention in the mid-1970s and through the 1980s. More specific studies from the 1970s onwards unveiled the foundation of Japan’s economic strength. Abegglen’s Management and Worker (1973), the Organization for Economic Cooperation and Development’s Manpower Policy in Japan (OECD 1973) and Dore’s British Factory– Japanese Factory (1973) contributed to identifying Japan’s source of strength and in creating an image of Japan not only as a competitor but also as a model to be ‘emulated’ or ‘learned’ from. These authors focused on employment, work organization and industrial relations, paying particular attention to manufacturing industry, which typically reflects the character of a late developer. The 1960s and 1970s were thus a prelude to Japan’s contemporary globalization. However, in the 1980s, in an attempt to alleviate trade conflicts with the US and Europe, Japan began a course of foreign direct investment (FDI), with Japanese management attracting further academic notice. This led to a number of key publications in the 1980s and 1990s, which can be classified into two major areas in terms of their

Introduction

3

approach. One was the production systems approach (Womack et al. 1990; Kenney and Florida 1993), and the other was an approach focusing on the transfer of Japanese management systems (Wickens 1987; Oliver and Wilkinson 1988, 1992; Garrahan and Stewart 1992; Bratton 1992; Elger and Smith 1994). The study of production systems, preferred by US academics, viewed Japan as a competitor and investigated the nature of its production systems, examining whether they offered something beyond Fordism; on the other hand, the study of the transfer of Japanese management systems reflects academic interest in and concern about the impact of Japanese management upon their own systems and social relations. Overall, the 1980s may be seen as a stage of pro-active Japanese globalization (Hasegawa 1998:57), i.e. Japan outwardly globalizing or penetrating other economies. During the 1990s and the early twenty-first century, Japan’s continued recession has inevitably caused large-scale restructuring. This has been a period of internal globalization within Japan, with an ideology of neo-liberalism derived from the US model of capitalism taking centre stage, representing an introspective adjustment to external forces. Large-scale restructuring in both employment practices and business organizations is being carried out under the assumption that, without such internal adjustment to global conditions, there might be no palatable future for Japan. Such views and strategies are expressed in various reports, but in particular in government council reports such as ‘Strategy for the Rebirth of the Japanese Economy’ (26 February 1999) and ‘Plan for the next ten years’ (13 April 1999) (Nikkei 14 April 1999). These reports list various reform plans and strategies; in particular, their argument for the internationalization of the yen and Japanese language are important and noteworthy in relation to Japan’s globalization. In terms of normative preference, certain commentators acknowledge and support globalization, whereas others question its process and voice concern. For instance, a number of bureaucrats, diplomats and top business leaders (Kondō 1998; Numata 1998; Okuda 1999) and supporting academics (Inoki 1998; Yashiro 1998; Iwasaki and Kaiho 1999) advocate globalization and support its ideology of neo-liberalism. They regard it as inevitable, necessary and normatively a good thing. Others, representing more the interests of labour and the concerned public, such as leaders of the Japanese Trade Union Confederation (Rengō) (Washio 1999; Inoue 1999; Itō 1999) and the National Confederation of Trade (Zenrōren) (Ōki 2000) and progressive academics (Sakamoto 1998; Fujimoto 1998; Nomura 2000), maintain a more cautious and restrained approach. Meanwhile, among Western commentators, the tendency to regard Japan as a model has largely disappeared. Recent work has shifted to examine the changing socioeconomic structure of Japan (Pempel 1998; Carlile and Tilton 1998; Noble and Katzenstein 1999) and Japan’s status in Asia in the context of globalization (Hatch and Yamamura 1996; Olds et al. 1999; Katzenstein and Shiraishi 1997; Pempel 1999). These studies show that, in the late 1990s, the nation took on the characteristics of dual globalization – pro-active globalization in East Asia combined with internal globalization within Japan, as indicated by the large-scale restructuring of industry and finance. Thus, over the last fifty years, Japan has gone through a period of high economic growth, leading to pro-active globalization and then dual globalization. This process involved the transformation of politics, economy, business, and even the structure and consciousness of society itself. It is with this general trend in mind that the contributors to

The political economy of Japanese globalization

4

this volume have sought to examine the meaning of Japan in a global context. The aim is to link the debate over and the reality of globalization in general with the Japanese experience, by focusing on major issues in politics and international relations, economy and business, and nation and society. Global Japan Globalization today differs from earlier versions; the early prototypes, expressed in nineteenth-century Western and pre-war Japanese imperial expansion, represented capitalist expansion by means of direct political and military aggression. Contemporary globalization, in contrast, is characterized by economic activity, supported by nation states and various international institutions like the International Monetary Fund (IMF), the World Trade Organization (WTO) and the World Bank. The major players of proactive globalization are multinational companies, while internal globalization is subject to attempts by the state to shape its course, as with controls to stem the inflow of migrant workers. In this sense, globalization can seem like a game played by two players – multinational corporations and nation states – whose existence appears on occasion contradictory. While one espouses economic liberalism, the other attempts to balance ideologies reflecting divergent interests within the same nation state, i.e. conservative as well as neo-liberal sentiments, with the former more resistant to globalization than the latter. The balance is influenced by the degree of proactive globalization pursued by multinational companies and other actors. The late 1990s and early twenty-first century in Japan reflect the nation’s own ideological mix, namely globalism and neo-liberalism, on the one hand, and various shades of nationalism and protectionism, on the other. How, then, is Japan globalizing vis-à-vis the rest of the world, and how is Japan itself being globalized? What is the meaning of this process and what are its consequences for the ‘global welfare’ of humanity, in areas such as peace, development and human rights? These are the general themes addressed in the following chapters. First, politically, global Japan can be explored in three areas: (1) conceptual implication, (2) identity and perception, and (3) global relations. The first appearance of ‘global Japan’ was in the Meiji period (1868–1912), when modernization was first set in progress by way of Westernization, leading to pre-war industrialization and imperialism. The political strategy then was to use the West and the rest of Asia as a mirror to create an identity for Japan, and to this end an ideology of an economically and militarily dynamic country was pursued. Thus, Japan’s early path of modernization, industrialization and militarism was that of an as-yet unglobalized country, pursuing actions that were opposed to general human welfare. The dominant perception in this period was that if Japan did not become independently strong in this way, it would be colonized by the West, in the same way as much of the rest of Asia. From this perspective, the pre-war Japanese perception was a response to Western imperialism, equally insupportable on human welfare criteria. The case of post-war Japan is different, in that it maintains a close link with the US in terms of both security and the economy. The current position of Japan is double edged: it is a strong economic power with considerable political influence in East Asia, yet it remains subject to US influence in politics and security, as suggested by reference to Japan as a US ‘junior partner’. Despite

Introduction

5

existing in this precarious position, its economic strength alone has become the image fuelling the way others see it. Japan thus becomes a competitor, partner and/or economic leader, depending upon how it globalizes and what relations it creates with others. In contrast, how Europe and East Asia perceive Japan is determined by how those regions determine their own character and structure. In this sense, regional developments and regionalism go hand in hand with globalization and reinforce each other. Within and between these and other regions competition has become more severe and, unless constraints are put in place to protect human welfare, this trend is likely to continue. The globalization of Japan is thus closely tied to the economic trajectory of both Europe and East Asia, the regional focus of this volume, even though relations with the US remain central to Japan’s political and economic future. Indeed, Japan’s relations with the US have been crucial for the role it has played in the globalization of East Asia. The triangular relationship amongst Japan, the US and East Asia symbolizes the character of globalization in this region. This implies US globalization in Japan and East Asia as well as Japan’s globalization in East Asia, thereby making the region the venue for a complex network of multi-layered globalization and rapid economic development. But what kinds of structural developments are being set in motion as a consequence of this multi-layered globalization? Are the East Asian economies becoming fragmented and losing autonomy, or is the region managing to develop organically in a way to promote the welfare of its peoples? These questions inform the later discussion. Second, in the area of economics and business, issues of regional capitalism, restructuring within Japan and the transfer of Japanese management techniques to other economies emerge as key issues to be addressed. Is there such a thing as ‘East Asian’ capitalism? If East Asia’s development is substantially conditioned by Japanese capitalism and if the region is structurally and functionally integrated into the reproduction of Japanese capitalism, then it implies the formation of some form of regional capitalism. The current world economy would then consist of three major capitalist regions – North America, Europe and East Asia. North American capitalism is centred on the US and European capitalism upon the major European Union (EU) economies; East Asian capitalism is a combination of global and local capital, but as the recent East Asian financial and economic crises showed, the crucial role of global capital cannot be ignored. East Asian capitalism is based largely upon manufacturing and exports and, in this sense, Japan’s role in the region is crucial, in terms of capital, management techniques and the division of labour. The economic, administrative and other reforms now taking place in Japan reflect the nation’s efforts to readjust itself to globalization processes. It is the internal aspects of this process that have inspired recent reform measures. This implies the uneven development of Japanese capitalism with, on the one hand, the overdevelopment of manufacturing and, on the other, the lesser development of the service sector. Both Japan and other parts of East Asia share this characteristic. It is here important to examine in what direction reforms are being made, whether towards an Anglo-American model, a European model or a modification of the existing ‘East Asian model’ of capitalism. Will the logic of capitalism lead to a convergence in systems if competition proceeds without constraint? This discussion of convergence relates to approaches analysing Japan in terms

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of ‘emulation’, ‘learning’ and ‘model’. The later discussion examines Japan along with these approaches. The transfer of Japanese management techniques also bears relevance to the question of ‘convergence’ and ‘emulation’, although these approaches may actually hinder the accurate analysis of capitalist rationalization in local management. Indications are that both convergence and emulation are at work. FDI in advanced economies such as the United Kingdom (UK) typically shows that management transfer is possible, to some extent at least, as seen in Japanese transplants. Local managers can also use the transfer of Japanese management techniques as a means to rationalize their production systems in order to enhance competitiveness. In Germany, where industrial capital is strong, Japan has been used as an example to enhance local rationalization. Thus, globalization, when acting through the transfer of management techniques, stimulates local managers and influences social relations in local communities. Third, global Japan can be assessed with reference to three areas of social significance: migration, nationalism and transnationalism; human rights; and democracy. Migration is an inevitable outcome of globalization, though not as obvious as that of capital and technology. Globalization of labour raises various social issues concerning human welfare. People often migrate from less developed to developed economies, as in the case of the movement of people from Asia to Japan, which can facilitate the internal globalization of Japan in the areas of human rights, democracy and other issues relevant to a multicultural society. The internal globalization of Japan here implies the creation of an open civic society based upon the people living in that society rather than upon those people’s nationality. As in other parts of the world, however, the influx of foreigners has created opposition as well as support for their becoming an integral part of Japanese society. Thus, migration has contributed to the strengthening of two conflicting ideologies: one displayed in varying shades of nationalism and the other in the more cosmopolitan values of transnationalism. An increase in immigration at a time of high unemployment tends to arouse nationalistic sentiments in certain quarters, while furthering transnational sentiments in others. The resulting ideological split differs from that of the Cold War: on the one hand, nationalist ideology often appears as a reactionary force supported by those who subjectively suffer from globalization, while transnationalism appears as an ideology pushed forward by those who benefit from it as well as by those with cosmopolitan social ideals. Rising immigration also focuses attention on the human rights of migrants and participatory democracy in local communities, and this extends to health, education, politics and employment opportunities. Citizenship movements combined with such demands also help to change the quality of democracy, and challenge the traditional concept of the nation state and nationality. Japan’s internal globalization is fed by such dynamics. Global Japan, then, offers an opportunity to learn about globalization as it emerges in and from Japan. Some of its consequences are already visible in terms of structural and relational changes. These provide material which can be used to evaluate what kind of globalization may be acceptable in the twenty-first century in order to enhance human welfare around the world.

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Structure Part I of the book focuses on the particular meaning of globalization to Japan and also its relevance to Japanese political economy in the process of globalization. It seeks to demonstrate how, despite the passing of the ‘Japanese model’, Japan can still provide important insights into the meaning of globalization, in terms both of the degree to which the nation is globalized as well as the ways in which it is not globalized. Globalization in politics and international relations The opening chapter of Part I by Takahashi addresses the global meaning of Japan in terms of the nation’s precarious position in international society, resulting from it becoming the first non-Western nation successfully to achieve industrialization as part of modernization. The course Japan charted from the Meiji period onwards was modelled after Western-style modernization. Japan’s global meaning in the 1990s reflects the same issue, as typified by Americanization and US pressures on Japan to globalize its own economic institutions. The author argues that the global meaning of Japan does not lie in Americanization, but in an alternative path by which Japan has an opportunity to identify itself through more democratic relations with other nation states. Takahashi begins his discussion with a provocative argument that Japan is not currently globalized. His revisionist interpretation investigates the basic features of Japanese foreign policy by reviewing the position and political behaviour of the state since the Meiji period. Unspoken assumptions in the pre-war period resulted in the formation of ‘sub-imperialism’, and similar assumptions remain in post-war Japan owing to the nation’s precarious double position as a regional power: subordinate to the US superpower, on the one hand, but pre-eminent with regard to other East Asian countries, on the other. In spite of Japan’s position in the world order, Takahashi points to new historical dynamics within globalization, which provide the country with an opportunity to promote democratic relations among other nation states. In reviewing the major affirmative and negative interpretations of modern globalization that have been raised by Japanese commentators, he finds that they do not necessarily promote an understanding of the real meaning of a global Japan, which leads to the conclusion that in fact Japan is not globalized at present. He argues that the dynamics of globalization give rise to qualitatively different forces engendering a new triangular arrangement amongst democracy, globalism and localism; a de facto situation of this sort is already manifest to some extent at the local level. Thus, there exists the potential for ‘democratic globalization’ in place of ‘undemocratic’ and ‘uncontrolled’ globalization. Next, Hook reviews the role of Japan in the East Asian political economy and argues that, in the post-Cold War period, Japan has been in a position to balance relations between the US (Asia Pacific Economic Cooperation, APEC) and East Asia (Association of Southeast Asian Nations, ASEAN plus Three), rather than choosing one over the other. This means that Japan needs to balance also the pressures of both globalization and regionalization; that is, project both globalist and regionalist policies. His chapter identifies a shifting process in relations between Japan and the US, and Japan and East Asia, from a strong ‘junior partnership’ with the US to a more

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independent position in shaping the post-Cold War regional order in East Asia. By not repeating the failure of its previous military adventurism, Japan has been able to create a vertical division of labour within East Asia, reshaping the regional political economy to Japanese advantage. For Japan it is thus an ambivalent but a natural integration of both globalism and regionalism. The role it plays in East Asia is intimately linked to the role it plays at the global level, and vice versa. This implies that the increasing economic influence of Japan in East Asia not only tends to reshape the regional political economy, but also helps Japan to play a more prominent role in global institutions such as the WTO. The following chapter explores Japan’s global meaning by examining European perceptions of Japan. In Hughes’ view, Japan has changed from ‘peril’ to ‘partner’ and thence to ‘participant’, according to the level and content of its pro-active globalization in Europe. The shift in economic relations from trade to FDI was particularly crucial in effecting this transformation from antagonist to ally. His analysis suggests that the general merits in both economic and political conditions deriving from FDI in the host country and its region will help to create a favourable perception of the pro-active globalization of Japan. Hence, complementary to Gilson’s findings in the following chapter on Japan’s perception of Europe, European perceptions of Japan were generated and transformed on the basis of Japan’s economic relations with the countries of Europe. As Hughes points out in the conclusion to his chapter, the possible ‘decline of Japanese FDI could reignite old tensions and recreate Japan’s image as a divisive peril’. In this sense, the identity of Japan in the minds of Europeans is not something constant or permanent but is rather subject to the degree and nature of Japanese FDI in Europe as well as competitive relations among EU (European Union) member states contingent on the development of EU integration. What this implies is that any globalization initiative which creates a negative influence upon the host country can backfire by engendering an unpopular image of the country undertaking pro-active globalization. In the following chapter Gilson approaches the dynamics of globalization between Japan and Europe by examining how the image of Europe was recreated in Japan from a simple collection of nation states in the 1960s to the composite whole of the EU in the 1990s. She attributes this to ad hoc encounters that have subsequently become embedded within a semi-permanent channel of dialogue. Globalization, as manifest in Japan’s economic expansion, drew Japan and Europe closer together in their mutual quest for realistic interests in both politics and economy. This led Japan to see Europe in terms of the EU, which itself was an outcome of the development of the European political economy. What is noteworthy in the development of this bilateral dynamics is that it enhances the Japanese national perception that Europe may become a legitimate counterbalance to its relationship with the US in the regional setting of East Asia. Nevertheless, an unfortunate irony, according to Gilson, is that the European identity that Japanese political and bureaucratic elites have come to hold does not reflect accurately the existing reality in Europe. In this way, she provides a European perspective on Japanese globalization, highlighting how European identity in Japan became an EU identity in the process of globalization on both sides, while pointing to the gap between that identity and the real situation in the EU. Thus, she demonstrates how the forces of globalization can shape the iden-tity of others in a way that is congruent

Introduction

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with their interests, while conversely the identity thereby created influences the existing reality. Globalization in economy and business Part II focuses on the economy and business at the heart of Japanese globalization. Japan’s globalization and the global reach of the US into its region is the foundation of East Asian capitalism. Large-scale FDI from these two capital exporters has served as a major financial source for the development of what Twu terms ‘oriental capitalism’. In the opening chapter, Twu argues that the capitalism emerging in East Asia is fostered by Japan, which is itself subordinate to the US, and tied to the dollar as a common currency. In this sense, ‘oriental capitalism’ cannot be described in the same terms as the fully fledged Anglo-American or continental European types of capitalism. Nevertheless, with the opening of the Chinese market and the increase in the division of labour in East Asia, the forces of capitalism in this region have reorganized production, linking constituent economies with the rest of the world and contributing an important dynamic to global capitalism. Indeed, some East Asian economies, such as the newly industrializing economies (NIEs) and certain members of ASEAN, have already laid their own FDI routes, with the outflows of capital in many cases surpassing inflows. Twu argues that, as ‘oriental capitalism’ embraces within it tradition, feudalism, speculation and corruption, its further development in the twenty-first century can only be achieved with the elimination of these elements. The role Japan played in the globalization of the region was thus important, and the global meaning of Japan in East Asia will become clearer as ‘oriental capitalism’ is drawn ineluctably into the logic and values of global capitalism. Within a very short space of time, the region’s rapid capitalist development has transformed the economies from reactive (Hasegawa 1998:57) to pro-active in globalization processes. Japan’s reactive globalization falls under scrutiny in Cerny’s contribution, which addresses the most recent changes in financial systems and argues that Japan is under strong pressure towards convergence. Global financial forces are pushing for a transformation of the old ‘Japanese model’ that was considered the foundation of Japan’s economic success, but to what extent such change will lead to a convergence towards the Anglo-American model remains to be seen. Cerny examines current changes in the context of more general trends in industrial development; he argues that Japan is presently at the stage of a third industrial revolution in common with the other advanced economies. This third industrial revolution (post-Fordism) is characterized by ‘hightechnology’ production and information technology, but he argues that it paradoxically gives rise to even larger economies of scale combined with a return to modular forms of infrastructure and financing. Such pressures for transformation come not directly from the state but from a combination of international market developments and technological change as represented by information technology, which characterizes them as elements of globalization. For Kudō, today’s ‘globalization’ is internationalization under a different name, a buzz-word used to disguise Americanization. Japan experienced both internal and external internationalization at different stages of its post-war industrial development. Thus, he argues that current globalization should be investigated in two particular areas:

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first as a large-scale structural change of the economy; and second, as a re-emergence of US influence upon Japan. From this perspective, the structural change in the economy driven by globalization is actually Americanization, appearing as internal internationalization. Although the Japanese economy is in need of reform, not only because of globalization but also because of the demise of the ‘bubble economy’, Kudō argues that up until now globalization has simply meant the adjustment of Japan to US norms. US economic pressure, in the guise of gaiatsu (external pressure), or, more precisely, beiatsu (US pressure), has reinforced this process. Nevertheless, Americanization as a means to settle Japan’s present problems is not necessarily suitable nor, for that matter, in keeping with the needs of the Japanese people. Hence an alternative to globalization through Americanization is globalization by learning from Europe, which is also critical of Americanization. In this context, European investment in Japan could serve as a useful tool in the process of Japan’s response to globalization. For KudŌ, therefore, the global meaning of Japan means learning from Europe in order to reform the Japanese economy. In this way, he views Japan’s globalization from an internal perspective, as it relates to the redirection of Japan from an ‘abnormal’ to a ‘normal’ mode of development. For this purpose ‘Europeanization’ (learning from Europe) is seen to be more effective and suitable than ‘Americanization’. Waldenberger’s chapter introduces a German perspective on Japanese globalization as symbolized by the transfer of the Japanese production system (JPS). He argues that Japan’s response in the context of globalization was a result of the need to develop counter-strategies in order to survive in the competitive world market. He shows how German management in the automobile industry used ‘Japanese methods’ as an instrument for their own organizational restructuring. The global meaning of Japan for German industry was thus to introduce Japanese ideas into a German context in order to promote rationalization; that is, to use ‘Japan’ for management’s own purposes. This can be said to reflect global competition, showing Germany’s strategic approach to competition in a global market and preparedness to use ‘exotic’ Japan as a vehicle to try out new ideas for the rationalization of the auto industry. There are two sides to Japanese globalization in Europe: on the one hand, increased competition and an expansion of the market for global Japanese companies; on the other, a diffusion of Japanese ideas pertaining to efficient manufacturing systems and organization. In this context, Waldenberger argues that JPS as a model is ambivalent and even contradictory, for JPS cannot serve both as an explanation of Japanese success and as an example of universal best practice. The reason is straightforward: the former is contingent on circumstances specifically Japanese, while the latter is not. He thus concludes that Japan’s success and consequent globalization gave a decisive push for change and served as an important instrument to implement reforms in German industry. But it was not a model in a global, i.e. objective, sense. The model was Germany’s own image of the situation. As such he shows a German perspective where industrial capital is still strong and independent in the context of globalization, and competitive with Japan. In the following chapter Hasegawa suggests that the popular terms ‘.Japanization’ and ‘globalization’ are metaphors for capitalist rationalization as part of the continuous development of global capitalism pursued by the Western world in the last 200 years, integrating the rest of the world into its logic. In this process Japan has played an

Introduction

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ambivalent role by becoming a recipient at one time, and an active agent at another. A typical example in the post-war period is the high-growth period in which Japan was a recipient and managed to build up a ‘relative’ advance in production systems, which later became a source of emulation by others in the form of ‘Japanization’; this led to the proactive globalization of Japan in the 1980s and 1990s. In the late 1990s and early twentyfirst century, Japan has once more looked successfully to globalizing US companies to seek a way out of its economic sluggishness, which has led to a US-led, reactive internal globalization. Hasegawa’s view is that the dynamics of capitalist development are uneven, requiring constant corrective measures if a country wishes to maintain or improve its position within the capitalist system. The flux of fortune between countries within that system inevitably leads to emulative activity. Whether it is ‘Japanization’ in the UK of the 1980s and 1990s or US-led globalization in Japan in the late 1990s and beyond, the process is one of corrective rationalization in a specific sphere of activity, namely production systems and corporate structure respectively; the terms used are metaphors for measures designed to improve the working of capitalist logic for domestic interests. Globalization in nation and society The three contributions in the third and final part of the book assess social issues in Japan in the context of globalization, highlighting the positive political impact of globalization, as seen in the way externally generated pressures have brought into focus ‘universal’ values, such as citizenship, human rights and democracy. Whether these trends represent the advance of ‘universal’ values, or simply the spread of ‘Western’ values, remains contested, although foreign residents and their supporters are clear in demanding a change in the status quo. Hatsuse examines the Japanese response to globalization as manifest in the emergence of nationalism and transnationalism. In his view nationalism emerges in two streams: moderate nationalism, as manifest in various government reports produced in response to the dynamics of globalization, and ultranationalism, expressed by right-wing authors and historians, who promote the superior nature of the Japanese race and history. Transnationalism, on the other hand, which he defines as a social principle whose efforts support human activities beyond nations and across national borders, shares a value system with universalism and cosmopolitanism. Hatsuse argues that globalism and globalization are relatively independent factors or agents which animate such ideological developments in a nation state. His conclusion is that transnationalism is a necessity for Japan, while the advocacy of nationalism is probable; the voice of ultranationalism is likely to continue at a low but persistent level. Sellek begins her chapter by remarking that international migration has become an integral part of globalization and illegal immigration itself demonstrates an erosion of the state’s sovereignty. The issue of migration is essentially related to Japan’s vision of itself as a nation, revolving around key questions such as ‘Who is Japanese?’ or ‘What is Japaneseness?’, and the meaning of citizenship. Sellek identifies an interplay among private market forces, Japanese society’s tolerance or otherwise of immigration, and government attempts to regulate immigration to accord with or resist the forces of globalization.

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An overview of recent migration into Japan identifies three different waves which reflect the impact as well as the nature of Japanese globalization. In fact, globalization has begun to give birth to a multicultural society in Japan, different from anything before. This may allow the Japanese, both the government and the populace, to respond positively to promoting universal human rights and better social conditions for nonJapanese residents. Sellek argues that this internal globalization has begun to create changes in Japanese people’s perceptions, and as a result social and economic policies at both central and local government levels are being reworked in order to deal with this challenge. This is not a one-way street, however, as seen in the rise of racist sentiments, and the simultaneous re-evaluation of the sense of national identity. The forces of globalization have indeed constantly produced phenomena which remain unpredictable in terms of the ultimate direction taken. Thus, globalization creates a significant increase in multiculturalism in societies, fostering international marriages, changing the perceptions of succeeding generations, encouraging various kinds of labour migration, and also revealing institutionalized racism. The nature of globalization can in this way be contradictory and dialectical. The final chapter examines the political integration of foreign communities in 1990s Japan from a global point of view. Here Seizelet explains how, as part of the process of globalization, the number and nationalities of foreign residents in Japan have increased, thereby setting in motion a process which has led to a recognition of their right to political participation (sanseiken) at the local level. This is a step towards a new political consciousness in support of ‘participatory democracy’ at a time when ‘representative democracy’ is facing a major credibility crisis in Japan. This crisis has arisen owing to the shift in the attitudes of both the general public and ethnic groups, especially long-term Korean residents; pressures generated by international legal precedents, which have helped to deconstruct the traditional link between citizenship and nationality; and various legal procedures, which have played a part in spreading democratic values in Japan. Seizelet proposes a new approach in order to grasp the evolutionary change of Japanese society and argues for a complete re-evaluation of the relationship between foreigners and Japanese society. He feels that parochial nationalistic values lie at the heart of Hatsuse’s critique, but that they are being modified by the effects of globalization, at least in the area of politics, as seen in the change in policies related to political participation at the local level. In this way, one of the political effects of globalization has been to shed a different light on the dominant culturalist approach to political issues in Japan, as seen in the case of political participation and human rights. Globalization as a dialectical process The globalization of Japan thus exerts considerable political, economic and social influences on the world and Japan itself. In the structure of capitalism represented by Japan, persistence as well as change have been identified by our contributors. As globalization remains an ongoing process, further change can be expected, though its direction is not a foregone conclusion. What is clear, however, is that as capitalist globalization derives from the logic of global capital, Japan will continue to be buffeted

Introduction

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by globalization processes, complete with their economic, political and social repercussions. Globalization is a dialectical process representing change in the world capitalist system. It is dialectic in that globalization involves two or more contradictory dimensions, as shown in the positive and negative effects of the globalization process. It is also dialectical in the change from the ‘quantitative’ to the ‘qualitative’ in both reality and idea, also part of the globalization process. The concepts created at the beginning of modern-day industrialization, such as democracy, liberalism and human rights, may now be recast into more ‘cosmopolitan’ concepts under this dynamic. Thus change is not a linear, but rather a ‘spiral’, development of human society. What is most important is that this process of globalization is not necessarily deterministic or natural, but arises through the dynamics of social forces that have stakes in such capitalist globalization. The following chapters should serve to highlight the degree to which social forces in contemporary Japan are seeking to promote globalization, resist its power, or influence the way it evolves. References Abegglen, J. C. (1973) Management and Worker: The Japanese solution, Tokyo: Kodansha International. Albert, M. (1993) Capitalism against Capitalism, London: Whurr. Allen, G. C. (1958) Japan’s Economic Recovery, London: Oxford University Press. —(1967) Japan as a Market and Source of Supply, London: Pergamon. —(1981) The Japanese Economy, London: Weidenfeld & Nicolson. Bratton, J. (1992) Japanization at Work, London: Macmillan. Carlile, L. E. and Tilton, M. (eds) (1998) Is Japan Really Changing Its Ways? Regulatory reform and the Japanese economy, Washington, DC: Brookings Institution Press. Dore, R. (1973) British Factory–Japanese Factory: The origins of national diversity in industrial relations, London: Allen & Unwin. Elger, T. and Smith, C. (eds) (1994) Global Japanization? The transnational transformation of the labour process, London: Routledge. Falk, R. (1999) Predatory Globalization, Oxford: Polity. Featherstone, M., Lash, S. and Robertson, R. (1995) Global Modernities, Oxford: Blackwell. Fujimoto, M. (1998) ‘Gendai shihonshugi no kōzō to kigyō keiei no rijōnaruka, gurōbaruka’ (Structure of contemporary capitalism and regionalization and globalization of business management), in 21 Seiki no Keiei Senryaku (Business strategy in the twenty-first century), Tokyo: Nihon Hyōronsha. Garrahan, P. and Stewart, P. (1992) The Nissan Enigma: Flexibility at work in a local economy, London: Mansell. Giddens, A. (1998) The Third Way: The renewal of social democracy, Oxford: Polity. —(2000) Runaway World: How globalization is reshaping our lives, London: Profile Books. Gilpin, R. and Gilpin, J. M. (2000) The Challenge of Global Capitalism, Princeton, NJ: Princeton University Press. Gray, J. (1998) False Dawn: The delusions of global capitalism, London: Granta. Hasegawa, H. (1998) ‘Japanese global strategies in Europe and the formation of regional markets’, in H. Hasegawa and G. D. Hook (eds) Japanese Business Management: Restructuring for low growth and globalization, London: Routledge.

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Hatch, W. and Yamamura, K. (1996) Asia in Japan’s Embrace: Building a regional production alliance, Cambridge: Cambridge University Press. Held, D. (1995) Democracy and the Global Order: From the modern state to cosmopolitan governance, Oxford: Polity. Hirst, P. and Thompson, G. (1996) Globalization in Question, Oxford: Polity. Hook, G., Gilson, J., Hughes, C. and Dobson, H. (2001) The International Relations of Japan: Politics, economics and security, London: Routledge. Inoki, T. (1998) ‘Nihon ni totte nani ga mondai ka’ (What is the problem with Japan?), Gaikō Forum 120: 14–19. Inoue, S. (1999) ‘Gurōbaraizeshon ga Ajia to Nihon no shakaiteki sokumen ni ataeru eikyō’ (Impact of globalization upon societies in Asia and Japan), Rengō Sōken Repōto 133: 20–8. Itō, E. (1999) ‘Gurōbaraizeshon to rōdō undō’ (Globalization and the labour movement), Rōdō Chōsa 6: 20–4. Iwasaki, N. and Kaiho, H. (1999) ‘Gurōbaru na shiten de kankeisei no manejimento no kōchiku’ (Construction of relational management on the basis of globalization perspective), JMA Management Review 5, 8: 7–15. Katzenstein, P. J. and Shiraishi, T. (eds) (1997) Network Power: Japan in Asia, Ithaca, NY: Cornell University Press. Kay, J. (1993) Foundations of Corporate Success, Oxford: Oxford University Press. Kenney, M. and Florida, R. (1993) Beyond Mass Production: The Japanese system and its transfer to the U.S., New York: Oxford University Press. Kilminster, R. (1997) ‘Globalization as an emerging concept’, in A. Scott (ed.) The Limits of Globalization: Cases and arguments, London: Routledge. Kofman, E. (ed.) (1996) Globalization: Theory and practice, London: Pinter. Kondō, S. (1998) ‘Etai no shirenu kyodai na genshō’ (An unimaginably huge phenomenon), Gaikō Forum 120: 20–5. Korten, D.C. (1999) The Post-Corporate World: Life after capitalism, West Hartford, CT: Kumarian. Mittelman, J. H. (ed.) (1996) Globalization: Critical reflections, London: Lynne Rienner. Noble, G. W. and Katzenstein, P. J. (eds) (1999) Collective Action in East Asia: How ruling parties shape industrial policy, Ithaca, NY: Cornell University Press. Nomura, M. (2000) ‘21 seiki shotō wa gurōbaruka no jidai dewa nai’ (The early twenty-first century is not the age of globalization), Monthly Rengō 2: 28–9. Numata, S. (1998) ‘Naze Nihon wa itsumo akudama ka?’ (Why is Japan always the bad guy?), Gaikō Forum 120: 38–46. OECD (1973) Manpower Policy in Japan, Paris: OECD. Ōki, K. (2000) ‘21 seiki ni mukau Nihon no keizai seiji jōkyō to rōdō undō’ (Japan’s economic and political situation towards the twenty-first century and the labour movement), Rōdō Sōken Quarterly 37: 2–12. Okuda, H. (1999) ‘Keieisha yo kubikiri surunara seppuku seyo’ (Employers, if you sack employees, kill yourself by hara-kiri), Bungei Shunjū 10: 152–62. Olds, K., Dicken, P. and Kelly, P. F. (eds) (1999) Globalisation and the Asia-Pacific: Contested territories, London: Routledge. Oliver, N. and Wilkinson, B. (1988, 1992) The Japanization of British Industry, Oxford: Blackwell. Pempel, T. J. (1998) Regime Shift: Comparative dynamics of the Japanese political economy, Ithaca, NY: Cornell University Press. —(1999) The Politics of the Asian Economic Crisis, Ithaca, NY: Cornell University Press. Sakamoto, Y. (1998) ‘Seikai shijōka e no taikō kōsō’ (An alternative blueprint to global marketization), Sekai 652: 57–74. Scott, A. (ed.) (1997) The Limits of Globalization: Cases and arguments, London: Routledge. Wallerstein, I. (1974) The Modern World-System: Capitalist agriculture and the origins of the European world-economy in the sixteenth century, London: Academic Press.

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Washio, E. (1999) Rengō Undō o Kangaeru (Thoughts on the Rengō labour movement), Tokyo: Kyōiku Bunka Kyōkai. Wickens, P. (1987) The Road to Nissan: Flexibility, quality, teamwork, London: Macmillan. Womack, J. P., Jones, D. T. and Roos, D. (1990) The Machine that Changed the World, New York: Macmillan. Yashiro, N. (1998) ‘Rōdōryoku no ryūdōka ga sairyō no seisaku’ (To create flexible labour is the best policy), Gaikō Forum 120: 47–51.

Part I Globalization in politics and international relations

1 The global meaning of Japan The state’s persistently precarious position in the world order Takahashi Susumu Two meanings of ‘global’ The meaning of modern Japan from the perspective of world history This chapter presupposes that the word ‘global’ contains at least two meanings: first, simply another word for world-wide; second, something new which has been rapidly created by new historical forces. The purpose here is to elucidate the world-wide meaning (the global meaning in the former sense) of non-global Japan. In other words, this chapter aims to examine the basic features of modern Japan from the perspective of world history, although at the end it will touch on the meaning of global Japan, in which case ‘global’ will be used in the latter sense. Its main focus is on the basic features of modern Japanese foreign policy from the Meiji Restoration of 1868 to the present time. Given the long time-span covered, for heuristic purposes the history of modern Japan will be divided into the following five periods: 1 The period of building modern Japan: from the Meiji Restoration to the beginning of the twentieth century (the end of the Russo-Japanese War of 1904–5). 2 The period of consolidating modern Japan: the beginning of the twentieth century to the end of the 1920s in the early Shōwa period (1925–30). It features democratization, industrialization and the enhancement of Japan’s position in the international community. 3 The period of searching for great power status: the beginning of the 1930s to the end of the Second World War. Japan committed itself in this period to a series of armed conflicts: the Manchurian incident, the war with China, and the Pacific War. 4 The period of building another modern Japan: the history of post-war Japan coloured by high-speed economic development as well by the shrunken role of Japan in world politics. This feature of post-war Japan can be summarized as the economic giant, political pigmy. 5 The period of sea change: this period, from the end of the 1980s to the present, shows the lack of adaptability of Japan’s post-war model to a rapidly globalizing world. In politics, although the old political system collapsed, political fluidity continues and a new political system has yet to be established. In the economy, a mismatch between

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the post-war economic model of Japan and the globalizing economy has become increasingly evident. Preconditions of Japanese foreign policy Before addressing the main topic of this chapter, it is first necessary to draw attention to recent work carried out by Japanese historians on the preconditions of modern Japan’s foreign policy. They have attempted to revise the orthodox interpretation of the world view of modern Japan promulgated by US Japan specialists, namely that since the Meiji Restoration Japan has adapted itself to the Western state system and succeeded in maintaining national independence and building a modern nation state in the Western sense. Following this interpretation, the history of modern Japan can be described as a successful history of modernization. In this sense, the successful achievement of modernization can be viewed as the global meaning of Japan. Revisionists, however, are challenging this orthodox interpretation (Watanabe 1997). They place emphasis on the continuity of a world view based on the traditional, premodern world order. It is a view strongly influenced by that of the Chinese Empire. As reflected in its position as the Middle Kingdom (chūka), China viewed itself as situated at the centre of a vast square earth, surrounded by the Four Seas, beyond which lay islands inhabited by barbarians. China has always asserted this central position in the world order. This Sino-centric view was transmitted into pre-modern, Tokugawa Japan. The reactions were varied: some Confucian scholars admired China as a great civilization, whereas others rejected this attitude and further claimed that chū (the centre) probably fitted Japan more precisely than it did China – geographically Japan, surrounded by the four seas, was stronger than China surrounded and periodically conquered by the four barbarians. What is important to stress is that Meiji Japan did not abandon this Sinocentric view of the world order, as many leaders in early Meiji Japan took the view that the Western powers occupied the central position always asserted by China. The attempt to civilize Japan (bunmeikaika) in the early Meiji period, according to Watanabe, should not be understood simply as Westernization, but also as the rise of Japan to the position of centrality in the world order in place of China (chūka) (Watanabe 1997:244–57). This Middle Kingdom theory in the Chinese sense strongly influenced the view of the world order shared by early Meiji leaders. Iwakura Tomomi, one of the powerful leaders who visited the West in the early 1870s, wrote in 1869: Even though we must make contact with every foreign country, these countries are the enemy of our Imperial Japan. What is an enemy? Every foreign country consumes so much energy in studying literature, developing technology and strengthening power … in order to gain a superior position to other countries. Country A treats country B in this way. Country B also treats country C in the same way. Therefore I claim that every foreign country is an enemy of our Imperial Japan. (Oka 1993:243) The quote demonstrates this period’s early and primitive discourse on power politics. It also provides a key to understanding the view of world order through which the political

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leaders perceived international politics and responded to them. The key sentences are ‘Country A treats country B in this way. Country B also treats country C in the same way.’ Clearly, the underlining assumption of these sentences is the vertical or hierarchical view of the world order, otherwise, country A would treat country B in one way, whereas country B would treat country C in another way. A corollary point is a logical consequence of the first: Iwakura considered the relationship between country A and country B in terms of superiority and inferiority, not in terms of power resources. This mind-set, it is argued, helps to account for the foreign behaviour of modern Japan ( Maruyama 1992; Oka 1993). Pre-war Japan: sub-imperialism and regional power Sub-imperialism Although it is true that a key aim of Meiji Japan’s foreign policy was to maintain independence, another important aim was to attain a higher rank in the international community. To this end a search for colonies was launched, as in the case of Japan’s colonization of Taiwan and Korea. By the time the full annexation of Korea was accomplished in 1910, this aim had been realized following colonial acquisitions and the defeat of China in 1895 and Russia in 1905. Another Meiji leader, Inoue Kaoru, wrote in 1887: What we have to do is to transform our empire [Imperial Japan, not the Japanese colonial empire] and our people, make the empire like the countries of Europe and our people like the peoples of Europe. To put it differently, we have to establish a new, European-style empire on the edge of Asia. (Jansen 1992:106) In 1885, the well-known Meiji thinker, Fukuzawa Yukichi, called on Japan to part from Asia (datsua). His arguments could be summarized by saying that progress for Japan required distancing itself from Asia. By 1912, when the Meiji period ended and the Taishō period started, Meiji Japan, as Fukuzawa had advocated, had attained the position of an imperial power by successful Westernization and modernization. From this perspective, the global meaning of the development of Meiji Japan is the success of modernization and the enhanced position of Japan in the international community. Yet this is no more than a one-sided view of Meiji Japan. In a well-known piece examining British imperialism, Gallagher and Robinson distinguish between ‘informal empire’ and ‘formal empire’ (Gallagher and Robinson 1976). They found that the British Empire in the nineteenth century had such a strong power base that it could deploy various means to control non-Western, less developed countries on a case-by-case basis, depending on the circumstances. On the one hand, when the British Empire faced favourable conditions, it tended to control the targeted non-Western countries informally – that is, it subordinated them without colonizing them. On the other, when the Empire faced less auspicious circumstances, as when circumscribed by proto-nationalist

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movements in the targeted countries, it deployed force against the opposition and ruled the country formally. The former case can be regarded as a formal, and the latter as an informal, empire. From this perspective, an empire possesses two types of colonies: formal and informal. Meiji Japan’s foreign behaviour suggests that, by the time of the Japanese victory in the Russo-Japanese War, it had become an informal colony of the Western powers. It was this position as an informal colony, as demonstrated by the unequal treaties that the Tokugawa government was forced to sign with the West in the 1850s and early 1860s, which drove Japan to sub-imperialism in East Asia – that is, imperialist behaviour by a country that is controlled informally by a more powerful imperialist country (Beasley 1987; Banno 1996; Mitani 1997). The sub-imperialist power plays a double role. Whereas it is the object of a great power’s expansion, it is simultaneously the subject which can expand its control beyond its own territory and dominate its neighbours (Fieldhouse 1973). Because early Meiji Japan was controlled informally by the Western powers, or at the very least was perceived to be controlled by them, it attempted to expand its power into neighbouring East Asia. In a sense, early Meiji Japan switched from resisting the expansion of the Western powers to expanding into neighbouring countries. It can thus be regarded as a classic sub-imperialist power (Moriyama 1992). Japanese sub-imperialism inhered the following three basic characteristics. First, as a sub-imperialist power, Japan was more conscious of being the object of informal colonial rule by the Western imperialist powers than of colonizing neighbouring East Asia. That explains why Meiji Japan did not identify itself as an imperialist power. Second, because of its unstable and insecure position in the East Asian regional order, Japan as a subimperialist power implemented a more brutal colonial policy than did the Western powers. Third, Japan as a sub-imperialist power had to tackle the difficult question of how to justify colonialism not as a colonial power, but as a power resisting Western colonial rule. Herein lies the importance of the ideology of Japanese colonialism as liberation from Western colonial rule. When the Sino-Japanese War began in 1894, Uchimura Kanzō, a prominent Christian leader who had stood almost alone in resisting the ideological claims of Meiji Japan, wrote that since Japan’s announced purpose of liberating Korea from Chinese suzerainty was unselfish and pure, it was reasonable to see it as a just war. He continued: ‘Japan’s victory will mean free government, free religion, free education, and free commerce for 600 million souls that live on this side of the globe’ (Jansen 1992:111). This was the argument of anti-colonial colonialism. About half a century later, this contradictory rhetoric led to that grand illusion, the Greater East Asia Co-prosperity Sphere. Thus, although early Meiji Japan did not identify itself as a subimperialist power, its thought and behaviour demonstrated its typical form. Regional power During the period from the Russo-Japanese War to the end of the 1920s, Japan strengthened its power enormously by annexing Korea, expanding its control in south Manchuria, entering the Permanent Council of the League of Nations, and participating in the Washington Conference system. In this way, it gained gradually at least a quasi-first rank position in the international community. The orthodox interpretation of Japanese

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foreign policy sees the positive side of this historical transition and considers the path chartered by Japan to have led to its transformation from a revisionist to a status quo power. An implicit assumption of this interpretation is that Japan should be satisfied with its achievement, abandon its ambition, and stop aggressive behaviour. Certainly, if early Shōwa Japan had recognized itself as a status quo power, it would have followed another historical path. As the Manchurian Incident showed, however, it did not, and hence remained a revisionist power. The reason for Japanese dissatisfaction with the great achievements the nation had made in the historical context of the late nineteenth century is related to the structural instability of its international position at that time. As a sub-imperialist power, Japan was pushed into the position of becoming a regional power as a result of gaining two formal colonies (Taiwan and Korea) and an informal colony in parts of China. A regional power shares three characteristics. First, it establishes hegemony in a defined region, not on a world scale. Second, its ability to maintain hegemony in the region depends on the intentions and capabilities of the extra-regional Great Powers, for a regional power cannot confront a great power or a coalition of Great Powers by itself. Finally, it faces the possibility of one of the countries it subordinated resisting and weakening its hegemonic position with the assistance of the Great Powers outside of the region. The regional power is thus in the paradoxical position of having capabilities which are too small to make a regional order by itself, but too large to be simply subordinated to a great power. In this sense, a regional power is neither a great power nor a small power. As with Japan, therefore, a regional power cannot by definition gain a stable position in the international order. It is always put under constant pressure from the Great Powers outside of the region, on the one hand, but imposes heavy pressure on the subordinated countries within the region in order to prevent them from resisting it with the assistance of the extra-regional Great Powers, on the other. Its position is so precarious that it is always worried about the nightmare of resistance by the subordinated peoples in its colonies in combination with the military or diplomatic intervention of the Great Powers. In the worst case, a regional power may yield to the temptation to impose a regional order in a self-centred way and make a suicidal attempt to shut out the Great Powers from the region (Banno 1993, 1996; Mitani 1997). The insecurity felt by Japan as a regional power is well illustrated by an article by Tokutomi Sohō, a famous nationalistic journalist in Meiji and Taishō Japan. He wrote in 1916: The countries of the white men are already extending into the forefront of Japan. They have already encroached on China, India and Persia. Japan is not so far from Europe. Most of the countries in the east from Suez, excluding Japan, have been dominated by them. Coping with such a situation, can we have a hope of equal treatment between the white man and the yellow man? No … Although Chinese, like us, also belong to the world of the yellow man, they always humble themselves before the white man and indulge themselves by leading a comfortable life. We, Japanese, should take care of the yellow man in general, Chinese in particular. We should claim that the mission of the Japanese Empire is to fully implement an Asian Monroe Doctrine.

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An Asian Monroe Doctrine means for Asians themselves to deal with the affairs of Asia. Although we say that Asians should handle their own affairs by themselves, there are no other Asian people than the Japanese who are entitled to perform this mission. Therefore, an Asian Monroe Doctrine means in reality a Monroe Doctrine led by the Japanese. However, my opinion should not be misunderstood. I am not the sort of narrow-minded person who claims that we should shut out the white man from Asia. What I want to say is that we should not be dependent upon the white man, and that we should end the dominance of the white man in Asia. (Eguchi 1993:42–3) Tokotomi’s line of argument, which illustrates Pan-Asianism, clearly shows the mind-set of the Japanese elite in this period (Hiraishi 1998). It had three key elements. The first was a sense of frustration at being in the position of a regional power. Many Japanese baulked at the persistent intervention of the Western powers against their efforts to establish hegemony in East Asia. With the passage of time, this frustration escalated into the delusion that Japan had already consolidated enough power to mount further imperialist expansion in East Asia. The stark reality of early Shōwa Japan, however, was the continuing need for the tolerance of the Western Great Powers in any new adventure. The second element was disappointment at the attitude adopted by the people of East Asia. As with Tokutomi, many Japanese were dissatisfied with the disregard they showed for Japan’s position as a regional power. Despite their role as a sub-imperialist power, the Japanese not only recognized the same cultural and historical bonds with neighbouring East Asian countries, but also empathized with the peoples of East Asia as peoples colonized and oppressed by the Western Great Powers. They therefore needed a greater degree of legitimization than the Western colonizers. For this purpose, Japan claimed that it was the first liberator of East Asia from the West, and was a patron of East Asian client states. Although, as mentioned above, this was nothing more than self-deception clouded by the rhetoric of anti-colonial colonialism, such a mentality hindered Japanese understanding of nationalism and anti-colonialism, which were gradually extending their influence amongst the peoples of East Asia. The stronger their rejection of Japanese demands, the more Japanese disappointment deepened. The third element was a fear of encirclement. For so long as Japan remained a regional power, it faced the dual risk of encountering resistance from the rising forces of East Asian nationalism, on the one hand, and intervention by the Western Great Powers, on the other. This situation forced Japan to recognize a minimum imperative – namely, that at all costs it must avoid a simultaneous confrontation with the forces of resistance in the subordinate countries of East Asia and the intervention of the Western Great Powers. While abiding by this minimum imperative, Japan nevertheless mounted a single confrontation with the forces of resistance in China in order to realize an informal empire there. It called for a high level of diplomatic skill and military self-restraint. As Western imperialism had demonstrated, however, the rational choice of establishing a colonial policy in the homeland can produce discontent among the colonial army on the frontiers of the empire. In the case of Japan, this discontent exploded in Manchuria in 1931 as the

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military intervention of the local colonial army, without any recognition by the home government, took place. In this way, pre-war Japan rose rapidly from the position of a small power on the edge of Asia to a regional power at the centre of East Asia. Despite this, it had yet to gain a stable and resilient position in the international community. The long struggle for a higher and less precarious position in the world order ended with Japan’s attempt at a great leap. As in the case of Imperial Germany before the First World War, this was caused by fear, not a result of careful calculation. Regional superpower and middle power Regional superpower Like the revisionist interpretation of the history of the early Meiji period, a number of Japanese historians have emphasized the continuity between pre-war and post-war Japan (Mitani 1997). A revisionist interpretation of post-war Japanese foreign policy from this point of view asks: why has post-war Japan so easily adapted itself to the position of a junior partner of the US? The starting point for the answer to this question is the primitive conceptualization of a superpower in 1930s Japan. If its power base at the time is compared with China and the other colonized countries of East Asia, Japan was manifestly the strongest – that is, it enjoyed clear superiority. If it could have shut out the Western Great Powers from this region, it could have gained a monopolistic position within East Asia. Such a position shares similarities with the two superpowers in the post-war world in terms of superiority and monopoly within the separate blocs. In order to control countries within its sphere of influence, Japanese foreign policy during the 1930s inclined heavily towards reliance on military power rather than political or diplomatic skill. This suggests the loss of an appropriate balance between military hard power and diplomatic soft power. The result was felt at home and abroad in the production of a highly militarized regime – a Japanese-style national security state, on the one hand, and aggressive behaviour towards China, the most brutal colonial domination of Korea, and the harshest occupation of East Asia during the Pacific War, on the other. This dual aspect of a militarized foreign policy was manifest, albeit to a far lesser extent, in the case of the superpowers during the Cold War period. Another implication of a militarized foreign policy was the tendency of Japan to play down the resolution of international conflicts through diplomatic negotiations. In January 1938, for instance, when only half a year had passed since the beginning of the SinoJapanese War, the Konoe government decided to abandon diplomatic negotiations with China. The well-known statement issued by the government, that the Japanese Empire would have nothing to do with the Chiang Kai-shek government, started out: Still, even after the occupation of Nanking, the Imperial government gave the Chinese government the last opportunity to reconsider its attitude. However, the Chinese government does not seem able to understand the real [benevolent] intention of Japan. Moreover, while the Chinese

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government has resisted Japanese action without good cause, the Chinese government has paid little attention to the unbearable agony of the Chinese people and has not considered seriously peace in the whole of East Asia. (Eguchi 1993:318–19) This statement demonstrates not only the naïvety of Japanese diplomacy, but also the degree to which foreign policy was militarized. The same can be said of the superpowers in the Cold War period: the militarization of foreign policy was characteristic of both the US and the USSR. Ideology played an important role in the foreign policy of pre-war Japan. It was crystallized in the ideology of the Greater East Asia Co-prosperity Sphere. In January 1942, Prime Minister Tōjō said in the House of the Representatives: the fundamental principle of building the Greater East Asia Co-prosperity Sphere is that, by giving each country and each people the proper status in Greater East Asia, the Japanese Empire aims to establish a world order of co-prosperity on the basis of the moral values held by the core country, Imperial Japan. (Eguchi 1993:321) Japan needed such a crude ideology to justify its violent foreign behaviour. In the same way, the two superpowers needed ideology to legitimize their foreign expansion and conceal their national interests. What the above seems to suggest is that, although the Japanese government may not have possessed a clearly articulated concept of a superpower, it had at least a primitive understanding thereof. From this perspective, the Fifteen Years War lasting from Japan’s intervention in China in 1931 to its defeat in 1945 can be understood as a period when it was aiming to achieve the position of a regional superpower. How does this interpretation relate to the international position of post-war Japan? To start with, it is first necessary to determine the international position of post-war Japan. In essence, the US superpower assigned Japan the position of a subordinate regional power in East Asia. Post-war Japan thus became deeply involved in the regional order in East Asia, which the US made and was committed to during the Cold War period. The remarks of Mitani Taichirō, a prominent historian, highlight this Japanese role: The US backed up Japan in playing the crucial role of a regional power in fields such as politics, economics and, if possible, the military, in order to build and maintain the East Asian regional order. The aim of this regional order was to mount a defence against the expansion of Communism in general, and Chinese Communism in particular. In other words, the policy of the US to reconstruct and strengthen Japan’s industrial power was related to the US’s overall Asia policy of both establishing a strong economic relationship between Japan and the other East Asian countries and excluding the Communist countries from this regional order. This policy also aimed at establishing a kind of vertical division of labour

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within this region and constructing a stronghold against Communism in order to reduce the financial burden on the United States. (Mitani 1997:102–3) Thus, post-war Japan gained the precarious double position as a subordinate regional power: subordinated to the US superpower, on the one hand, but superior to other East Asian countries, on the other. Japan’s long history as a regional power helps to explain the adaptability of post-war Japan in again taking on the position of a regional power. This time, however, the position is not that of a purely regional power, but as a subordinate regional power. Needless to say, given the enormous US power base, Japan had to adapt to this subordinate role, willingly or reluctantly. This adaptability is undoubtedly related to the primitive idea of a superpower held in the pre-war period as, however primitive, Japan had recognized the position of a superpower. This helped Japan to understand the omnipotent attitude of the US superpower. It is for this reason that the political leaders of the conservative parties in early post-war Japan made every effort to maintain a good relationship with the US. In contrast, by casting back to the idea of the superpower in the pre-war period, the political leaders of the progressive parties focused on the attitude and the behaviour of the superpower. The result was a headlong rush into anti-Americanism without understanding the real US power. In this way, the legacy of the Japanese idea of a superpower from the pre-war period has hindered post-war Japan in reconsidering its position as a subordinate regional power (Iokibe 1999). The lost idea: the middle power A deeper understanding of why post-war Japan has not redefined its position can be gained by a comparison with the major Western countries, particularly Germany. They succeeded in identifying themselves as middle powers, although a long time was needed to achieve this redefined international position. The question is why Japan has not been able to identify itself as a middle power. Generally speaking, a middle power is characterized not only by a middle-rank position in terms of power base – that is, less than a superpower but more than a small power – but also by an intermediary role between the superpowers and small powers. In other words, the imperative of a middle power is to support the interests of the small powers and restrain the imprudent behaviour of the superpowers. In order to play an intermediary role, however, two conditions are necessary: first, the middle power must obtain the confidence and support of the small powers, otherwise it cannot mobilize enough political and diplomatic power resources to support their demands against the superpowers. Second, it cannot follow the superpowers in every case, otherwise its position will be perceived as a subordinate power. If this occurs, it is unable to gain the confidence and support of the small powers. The case of (West) Germany is instructive. At the outset, it faced great difficulty in gaining the support of the small powers and in restraining the superpowers’ behaviour. It thus needed to make a great effort to gain the position of a middle power. Above all, it had to overcome the legacy of history. Given the terrible legacy of Nazi Germany, a key goal was to weaken and overcome the misgivings of neighbouring countries. The strong

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commitment to European integration and the active Ostpolitik toward East European countries helped West Germany gradually overcome the legacies of the past. Second, West Germany abandoned a foreign policy based on the balance of power, despite its continuing domination of the Western international system. If West Germany had indulged in the balance of power game, it would have been unable to establish a cooperative relationship with neighbouring countries, as with France. Third, it sought to mitigate the sharp East–West confrontation, as not to do so would have enabled the superpowers to impose their will on the subordinate countries within each bloc. This policy provided West Germany with the opportunity to control, or at least influence, the superpowers. In this sense, the German Ostpolitik aimed to play an intermediary role by gaining the support of the small East European countries and promoting their interests against the USSR as well as the US. In this way, West Germany established its position as a middle power. In the case of post-war Japan, however, the failure to take on the position of a middle power was rooted in its position as a subordinate regional power. So long as Japan remained subordinate to the US, it could not play an intermediary role between the US and the small powers of East Asia. Nor could it restrain US policy in Asia. It was as a regional power that Japan acted by seeking to control other East Asian countries. In other words, the contradictory position of being subordinated by the US, on the one hand, and subordinating other East Asian countries, on the other, hindered Japan in recognizing itself as a middle power (Takahashi 1991, 1999). Japan’s threefold challenge Japan’s position as a subordinate regional power has been transformed as a result of three major historical changes: the end of the Cold War, the Gulf War of 1990–1, and ongoing globalization. Despite their respective differences, the important common feature of Japan’s response to these changes is the fact that it was not the main player in regard to any of them. The main site for the end of the Cold War was Europe, with the main actors being the two superpowers, the two German states, the UK, France and other European countries. The battle ground of the Gulf War was the Middle East. As a result of constitutional restrictions imposed by Article 9, which states in part that ‘land, sea, and air forces, as well as other war potential, will never be maintained’, together with the long distance to the Middle East, Japan could not participate in this war directly. Although globalization is indeed a global phenomenon, Japan perceived it as an historical trend propelled by the other main powers, in particular the US. These facts, and the perception amongst policy-makers that Japan could not play a major role in response to these three major historical changes, has to led a reconsideration of Japan’s position in the world (Sakamoto 1997). The impact of the end of the Cold War To start with, it should be emphasized that, even though the Cold War ended in Europe, its end destroyed the Cold War structures so completely that the Cold War ended in other parts of the world too, including East Asia. The first impact of its ending on Japan was

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the transformation of post-war Japan’s domestic political regime. The so-called ‘1955 political system’, within which a strong governing party, the Liberal–Democratic Party (LDP), and a permanent opposition party, the Japan Socialist Party (JSP, renamed the Social Democratic Party of Japan in 1991), dominated the political terrain, had been maintained as a result of the domestic Cold War. One important element of the domestic Cold War in the case of Japan was conflict between these two political forces in regard to foreign and security policy. The LDP supported the US and the US–Japan security treaty, on the one hand, whereas the JSP opposed the security treaty and Japan’s Self-defence Forces (SDF), on the other. So long as the governing party kept close ties with the US, Japan’s domestic politics had to exclude the JSP and the Japan Communist Party (JCP) as the governing parties. In the same way that the key feature of the Italian First Republic (1945 to the early 1990s) was the exclusion of the Italian Communist Party from the national government, the key feature of Japan’s 1955 political system was the exclusion of the JSP from the national government. The end of the Cold War also brought to a close the domestic Cold War and terminated the legitimacy of maintaining the imperative of the ‘1955 political system’ – that is, the exclusion of the JSP from the government. Although the breakdown of the ‘1955 political system’ engendered the dealignment and realignment of the Japanese party system, the fact that the JSP remained part of government for five years provides solid evidence that the domestic Cold War in Japan had ended (Yamaguchi 1997; Sasaki 1999; Tawara 2000). The second impact of the end of the Cold War was the re-entry of Japan into East Asia. The end of the Cold War and the concomitant political developments in Europe, in particular the deepening and widening of the EU, exerted a profound impact on regionalism. From the Japanese perspective, the political developments in 1990s Europe have been regarded as the Europeanization of Europe in terms of its power, new organizational structure and its autonomy. Propelled by the Europeanization of Europe, East Asian countries, including Japan, started to design a new regional order in East Asia. Regionalism in East Asia, however, must cross two hurdles. The first hurdle is the basic difference in regard to the concept of regional order. One concept of regional order is in the style of the hub-and-spoke relationship strongly proposed by the US, whereas an alternative is the concept of regional order in the style of horizontal and multilateral relationships, as proposed by some countries in Southeast Asia. In this sense, the Asia Pacific Economic Cooperation (APEC) forum can be understood as a compromise between these two ideas, combining both the vertical and the horizontal. For Japan, the task of selecting between these two choices has been fraught with difficulty. If it were to select the first, and follow the blueprint of the huband-spoke relationship, it would reinforce its own position as a subordinate regional power, departing East Asia. If Japan were to select the second choice and establish a close relationship with other East Asian countries, it would weaken its relationship with the US and would face criticism as an independent regional power. This relates to Japan’s historical legacy: it might awaken the nightmare of the ‘Greater East Asia Co-prosperity Sphere’. Thus, Japan’s role in the process of building a regional order in East Asia has been restricted to the role of compromiser between both concepts (Funabashi 1995; Hook 1999a). The second hurdle has been how to overcome the past. During the period of the Cold War, the issue of the legacy of the Japanese military’s behaviour during the Second

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World War was suppressed because of the dominant influence of the regional US presence and the authoritarian regimes in East Asia. However, the possibility of weakening the US presence and the dynamic wave of democratization in East Asia sparked the issue of overcoming the past. This issue has been decisive not only for the reentry of Japan into East Asia, but for the democratization of East Asia, too. The main problem of overcoming the past lies not only in how to establish a good relationship with East Asian countries at the governmental level, but also in how to build a close relationship at the grass-roots level. Needless to say, democratization strengthens the power of the people. If so, then Japan needs to make strenuous efforts to build a good relationship with East Asian countries at both the governmental and grass-roots levels. In the period of the Cold War and authoritarian regimes, the issue of overcoming the past could be solved by paying war reparations to East Asian governments. In the period of democratization, however, this issue cannot be dealt with successfully without weakening the trauma of the past at the grass-roots level. Otherwise Japan will be unable to establish a good relationship with the people of East Asia. At the heart of the problem is Japan’s lack of experience in building up a relationship with a democratized East Asia. Since the Meiji Restoration of 1868, Japan’s experience has been with a colonized East Asia, next with an East Asia experiencing the decolonization process, and then with authoritarian or communist countries in the wake of the decolonization process. In this sense, the issue of Japan’s past is the touchstone for the re-entry of Japan into a democratized East Asia (Wakamiya 1995; Che 1995; Moriyama 1998). Third, the end of the Cold War brought Japan face to face with a new experience. In particular, the collapse of the Soviet-type communist regime led to the problem of transition for the communist regimes of China, North Korea and Vietnam. Although no one can predict the final outcome of their transition, these regimes have sought to make the transition from old-style communist rule to a new type of regime. In Europe, the problem is whether the post-communist regimes will evolve as democratic regimes in a post-communist world; in East Asia, in contrast, the problem is the metamorphosis of the communist regimes in a post-communist world. In other words, the communist regimes in East Asia have faced a much more difficult problem than the post-communist regimes in Russia and Eastern Europe – that is, how to maintain communist rule in a postcommunist world in terms of political legitimacy, development strategy and international support (Hughes 1999). Whereas the West European countries have tackled the problem of regime transition in Russia and Eastern Europe, Japan has been engaged in a different type of transition problem in East Asia. The most serious issue has been how to evaluate the resilience of these regimes, in particular the future of North Korea. The most sensitive problem has been how to respond to the unpredictable behaviour of these countries, as illustrated by China’s action regarding Taiwan – for instance, the use of missile tests to threaten the presidential elections in 1996 – or the nuclear plant and 1998 missile problem in North Korea. The most intractable problem has been how to support the development of these countries. The key point for Japan is that these problems are completely new and require a prudent attitude toward these countries. To sum up, the impact of the end of the Cold War on Japan is, in essence, that Japan has entered a new historical stage, a stage which Japan has not experienced during the period from the Meiji Restoration to the end of the Cold War. In the post-Cold War era,

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Japan has had to tackle, first, the consolidation of the post- ‘1955 political system’; second, the re-entry of Japan into democratic East Asian regionalism; and third, the response to the unpredictability of the East Asian communist regimes in a postcommunist world. The impact of the Gulf crisis and Gulf War If the Gulf crisis (1990–1) and Gulf War (1991) had not occurred, Japan could have reconsidered its position as a subordinate regional power over a longer time period. As it was, however, the war sparked two problems: the question of international security and the question domestically of how to tackle international security. Essentially, the reaction of Japanese policy-makers to the Gulf War was that they did not consider it in terms of international security, but rather focused almost exclusively on reconsidering Japan’s own foreign and defence policy. In other words, Japan dealt with the Gulf War not from the perspective of international security and peace in the Middle East, but from the perspective of Japanese foreign policy (Kunimasa 1999). The Gulf War posed for the international community the problem of post-Cold War international security. During the Cold War period, regional conflicts had been dominated by the US–USSR or US–China confrontation. In this context, the US had a permanent enemy in communism, manifest concretely as the USSR and China. Since the end of the Cold War the Western camp, and, indeed, the international community, has had no permanent enemy, but rather a range of unidentified enemies. Although an enemy may exist in various forms, the international community has been unable to identify which country will emerge in this guise. The basic problem of the post-Cold War period is how to cope with this potential and unidentified enemy. Despite this, Japan has paid hardly any attention to this fundamental problem. During and after the Gulf War, Japanese policy-makers failed to make any efforts to consider a new concept of security corresponding to the new international security environment. In particular, they failed to build a new East Asian regional order capable of adapting itself to the new situation in post-Cold-War East Asia. For instance, since the ASEAN Regional Forum (ARF) was established, the leading force in promoting the organization has been ASEAN, not Japan. Regarding peace on the Korean peninsula, too, the US has taken the initiative in making contact with North Korea. Japan has simply followed the North Korean policy of the US and South Korea. During the Gulf War conservative commentators in Japan criticized the nation’s onecountry pacifism – that is, the policy of simply acting in order to keep Japan’s own peace, without taking action in order to promote international peace. Despite this criticism, the fact that Japan has made little effort to build a new world and an East Asian peace order can more accurately be said to arise from Japan’s persistent one-country perspective. Accordingly, at the time of the Gulf War and thereafter, Japan has concentrated on reshaping its defence policy. In October and November 1990, the government of Prime Minister Kaifu Toshiki sought but failed to pass the United Nations (UN) Peace Keeping Cooperation Bill into law. This débâcle triggered a series of debates focused on the issue of the basic principles of Japanese defence policy. At the heart of these debates, as in the Cold War era, has been the interpretation of Article 9 of the Constitution. In other words, the debate revolved around the legal treatment of Japan’s contribution to the UN

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peacekeeping force. The outcome was the passage in June 1992 of the Peacekeeping Operations (PKO) law. The by-product of these debates was the reconsideration of Japan’s position in the world. Two lines of argument have been pursued. First, Japan as a ‘normal country’ has its base in the realist view of international politics. According to this view, the main actor is the state and the centre stage of international relations is interstate relations. This view emphasizes the power and role of the state and the importance of the Great Powers. Representative of this view is the ‘normal state’ advocated by Ozawa Ichirō, a key member of the Liberal Party ( Jiyūtō). He proposed in his book, Blueprint for a New Japan (1993), that Japan should become an international state in the pure sense. In order to become an international state, Japan needs to become a ‘normal state’ in that it should accept those international responsibilities which are considered as a state’s natural duty by the international community. In defence policy, therefore, he proposes the building of a permanent UN force and the participation of Japanese forces (separate from the present SDF) in it. The question then becomes why post-war Japan has not been a normal state. Ozawa’s line of argument is simple: first, a normal state should possess enough military power to contribute to the creation of international peace. Second, a normal state should become a great power in terms of political and military power, not simply economic power. Third, as a consequence, Japan should possess military power corresponding to its economic power. However, as the Constitution prohibits the possession of a large military, Japan should organize an expeditionary force, separate from the SDF, which could play a significant role in a permanent UN force in the future. In line with this perspective, he argues that Japan should revise the Constitution in the mid to long term. It can be seen that the implicit assumption of Ozawa’s argument is that Japan, by acquiring the means, can become one of the Great Powers and abandon its subordinate position. His dream is the improvement of Japan’s position in the world, where it moves from a subordinate regional power to an autonomous regional power which fulfils the requirements of a great power. The second line of argument relates to Japan as a civilian power: this argument is in line with the liberal school of world politics. The liberal school emphasizes the interdependence of the world, international regimes and international integration. This standpoint suggests that interdependence has brought about dense interstate relations and, with it, new mechanisms for international cooperation. Representative of this argument is Funabashi Yōichi of the Asahi newspaper and Hans Maull, a German international politics expert. Their argument is that Japan and (West) Germany have developed as civilian powers in the post-war period. On the basis of Maul’s earlier work, Funabashi proposed that Japan should become a global civilian power. It should play a decisive and leading role in the world, using its economic and technological potential, and strive to realize the goal of civilizing the world community. For this purpose, Japan should reduce its military power, one of the main elements of ‘hard power’, to the lowest level. In its place should come an increase in ‘soft power’, i.e. the sort of power which could contribute to solving global problems in the area of the environment, development and human rights. In this sense, Funabashi’s argument for a global civilian power could be rephrased as Japan as a ‘global soft power’ (Maull, 1990–1; Funabashi 1993).

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In summary, while Ozawa’s argument for a normal state challenged the fundamental position of post-war Japan’s constitutional pacifism, and was therefore subject to a barrage of criticism, Funabashi’s argument for a global civilian power confirmed Japan’s constitutional pacifism and updated its position, elaborating its power elements. It therefore received much support. However, both arguments contain a number of weak points. Although Ozawa succeeded in highlighting the role of military power in the postGulf War period in challenging the tradition of post-war Japan’s foreign and defence policy, he was too strongly oriented towards hard power problems in order to demonstrate the appropriate power portfolio for Japan. In contrast, Funabashi succeeded in maintaining the fundamental course of post-war Japan’s foreign policy, yet he seems to have failed to touch on the links between hard and soft power in Japan’s power portfolio. In this sense, both proposals contain the possibility of setting a new agenda for balancing hard and soft power in Japan’s power portfolio. So far, however, the debate has not developed in such a direction. The fluidity of domestic politics, the inauguration of the PKO law, the lessons of a civilian volunteer being killed at the time of the UN Transitional Authority in Cambodia, and the bursting of Japan’s ‘bubble economy’, have led to the debate on this problem being overshadowed. Ironically, the failure to resolve these questions fully has meant that, having missed the opportunity, Japan has had no alternative but to continue in its position as a subordinate regional power. The reconfirmation of the US–Japan security treaty in April 1996, the revision of the US–Japan guidelines for defence cooperation in September 1997, the Asian financial crisis of 1997, and the new threat posed by a more adventurous North Korea, have in a sense sealed Japan’s position as a subordinate regional power (Funabashi 1997; Ōta 2000). The impact of globalization At the present time, Japan has been agonizing under the pressures of the longterm economic slump which followed the bursting of the ‘bubble economy’ at the end of the 1980s. The immediate issue of economics means that many Japanese fear the impact of low economic growth, such as the government’s heavy financial deficit, high unemployment, the difficulty of reforming welfare and educational policy, and so on. This is the Japanese context for the discussion of globalization. If Japan could have boasted of good economic performance, the contours of the discussion on globalization would no doubt have been different. As it is, the debate on globalization has been strongly dominated by anti-globalist sentiments, amongst both conservative and progressive economists. A representative economist of the conservative school is Saeki Keishi. The keyword of his argument is Americanism, as he regards the twentieth century as the age of Americanism. According to Saeki, its essence is the realization of liberalism and democracy by business (Saeki 1998:135–6). He argues that the US has established democracy not only in the political community, but also in economic life. In other words, it has realized an affluent society by mass production (Fordism) and mass consumption. He calls this phenomenon the democracy of goods. The universality of Americanism, he continues, lies not in political democracy, but in the materialism of the democracy of goods (Saeki 1998:135). He draws the conclusion that Americanism in the terms of his

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argument penetrated post-war Japan and produced a higher level of the democracy of goods than in the US. In this sense, post-war Japan has become the winner of Americanism. At the same time, however, he points to the dark side of this victory: although Japan succeeded in the pursuit of Americanism, this success has produced the present crisis in the Japanese economy. Saeki’s argument about globalism starts out by defining globalism as hyperAmericanism. He regards globalism as a means to rebuild US hegemony by manipulating global financial markets. He regrets that globalism has divided the people into the global experts who work beyond the border of the nation state and the marginalized and discontented mass of people within the state’s borders. And he laments that, because globalism depends heavily on libertarianism, it destroys the social ethos which integrates members of the political community into the nation state. He therefore advocates the importance of re-establishing civic nationalism which strengthens the power of the nation state (Saeki 1998:283–343). The point which he emphasizes over and over again is the importance of believing in healthy nationalism, which is different from the ultranationalism of 1930s Japan. Progressive economists have also taken issue with globalization. For instance, a number of leading economists belonging to the progressive school proposed a plan for reviving the Japanese economy (Kaneko et al. 1999). As regards globalization, the proposal opposes the policy goals recommended by neo-liberal and hyper-global economists, such as small government, deregulation, favourable tax treatment, as meeting the requirement for globalizing the Japanese economy. It instead takes up the issue of global standards and insists that the so-called global standard is not global but simply a US standard. It evaluates this ‘American standard’ and concludes that its enforcement in Japanese financial markets could intensify casino capitalism (Strange 1986) in global financial markets and exert a negative impact on Asian financial markets. The main critical comment of this proposal on the policy goals of neo-liberal economists focuses on the destruction of the social welfare safety net by globalizing the Japanese economy. It reads as follows: until the 1980s the nation state was able to provide both the social safety net for maintaining social order and the economic safety net for maintaining the domestic financial system. However, today these safety nets have been completely destroyed by the self-propelled, globalized market economy. (Kaneko et al. 1999:75) To avoid misleading the reader, it should be pointed out that this proposal does not oppose the globalization of the Japanese economy per se. It rather works out a different strategy to revitalize the Japanese economy. According to the standpoint taken, the weakness of neo-liberal and hyper-global economists is that they analyse the world economy on two levels, the global and the national. In this sense, their aim is to globalize the national economy directly. The alternative strategy advocated by this progressive proposal is to analyse the world economy on four levels, the global, the regional, the national and the local or sub-national level. In this way, it emphasizes the importance of establishing a regional economic order in East Asia and of pushing forward with the

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decentralization of the Japanese government system to improve the local economy (Kaneko 1999). To sum up these arguments, two standpoints on anti-globalism can be discerned. The first is to take countermeasures against globalization by re-establishing the nation state. This is illustrated by Saeki’s argument. The second is to take a more complex view of globalization and to reconstruct the global order by establishing regional order and local order. On the one hand, globalism should be counterbalanced by strengthening regionalism; on the other, the nation state should be reinvented by strengthening localism. The proposal of economists belonging to the progressive school takes this standpoint. As both arguments demonstrate, the debate on globalization in Japan contains the following three points. First, the anti-globalist arguments on both sides have paid little attention to the dynamic aspects of globalization. From the Japanese perspective, globalization has two aspects: globalizing and being globalized (Hasegawa and Hook 1998). In other words, globalization has brought about actors both as subjects and as objects. Anti-globalist arguments concentrate on analysing and criticizing the aspect of being globalized, ignoring completely the fact that Japan as a globalizing actor has propelled globalization. As far as the Japanese economy is concerned, the Japanese financial market has been forced to be globalized through the introduction of the socalled global standard. Certain companies in the manufacturing sector have driven globalization as globalizing actors, such as Toyota in the automobile industry and Sony in the electronics industry. As mentioned above, about a hundred years ago Japan was more strongly conscious of being the object of informal colonial rule by the Western powers than of being a subject in colonizing neighbouring East Asia. Now, in the global age, Japan continues to hold the same mental attitude of being the object of global trends. It seems that, when the globalization debate is closely examined, the dominance of anti-globalism demonstrates the resilience of the mentality of being the object of global historical trends. The second point is that the arguments not only of anti-globalism, but also of globalism, tend to distinguish between the global world and the domestic world. Although globalization has collapsed the global (foreign) and domestic (home) distinction, policy-makers and others continue to maintain a dichotomy between foreign and domestic society as well as between the world and Japan. The global world consists of countries and peoples in the globe, not excluding Japan. Despite this, many Japanese policy-makers continue to regard the global world as the outer world which does not include the inner world, i.e. Japan. This mentality of maintaining a strong distinction between the outer and inner worlds is demonstrated well by the weak development of multicultural society in Japan (Kang 1996; Kang and Yoshimi 1999). The third point is the tendency to consider globalization solely in terms of the economy, particularly financial markets. Globalization is a multi-faced phenomenon, covering politics, economy, culture, identity and society. Above all, the political dimension of globalization has been neglected in Japan. As some scholars argue (Beck 1998), globalization calls for new governance in Japanese politics. In recent years, the Japanese government has started to push forward with decentralization, propelled by the comprehensive decentralization laws of 1999 (Nishio 1999). Such decentralization not only changes the intergovernmental relationship between the central and local governments, but also promotes the power of local governments. One of the goals of

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decentralization is to strengthen the position of local government and local community as globalizing actors. One global activity of local governments is to build cooperative relationships at the micro-regional level (Hook 1999b). Another activity is to support development in less developed countries. Development assistance programmes of local governments cover direct aid, like sending local government officials, re-education programmes, and supporting local non-governmental organizations (NGOs). These activities demonstrate a new trend in Japanese politics in terms of governance. Conclusion Such views on world politics as the distinction between the outer and inner world, the vertical or hierarchical view of the world order, the strong feeling of being the object of global trends, remain the musical codes for understanding modern Japanese history since the Meiji Restoration. These codes have variations in each historical period. However, Japanese local politics in an age of globalization has shown signs of dissonance in these traditional keys. Even though local governments and local NGOs have not yet played an influential role as globalizing actors, their activities have the potential to transform the understanding of globalization from a global perspective. Since the end of the 1980s, some local governments have advocated think globally, act locally. In spite of these efforts, the activity of citizens in local communities has not been strongly vitalized. In this respect, a number of political analysts have paid attention to the importance of local democracy (Ishikawa 1999; Yamaguchi 1999). Without a strong democratic commitment to the local community, it is difficult to act locally and think globally. The next important task for Japanese democracy is to establish a triangular relationship among democracy, globalism and localism at the local level in order to discover an alternative, democratic globalization in place of the present neo-liberal and uncontrolled globalization. References Banno, J. (1993) Nihon Seijishi: Meiji, Taishō, Shōwa Shoki (Political history – Meiji, Taishō, Prewar Shōwa), Tokyo: Hōsō Daigaku Kyōiku Shinkōkai. —(1996) Kindai Nihon no Kokka Kōsō 1871–1936 (The concept of the state in modern Japan 1871–1936), Tokyo: Iwanami Shoten. Beasley, W. G. (1987) Japanese Imperialism 1894–1945, Oxford: Clarendon Press. Beck, U. (1998) Was ist Globalizierung?, Frankfurt a.M.: Suhrkamp. Che, M. K. (1995) Kankoku no Minshuka (Democratization of South Korea), Tokyo: Iwanami Shoten. Eguchi, K. (1993) Futasu no Taisen, Nihon no Rekishi 14 (Two world wars, history of Japan vol. 14), Tokyo: Kōdansha. Fieldhouse, D. K. (1973) Economics and Empire 1830–1914, London: Macmillan. Funabashi, Y. (1993) Nihon no Taigai Kōsō (New vision of Japanese foreign relations), Tokyo: Iwanami Shoten. —(1995) Ajia Taiheiyō Fūjon: APEC to Nihon (Asia-Pacific fusion: APEC and Japan), Tokyo: Chū Kōronsha. —(1997) Dōmei Hyōryu (Alliance adrift), Tokyo: Iwanami Shoten.

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Gallagher, J. and Robinson, R. (1976), ‘The imperialism of free trade’, in W. M. R. Louis (ed.) Imperialism: Robinson and Gallagher controversy, New York: St Martin’s Press. Hasegawa, H. and Hook, G. D. (1998) ‘Introduction’, in H. Hasegawa and G. D. Hook (eds) Japanese Business Management: Restructuring for low growth and globalization, London: Routledge. Hiraishi, N. (1998) ‘Kindai Nihon no kokusai chitsujō-kan to Ajia shugi’ (Views on world order and Asianism in modern Japan), in Institute of Social Sciences, University of Tokyo (ed.) 20seiki Sisutemu 1 (20th century system, vol.1), Tokyo: Tokyo University Press. Hook, G. D. (1999a) ‘The East Asian Economic Caucus: a case of reactive subregionalism?’, in G. D. Hook and I. Kearns (eds) Subregionalism and World Order, London: Macmillan. —(1999b) ‘Japan and microregionalism: constructing the Japan sea rim zone’, in Y. Yamamoto (ed.) Globalism, Regionalism and Nationalism: Asia in search of its role in the 21st century, Oxford: Blackwell. Hughes, C. W. (1999) Japan’s Economic Power and Security: Japan and North Korea, London: Routledge. Iokibe, M. (ed.) (1999) Sengo Nihon Gaikōshi (History of postwar Japan’s foreign policy), Tokyo: Yuhikaku. Ishikawa, M. (1999) Ochite yuku Seiji (Japanese politics is collapsing), Tokyo: Iwanami Shoten. Jansen, M. B. (1992) China in the Tokugawa World, Cambridge, MA: Harvard University Press. Kaneko, M. (1999) Han Gurobarizumu (Anti-globalism), Tokyo: Iwanami Shoten. Kaneko, M., Konishi, K., Jinno, N. and Tsurumi, M. (1999) ‘Keizai saisei e no kinkyū teian’ (Urgent proposals for reviving the Japanese economy), Sekai January: 65–79. Kang, S. J. (1996) Orientarizumu no Kanata (Beyond orientalism), Tokyo: Iwanami Shoten. Kang, S. J. and Yoshimi, S. (1999) ‘Konseika shakai e no chōsen’ (Challenges for multicultural society), Sekai August: 285–98. Kunimasa, T. (1999) Wangan Sensō to iu Tenkanten (The Gulf War as the watershed of Japanese politics), Tokyo: Iwanami Shoten. Maruyama, M. (1992) ‘Kindai Nihon shisōshi ni okeru kokka risei no mondai’ (The problem of the reason of state in the history of Japanese modern political thought), in Chūsei to Hangyaku (Loyalty and resistance), Tokyo: Chikuma Shobō. Maull, H. W. (1990–1) ‘Germany and Japan: the new civilian powers’, Foreign Affairs 69, 5: 91– 106. Mitani, T. (1997) Kindai Nihon no Sensō to Seiji (War and politics in modern Japan), Tokyo: Iwanami Shoten. Moriyama, S. (1992) Nikkan Heigō (Japan’s annexation of Korea), Tokyo: Yoshikawa Kōbunkan. —(1998) Kankoku Gendai Seiji (Contemporary Korean politics) Tokyo: Tokyo University Press. Nishio, M. (1999) Mikan no Bunken Kaikaku (Unfinished decentralization reform), Tokyo: Iwanami Shoten. Oka, Y. (1993) ‘Kokuminteki dokuritsu to kokka risei’ (National independence and the reason of state), in Y. Oka, Chosakushū 6 (The works of Y. Oka, vol. 6), Tokyo: Iwanami Shoten. Ōta, M. (2000) Okinawa no Ketsudan (Okinawa’s decision), Tokyo: Asahi Shinbunsha. Ozawa, I. (1993) Nihon Kaizō Keikaku (Blueprint for a new Japan), Tokyo: K!dansha. Saeki, K. (1998) Amerikanizumu no Shūen (The end of Americanism), Tokyo: Kōdansha. Sakamoto, Y. (1997) Sōtaika no Jidai (The era of relativism), Tokyo: Iwanami Shoten. Sasaki, T. (ed.) (1999) Seiji Kaikaku 1800 nichi no Shinjitsu (Political reform: the story of 1800 days), Tokyo: Kōdansha. Strange, S. (1986) Casino Capitalism, Oxford: Blackwell. Takahashi, S. (1991) ‘Seiō no detanto: tōhō seisaku shiron’ (The new Ostpolitik of West Germany), in K. Indo et al. (eds) Sengo Demokurashi no Henyō (Transformation of post-war democracy), Tokyo: Iwanami Shoten. —(1999) Rekishi toshite no Doitsu Tōitsu (German unification as history), Tokyo: Iwanami Shoten.

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Tawara, S. (2000) Atama no nai Kujira: Heisei seijigeki no shinjitsu (The whale without a head: the story of Heisei political change), Tokyo: Asahi Shinbunsha. Wakamiya, H. (1995) Sengo Hoshu no Ajia-kan (Views on Asia by post-war conservatives), Tokyo: Asahi Shinbunsha. Watanabe, H. (1997) Higashi Ajia no Ōken to Shisō (Power of king and political thought in East Asia), Tokyo: Tokyo University Press. Yamaguchi, J. (ed.) (1997) Renritsu Seiji: Dōjidai no kenshō (Coalition politics: investigating contemporary Japanese politics), Tokyo: Asahi Shinbunsha. —(1999) Kiki no Nihon Seiji (The crisis of Japanese politics), Tokyo: Iwanami Shoten.

2 Japan’s role in the East Asian political economy An emerging region? Glenn D. Hook Introduction The role of Japan as a catch-up state seeking to draw level with if not overtake the early starters of the West has profoundly shaped the regional order and path of development charted by the late-comers of East Asia. While in the mid-nineteenth century Japan on the Eastern wing joined Germany and Italy on the Western wing of the emerging global order as late-comers to development, the path to modernization chosen by Japan involved imperial expansion into neighbouring countries, as with the formal colonization of Taiwan and Korea and the informal colonization of China. In the post-war era, Japan could not again traverse the same path to economic development pursued in the pre-war period, and instead instrumentalized policy through economic rather than military means. The capitalist developmental states of East Asia which emerged out of the decolonization process, although falling under the shadow of the US during the Cold War in terms of politics and security, were rather influenced by Japan economically. With the Cold War’s ending, Japan has begun to play a greater political and emerging security role in the region, but its economic role in East Asia still predominates. In order to elucidate Japan’s role in East Asia, this chapter first introduces how it helped to reconstitute the East Asian political economy during the Cold War period, with a focus on the economic dimension of regional relations. East Asia is here understood in the broad geographic sense of both Northeast and Southeast Asia, and in essence refers to the ten members of the ASEAN as well as Japan, China and South Korea (ASEAN plus Three). The chapter next highlights Japan’s role in the emergence and development of post-Cold War regionalism, and goes on to discuss the Japanese response to the East Asian financial and economic crises. It then examines Japan’s role in emerging East Asian regional groupings, especially the ASEAN plus Three summits, and seeks in the concluding section to evaluate the global and regional meaning of Japan in a globalizing political economy. Japan’s role in the Cold War East Asian political economy The Japanese defeat in the Second World War brought to an end the imperial ambition of establishing a Greater East Asia Co-prosperity Sphere through military means and led to the physical and psychological withdrawal of Japan from East Asia during the early post-

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war years. Although the signing in 1951 of the US–Japan security treaty, along with the San Francisco peace treaty, meant that Japan became integral to US strategy in the region as a bastion against communism, the provision of bases and support of US policy was an indirect rather than a direct military contribution to the emerging Cold War order. Certainly, Japanese forces carried out crucial minesweeping operations during the Korean War (Auer 1993:79), but no troops were sent to fight in either the Korean War or the later Vietnam War. Instead, Japan provided bases for US forces to fight these conventional wars and to prepare for and possibly launch a nuclear war. The Japanese government, although not always Japanese society, supported the US in these efforts. The confrontation between the East and the West shaped the overall strategic environment within which East Asian states interacted during the Cold War period. As a result, Japan’s political and economic relations with the communist states of East Asia were severely curtailed. The government’s recognition of Taiwan instead of the People’s Republic of China (PRC) suggests how Japan reconstituted its political role in East Asia within the overarching constraint of the alliance with the US and the East–West Cold War confrontation. Economically, however, it was able to build up some trade relations with the PRC under a policy of the ‘separation of politics and economics’ (Johnson 1995:235–63). Overall, the need of the US for a stable and reliable ally in the region ensured Japan’s international rehabilitation and its role in the development and exploitation of the resources and markets of those parts of East Asia falling within the US sphere of influence. It also gained access to the markets and technologies of the US. The problem for Japan was how to carve out its own role, given the dual constraints of reliance on the US–Japan security treaty and the sensitivity of the new East Asian states to the re-emergence of Japan as a regional military power. As the other big East Asian power, China, was communist, policy-makers faced no real rival in establishing Japan’s role as a supporter of the US in East Asia. Thus, while indirectly supporting the US in the military dimension, Japan’s reconstitution of a direct role in East Asia commenced in the economic dimension of regional relations. It is evident in the reparations made in the form of loans and the transfer of industrial parts and machinery to those countries which had suffered at Japanese hands during the war. Now freed from the shackles of colonization or occupation by either European powers or Japan, Burma (1954), the Philippines (1954), Indonesia (1958) and South Vietnam (1959) all received reparation payments from Japan. As the reparations to South Vietnam and not to North Vietnam testify, the attempt to rebuild economic links in East Asia were constrained by the overarching Cold War strategic environment within which Japan operated. In essence, economic means were used by Japanese policymakers to carve out a role as a supporter, or as a ‘junior partner’, of the US in East Asia (Shiraishi 2000:57–8). At the same time, however, the policies adopted by the Japanese government helped to shape the nature of the regional political economy. Japanese policymakers pushed forward with economic cooperation and the extension of Official Development Assistance (ODA) to the developing economies of East Asia in terms of Japanese interests, not only those of the US. Depending on the era, Japan at some point accounted for the majority of ODA for each of the East Asian economies (Hook et al. 2001). Moreover, until the early 1970s nearly three-quarters of Japanese ODA was tied to the purchase of Japanese goods and services (Soderberg 1996:72–88). This provided Japan

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with the economic links needed to help reshape the regional political economy. Furthermore, as seen in the Japanese response to energy needs in the face of the 1970s oil shocks, when ODA was diversified away from East Asia, the focus of Japanese ODA changed as Japanese interests changed. Of course, ODA and other forms of economic cooperation were mostly carried out within the context of support for the US, as was evident in the provision of US$500 million in economic assistance to South Korea when diplomatic relations were normalized in 1965 (no diplomatic relations exist with North Korea in early 2000). Nevertheless, the economic dimension of regional relations offered Japanese policy-makers an opportunity to forge close economic links with other parts of East Asia, thereby promoting regional stability and prosperity, albeit within the overarching framework of the Cold War confrontation between East and West. The provision of Japanese equipment and the direct tying of ODA helped to shape a regional division of labour based on the idea of the ‘flying geese’ pattern of development (Korhonen 1994). In essence, this model of development posits a vertical division of labour, with Japan as the goose at the head of the flock moving to production of goods at a higher level of technological sophistication as the follower geese of other parts of East Asia take over the older technologies and develop economically by exploiting comparative advantage and exporting the goods produced. Metaphorically, each goose has a role to play as the flock heads in a unilinear direction of transferring older technology further down the flock. Concretely, technology is passed from Japan to the NIEs, to the lead economies of Southeast Asia, and on to China and Vietnam. For Japanese supporters of the ‘flying geese’ pattern of development, the ‘economic miracle’ of East Asia during the 1980s, when some economies reached double-digit growth, offers ample evidence of the viability of the model and the ability of Japan to stimulate and help to sustain growth and prosperity in East Asia. Kojima Kiyoshi, one the Hitotsubashi University group of economists who have propagated this model, recently argued that even the East Asian financial and economic crises do not invalid this pattern of development (Kojima 2000). However, others argue that growth in East Asia moved from the role of the ‘flying geese’ to that of FDI from the 1980s onwards (Izaka 1999:145), and others have moved beyond the idea of ‘flying geese’ and ‘production cycles’ (Bernard and Ravenhill 1995). Even within the context of the ‘flying geese’ pattern of development, moreover, while Japan has certainly moved rapidly from the production of textiles in the 1960s to computers in the 1990s, the follower economies of East Asia have not only taken over the older technology; they have in certain instances been able to leapfrog to the production of high-technology products as a result of Japanese investments. This can be seen, for instance, in the location by Japanese multinational corporations of research facilities and high-technology plants in the electronics industry in Malaysia (Hook 1996a). Within the wider context of Japan’s own successful economic development as the ‘lead goose’ from the mid-1950s onwards, a radical change was brought about in its economic relationship with the US. Rather than Japan remaining as a second-tier economic power, as expected by US planners during the Allied Occupation of Japan (Cumings 1984), it became an important exporter of increasingly sophisticated products to the US market. The successful development of Japan as an export economy meant that, starting in 1967, the US suffered a trade deficit rather than enjoyed a trade surplus in the bilateral relationship. A range of trade conflicts followed in the wake of the mounting

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deficits, represented by textiles in the 1960s, steel in the 1970s, automobiles in the 1980s and semiconductors in the 1990s. The impact of this change in Japan’s economic standing became salient in East Asia in the late 1960s and early 1970s. With the war in Vietnam and the costs of maintaining regional hegemony sapping US power, President Richard Nixon in 1969 announced the Guam Doctrine, which called on the regional allies of the US to share more of the defence burden. Two years later, in 1971, Nixon announced the end of US hegemony as known until that time: politically, he abandoned Taiwan and recognized the PRC as the legitimate government of China; economically, he moved off the gold standard and imposed an import surcharge. Whereas the latter decision signalled the restructuring of the post-war economic order, the former indicated the restructuring of the political and strategic order. The Nixon ‘shocks’ profoundly affected the future shape of the regional political economy. Nixon’s abandonment of the gold standard and the move to a floating exchange rate system led to a rapid rise in the value of the yen. From 1949 to 1970 the yen had been pegged at 360 yen to the dollar, but its value soared during the 1970s, from 308 in 1971 to 272 in 1973 to 210 in 1978. The increase in the value of the yen was a challenge to Japanese exporters as its rise undermined the competitiveness of Japanese goods on world markets, given the dominance of the dollar as the international currency of trade. By the same token, however, yens converted into dollars gave Japanese producers an incentive to move production offshore. Domestic factors also spurred this move, such as the increase in the costs of labour. These push and pull factors of FDI led to the first major push by Japanese manufacturers into parts of developing East Asia. Three others were to follow: the second in the late 1970s and early 1980s, the third in the mid to late 1980s, and the fourth in the early 1990s (Hook 1996a). The source of manufacturing FDI has changed over time, as has the destination. Instead of textiles, automobiles, electronics, semiconductors and other high-technology products grew in importance over the years. With the increase in labour and other costs in the front-runner economies of East Asia as well as in Japan, Southeast Asia and China, rather than the NIEs, took on greater importance in the later waves of investment. Despite these changes, the motivations for moving offshore have revolved around the rise in the value of the yen, the need to create export platforms to enter the US and other markets in the face of trade conflicts as well as the Japanese government’s continuing focus on the reshaping of the East Asian political economy into a region of stability and economic prosperity. Post-Cold War regionalism The relocation of Japanese production facilities to other parts of East Asia, starting with the NIEs, then Southeast Asia, and now China, has helped to create a regional political economy. Japan has been the source for the creation of a division of labour linking it and other parts of the region together economically, but until the post-Cold War 1990s the US and Europe played the predominant role as absorbers of the exports from the region. However, intraregional trade has increased significantly between Japan and the NIEs of Hong Kong, Singapore, South Korea, Taiwan, the main four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand, and China, growing from 21 per cent in 1980 to 27 per cent in 1990 to 28 per cent in 1998, making trade within the region

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greater than with the US (Hook et al. 2001). Nevertheless, although an increase in manufactured goods has taken place, much intra-company trade in component parts remains, and the US continues to play a crucial role as an absorber of the output of Japanese transplants in East Asia. This role of Japan as both an ‘Asia Pacific’ as well as an ‘East Asian’ economy has created a dual need on the part of Japanese policy-makers: access to US and other advanced markets, on the one hand, and a stable and developing East Asia, on the other. From this has emerged the sense of Japan as part of two regions: Asia Pacific and East Asia. Antecedents to the successful attempts in the late 1980s to build a regional framework tying together the Asian and Pacific wings of the regional political economy can be found at various historical junctures, as in a number of proposals made by Japanese leaders from the 1960s onwards (Korhonen 1994). Although formally announced by Australia, the Japanese initiative to establish the APEC (Funabashi 1995) clearly illustrates the pull of the US wing of the Pacific. The APEC process has gradually become institutionalized since the first inaugural meeting in Canberra in 1989, especially in the wake of the summit of leaders held at the 1993 meeting in Seattle. From then, the US began to take a lead role in driving the APEC process forward as part of its globalist agenda to spread the liberal market economy. Indeed, APEC has gradually emerged as a central means through which the US promotes liberalization in East Asia. With a commitment to ‘open regionalism’, APEC enables Japan to pursue economic interests which can be realized as part of the agenda to liberalize and deregulate regional markets. It was concern over the closed nature of the proposal to establish the East Asian Economic Caucus (EAEC) made in 1991 by Prime Minister Mahathir Mohamad of Malaysia that led the Japanese government to resist the Malaysian proposal. As, from the outset, the proposal excluded the US, the EAEC seemed to offer ‘closed regionalism’ instead of APEC’s ‘open regionalism’. Apart from immediate concerns, such as the upcoming launch of the EU, Mahathir’s EAEC proposal was in fact seeking to achieve four longer-term goals: (1) to continue to benefit from Japanese investment, trade, technology, and so on, as one of the follower geese in the flying geese pattern of economic development; (2) to enhance the political bargaining power of the East Asian developing economies vis-à-vis Japan, as in dealing with any further steep rises in the price of the yen due to pressure from the other advanced economies; (3) to hinder the implementation of a divide-and-rule strategy by powers inside the region, by including within EAEC South Korea, Japan, China, and the other ASEAN members; (4) to strengthen East Asia’s hand in coping with trade conflicts and other economic issues arising between East Asia and the advanced economies of North America and Europe by pressing Japan to become more vocal as the ‘voice of Asia’. (Hook 1999:226) While the proposed membership of the EAEC at the start fluctuated, except for the pointed exclusion of the US, Australia and New Zealand, the expansion of ASEAN to include the Indo-China states and the negative reaction of the Chinese government to the possible inclusion of Taiwan has meant that the ASEAN members plus Japan, China and South Korea have come to make up the EAEC grouping. Despite the attempt made by

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Malaysia to establish a clearly separate identity for EAEC, the decision to locate the grouping within the APEC process was a compromise acceptable to all of the East Asian states. Nevertheless, the ASEAN plus Three grouping emerged to take part in the Asia– Europe Meeting (ASEM) at the first summit in Bangkok in 1996 and again at the second summit in London in 1998. In other words, these states have emerged as a grouping in their own right – in essence, EAEC without a declared identity. While the APEC commitment to ‘open regionalism’ and liberalization allows Japan to benefit from the reduction in barriers to trade, this does not mean the simple abandonment of barriers in all sectors, such as agriculture. In this case, Japan has joined with the other East Asian governments involved in APEC in resisting US pressure to open up fully to the force of market competition. At the 1998 APEC meeting in Kuala Lumpur, for instance, US pressure to open up markets in the marine and forestry industry was resisted by Japan and other East Asian states (Hook 1999). In this way, Japan shares interests in East Asia and can join with its neighbours and others in order to resist unwanted pressure to open up the Japanese economy. The East Asian crises: tilting towards EAEC and a regionalized yen? The so-called ‘miracle’ economies of East Asia came under severe test in the wake of the financial and economic crises which hit one after another of the region’s economies following the devaluation of the Thai baht in July 1997, the subsequent fall in the value of other East Asian currencies, and the flight of capital from the region. A range of explanations for the crises has been offered, including: (1) a reduction in the international competitiveness of East Asian exports due to the rise in the dollar’s value, as these economies were virtually pegged to the dollar; (2) the introduction of policies to end the Japanese bubble economy which had arisen owing to the flow of short-term capital to the region; (3) the devaluation of the Chinese yuan in 1994 and the loss of international competitiveness for the export of labour-intensive products from other parts of East Asia; (4) the general loss in competitiveness of labour-intensive goods due to the rise of China as a major exporter of these goods in the 1990s; (5) except for Thailand and South Korea, the economic fundamentals were sound, but massive speculative attacks by hedge funds served as a catalyst for the crisis; (6) and so-called crony capitalism was rife owing to the cosy relationship between government and business (Hirashima 1999:18–19). In an attempt to stabilize the currencies and economies of the region, the IMF offered a package of financial assistance, but only so long as the East Asian governments accepted IMF conditions. These were drawn up in terms of the liberal economic model of development, with calls for greater market liberalization and transparency. The economic measures adopted by the IMF suggest a clear attempt to cut the close ties between government and business – a crackdown on crony capitalism, or the close relationship between government and business represented by the Japanese model of development. While not as such a direct attack on the Japanese model, the IMF policies essentially served to spread the liberal project pursued by the US and undermine the Japanese model by calling for changes meant to erode the basic premise of the model. The Japanese response to the currency crisis was initially in the form of support for the international effort and then an attempt to offer an East Asian answer to East Asian problems. Thus, while immediately after the crisis the Japanese government quickly

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moved to back the financial measures taken by the IMF, it also took the initiative in proposing to set up a US$100 billion Asian Monetary Fund (AMF) (Nakatsuji 2000:32– 7). This proposal to open another avenue for the affected economies to obtain funds, however, was opposed by the IMF and the US, as a Japanese answer to the regional problem could mean the creation of a double standard in terms of the conditions for the receipt of funds, undermining the position of the IMF. The Japanese decision to abandon the AMF demonstrated its willingness to bow to the demands of the bilateral relationship and is evidence of the continuing power of bilateralism to shape Japan’s international relations. Nevertheless, in November 1998 Japan announced the Miyazawa Initiative, whereby US$30 billion was made available for the affected economies, indicating also a willingness on the part of Japanese policy-makers to take independent measures to support the economies of the region. In this case, the US did not oppose the move. The decision to commit these funds, along with the later US$15 billion Obuchi fund for project financing, can be seen as both a recognition that the stability and prosperity of East Asia are essential for Japan’s own well-being as well as an attempt to shore up economies following a similar path of development. These funds have been used to recapitalize banks and firms, albeit without them being subject to the same conditionalities imposed by the IMF. In the case of Malaysia, for instance, the Mahathir government had baulked at IMF support, fearing the impact of stringent IMF conditions, both politically and economically. Moreover, owing to concerns about the damage which could be done to the economy by the short-term flow of speculative capital, the government imposed capital controls, in direct opposition to IMF orthodoxy. Despite these decisions by Malaysia, the Japanese government included Malaysia amongst the countries to receive Miyazawa funds, which also included South Korea, Indonesia, Thailand and the Philippines. In this way, Japan has been able to circumvent the conditionalities which the IMF would have imposed for the release of funds. In addition, the Japanese response to the East Asian financial crisis included the further internationalization of the yen. It was stated as Japanese government policy by the Minister of Finance at the 1998 APEC meeting of finance ministers. While this response can be seen to result from growing Japanese concerns in the wake of the Asian financial crisis and the move to a single currency in Europe in the short term (Murase 1999:30), in the longer term the internationalization of the yen is part of the Japanese strategy to strengthen regional integration amongst the East Asian economies. Its use in the region increased following the 1985 Plaza Accord, which had led to a major rise in the value of the yen. Until 1987, none of Japan’s exports to Southeast Asia were invoiced in yen, but from that year until March 1998 between 41 per cent and 52 per cent of them were invoiced in the Japanese currency. The figure for March 1998 was 48.4 per cent, only slightly less than trade invoiced in dollars at 48.7 per cent. As far as imports are concerned, however, the amount from Southeast Asia denominated in yen is far less, running at between 11 per cent and 34 per cent from 1987 to March 1998. The figure for March 1998 was 26.7 per cent, down from a high of 34.1 per cent in March 1995. In terms of commodities, over 80 per cent of automobiles and automobile parts exported to Southeast Asia are invoiced in yen, as are over 90 per cent of motor vehicles imported from there (Sato 1999:548, 552, 558). While it is still not clear whether the government’s policy of promoting the internationalization of the yen will increase its use for invoicing

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exports and imports within East Asia, the pegging of the East Asian currencies to a basket of currencies, including the yen, can be expected to lead to a greater use of the Japanese currency by East Asian governments. At present, however, the tendency is for these economies to maintain a strong link to the dollar after recovering from the immediate effects of the East Asian crises (Ishiyama 2000:23). At the outset of the financial and economic crises in East Asia, opinion was divided as to the effect they would have on regionalism, with some observers expecting a decrease and others expecting an increase in pressures towards regional integration in East Asia. In the years since the Thai baht crisis of 1997, however, the tendency seems to be clearly in the direction of closer integration between the Southeast and Northeast parts of the region. The crisis demonstrated the need to promote further regional integration as the basis for the emergence of a regional order as well as the basis for stability and economic prosperity. What is emerging increasingly is a more integrated East Asian regional political economy. This is illustrated by the growth of the ASEAN plus Three grouping – a clear tilt towards the EAEC. EAEC as ASEAN plus Three The ASEAN plus Three grouping is EAEC in all but name. As the ASEAN plus Three grouping, its start can be traced to the 1995 fifth triennial ASEAN summit. At that meeting, the leaders of ASEAN reached agreement on holding an informal summit in the years in between the triennial formal summit. The aim was to create a venue for wideranging discussion without any formal agenda. Following the first informal summit in Jakarta in 1996, at the next meeting in 1997 in Kuala Lumpur, which was the association’s thirtieth anniversary summit, the ASEAN leaders took the initiative to invite the leaders of Japan, China and South Korea to the meeting. A second informal summit of ASEAN and the three non-ASEAN members was held at the next ASEAN meeting in 1998 in Hanoi. At this meeting, then Prime Minister Obuchi proposed holding a separate tripartite meeting of the three East Asian leaders. At the third informal summit in November 1999 in Manila, which was the first occasion with all ten ASEAN leaders in attendance, the first separate meeting of the leaders of Japan, China and South Korea took place. This resulted from Obuchi’s initiative, although it was only a few days before the summit that China agreed to attend (Asahi Shinbun 29 November 1999). The first summit of all East Asian leaders occurred shortly after the East Asian financial crisis broke out in the middle of 1997. With their economies suffering under the shock of IMF policies, the meeting provided an opportunity to reflect on regional issues and the path for the future as much as to celebrate the achievements of the past. When considered against the background of Japan’s imperial expansion into East Asia during the pre-war period, and the remaining suspicions of Japan in the region, especially by China and South Korea, the inaugural meeting of Prime Minister Hashimoto Ryūtarō, President Jiang Zemin and President Kim Young Sam implied that, despite continuing concerns over Japan’s regional role, the three East Asian states were prepared to meet together in the context of a wider East Asia meeting, albeit not yet as a troika. Whereas, as pointed out above, at the outset of the 1990s Japan was reluctant to participate in the

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EAEC meeting precisely because it excluded the US, this meeting went ahead without the US or the camouflage offered by the presence of the Europeans in the ASEM process. The November 1999 summit in Manila included for the first time a meeting of finance ministers and central bankers as well as a meeting of the ministers of foreign affairs and trade. On the understanding that regional peace and stability could be helped by further regional cooperation, the thirteen leaders agreed for the first time to issue a joint communiqué. It proposed to push ahead with dialogue in fields such as politics, finance and technology. The initial draft apparently had included security but, under pressure from Japan, which feared holding security dialogue in a setting without the US, this was excluded (Akahata 30 November 1999). In this way, the centrality of the US–Japan security treaty in the security policy of Japan, and the increasingly salient role Japan is playing in the wake of the 1996 ‘redefinition’ of the security treaty and the 1999 passage of the revised US–Japan defence guidelines, continue to constrain the types of initiatives Japan is willing to take or support in the region (Yamada 2000). In terms of economics, while the first and second summits concentrated on immediate issues, especially those emerging from the financial and economic crises, the third summit witnessed concern with longer-term economic issues. With the economies of the region having recovered from the immediate problems created by the crises, and lead NIEs expected to achieve 5–9 per cent growth rates in 1999 (Komine 2000:73), the East Asian leaders turned to future issues, such as longer-term assistance in the development of human resources and the promotion of technical exchange in electronic information and commerce. Within this context, the Japanese government has taken the initiative to train local employees in the fields of engineering and finance. In the 1950s, when the Japanese economy was recovering from the war, the neighbouring economies of East Asia were tied to Japan by the transfer of machinery as war reparations. The tying of ODA to the purchase of goods and services from Japanese companies further helped to integrate a regional political economy in later years. With the globalization of the world economy in especially the 1990s and onwards, however, the importance of linking the East Asian economies to the financial soft side as well as the manufacturing hard side of the Japanese economy has grown in importance. The training of engineers and financial experts will serve to assist Japanese policy-makers in the creation of human resources competent to deal with both the manufacturing as well as the financial needs of Japan in shaping the regional political economy. Whether in the 1950s or the early twenty-first century, therefore, Japan’s focus on economics suggests the continuing use of ODA and FDI to shape the development path chartered by the economies of East Asia and the training of human resources in fields of central importance to Japanese interests. Similarly, as far as the separate inaugural meeting amongst the leaders of Japan, China and South Korea is concerned, the main focus of discussion was economics. This included Obuchi’s reiteration of support for China’s application to the WTO and his request for support in putting forward an Asian perspective at the G-8 summit scheduled to be held in Okinawa, Japan, in July 2000 (Asahi Shinbun 29 November 1999). The three leaders also agreed to strengthen tripartite economic cooperation and to establish groups of experts to examine issues related to trade, customs, finance, industry, fishing and the environment (Nikkei 29 November 1999). For Japan, the holding of a tripartite dialogue served to consolidate its position in the emerging East Asian regional order.

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While this first summit did not examine sensitive issues such as the situation in North Korea, given the agenda’s focus on economics, in the future these meetings could evolve into a broader framework, where political and security, not just economic, issues are discussed. This would provide Japanese policy-makers with at least some possibility for the future development of dialogue on North Korea, as Japan is presently not taking part in the four-party talks on peace on the Korean peninsula amongst the US, China and North and South Korea. Although the announcement in April 2000 of the proposal by North and South Korea to hold a June summit in Pyongyang was welcomed by the Japanese government, the exclusion of Japan from this process remains as a clear hindrance to Japanese policy-makers influencing the course of events. As it stands, however, while Prime Minister Obuchi’s proposal to establish an annual summit was welcomed by President Kim Dae-jung of South Korea, Premier Zhu Rongji of China would not be drawn into making any future commitment. As in the security field with the ARF, Japan is working to establish a stable political and economic framework in East Asia to supplement, though not to replace, the core relationship with the US and the APEC process (Hook 1998). This is part of the reemergence of Japan as a core player in the political and security dimensions of regional relations, not just economics, which has grown in significance during the late 1990s and early twenty-first century. The need to balance the relationship with the US and East Asia is nevertheless of primary concern to Japanese policy-makers. This can be seen, for instance, in their sensitivity to the US reaction to Obuchi’s initiative to hold the first postwar meeting of the three leaders of East Asia. The forum was not only carefully chosen, but before the tripartite meeting and the selection of the ASEAN plus Three meeting was determined, Japanese policy-makers held prior consultation with their US counterparts (Asahi Shinbun 29 November 1999). In this sense, although Japan’s role in East Asia is indeed growing, the core relationship remains centred on the US. In addition to Japanese activities at these two summits, Obuchi used the occasion of the Manila meetings as a way to push forward with the policy of engagement with Myanmar (Burma), as part of Japan’s longer-term goal of reintegrating the East Asian political economy. Although the government withheld ODA from Myanmar for a brief spell following international condemnation of the military regime’s abuse of human rights after the 1988 clampdown, it soon restored it and is the country’s number one donor. The condemnation Japan received at the resumption of ODA did not occur this time, when Obuchi became the first leader of the major industrial states to hold talks with Senior General Than Shwe, Chairman of Myanmar’s State Peace and Development Council and prime minister. This meeting not only suggests that the ASEAN plus Three summit provides Japanese policy-makers with an opportunity to engage with ASEAN as the Southeast Asian regional organization, but also offers a springboard to push forward with its longer-term regional strategy of engaging all of the East Asian states and promoting the economic development and integration of the region. The EAEC’s emergence at the ASEAN Plus Three summits is essentially linked to the East Asian financial and economic crises. The response to the crises by the East Asian states, especially the funds released under the Miyazawa Initiative in the case of Japan and the Chinese decision not to devalue the yuan further following the devaluation of 1994, demonstrated to Southeast Asian states the need to expand cooperation in East Asia. Without this cooperation, especially the financial support of Japan, the rapid

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recovery made would not have been possible. The East Asian crises increased regional awareness of the need for cooperation, although what form of regional organization can or will emerge is not yet clear. At the 1999 meeting, President Joseph Estrada of the Philippines went so far as to put forward a vision of one ‘East Asian common market, one East Asian currency, and one East Asian Community’ (http://www.mb.com.ph/main/1999–11/mn112902.asp (accessed 14 November 2000)). Whether Japan would be willing to accept the idea of another currency other than its own as the basis for the East Asian currency remains to be seen. Nevertheless, the deepening and widening of cooperation in East Asia and Estrada’s vision demonstrate how, with the gradual institutionalization of the ASEAN plus Three formula, the concept of an East Asian regional identity and a common East Asian agenda has started to take root. Conclusion The above discussion highlights how the Japanese role in the East Asian political economy has been to build a region of stability and prosperity, first with Japan as the ‘junior partner’ of the US, but increasingly as a core player in shaping the post-Cold War regional order. Reparations, ODA, FDI and the location of Japanese transplants in other parts of East Asia have created a vertical division of labour between Japan and its neighbours. The ‘flying geese’ pattern of development, while not necessarily applicable in the post-1980s, nevertheless does provides a powerful metaphor for understanding the way the follower economies of East Asia have successfully followed Japan’s lead. In concentrating directly on the economic dimensions of regional relations, albeit while indirectly supporting the US militarily, Japanese policy-makers were responding to the failure of the previous attempt to establish a new regional order based on military means, the constraints imposed by the regional hegemony of the US, and the sensitivity of the other East Asian states to Japan playing any other role. Within these constraints, policymakers were nevertheless able to reshape the East Asian political economy to Japanese advantage. Not only have the region’s resources and markets provided the wherewithal for Japanese growth, but the location of Japanese transplants in other parts of East Asia has provided an answer to the problems created by the rise in the value of the yen and trade conflicts with the US for many of Japan’s manufacturers. The need to balance the relationship between East Asia and the US has been of concern to Japanese policy-makers throughout the post-war era, but has emerged as a key issue in the post-Cold War period in particular. During the Cold War, the East–West confrontation provided the setting for regional relations, thereby curtailing the growth of East Asian regionalism. East Asia as a region did not exist. Rather than geographic proximity, ideological compatibility was central to the development of regional relations. Thus, although the goal of ASEAN from the start was to embrace within the organization the ten Southeast Asian nations, thereby creating an organizational identity for ‘Southeast Asia’, communist countries were not at first considered as potential members. With the end of the Cold War, however, the ideological basis for demarcating the region has all but disappeared. In place of ideology has appeared regional space, as ‘Asia Pacific’ and ‘East Asia’ (Hook 1996b). While the diversity of East Asia has often been given as a reason for the difficulty of creating an East Asian community, as proposed by President

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Estrada, the creation of a shared sense of community can emerge out of the economic, political and security activities now gradually tying East Asia together as an integrated region. Certainly, nothing in the ‘Asia Pacific’ identity, which is largely rooted in economics, suggests that this will be any easier to create than one rooted in ‘East Asia’, whether that be based on economics, culture or history. At the time of Mahathir’s announcement of the EAEC, Japan seemed to place priority on APEC and a commitment to the Asia Pacific region over EAEC and the East Asian region. However, the East Asian financial and economic crises and the ASEAN plus Three summits which have emerged in their wake have led to a strengthening of regionalism in East Asia. These summits provide a framework and process for East Asian states to discuss regional interests and for Japan to play a central role in shaping the emerging regional order. For Japanese policy-makers have been willing not only to take part in the ASEAN plus Three summits, but also to take the initiative in launching the first tripartite summit amongst Japan, China and South Korea in 1999. Moreover, even though the government abandoned the AMF in the face of US opposition, the Miyazawa funds have been used to perform the exact same function feared by the US: the creation of a double standard in the provision of financial assistance, as the extension of funds to Malaysia confirms. Nevertheless, such action should not be taken to mean a fundamental weakening of Japan’s commitment to bilateralism. As is illustrated by the ‘prior consultation’ before the tripartite summit amongst the East Asian leaders, Japanese policy-makers still remain constrained in their relations with East Asia by the US. In this way, a policy of balancing the US (APEC) and East Asia (ASEAN plus Three), rather than choosing one over the other, has become increasingly salient at the beginning of the twenty-first century. What conclusions can be drawn on the global and regional meaning of Japan in a globalizing political economy? First, the US promotion of the APEC process as a vehicle to help globalize the liberal model of economic development intersects with certain of Japan’s regional interests in East Asia. It benefits, for instance, from the opening of market sectors in East Asia where internationally competitive Japanese companies can be expected to play a lead role. At the same time, however, as was seen at the 1998 meeting of APEC, not all market opening is in Japan’s interest. Thus, the focus of Japanese policy-makers on maintaining a balance between Asia Pacific and East Asian interests is in essence an attempt to balance the pressures of globalization and regionalization. In this sense, Japan is involved intimately in both globalist and regionalist projects. Second, as suggested by Mahathir’s proposal for Japan to play a role as the ‘voice’ of East Asia in global institutions, or Obuchi’s proposal to reflect East Asian interests at the 2000 meeting of the G-8, Japan is in a position to voice East Asian concerns at the global level, especially in global economic and political institutions of which it is the only East Asian member. It should be noted in this regard that Japanese policy-makers deploy regional economic power as a means to increase influence at the global level. At the 1999 ASEAN plus Three meeting in Manila, for instance, President Estrada agreed to back Obuchi’s request to support Sakakibara Eisuke, former Japanese Vice-Minister for International Finance, to head the IMF at the same time that he announced US$380 million in lowinterest loans to the Philippines as part of the ‘Obuchi initiative’ (http://www.mb.com.ph/main/1999–11/mn//2801/asp (accessed 14 November 2000)). Even though Sakakibara’s election chances were slim in the face of European opposition,

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the attempt illustrates the way in which Japanese policy-makers deploy regional power at the global level. Finally, not only does Japan seek to promote its interests by gaining wider regional support, it also employs ‘proxy diplomacy’ at the regional level in order to promote an East Asian voice globally (Hook et al. 2001). This can be seen, for instance, in the case of the 1999 battle over the post of Secretary-General of the WTO, when Japan backed the Thai candidate rather than the New Zealand candidate favoured by the US. Thus, the role Japan plays regionally in East Asia is intimately linked to the role it plays at the global level. Not only does Japanese economic power provide policy-makers with a means to shape the regional political economy, it also provides them with a means to play a more prominent role in global institutions. Whether this is as a supporter or ‘junior partner’ of the US, as a political rival to China, or as a new kind of ‘civilian power’ (Maull 1990–1), remains to be seen. What seems clear from the various initiatives taken by Japan in the late 1990s and early twenty-first century, however, is that in the future it can be expected to play an increasingly important role at both the regional and global levels. Acknowledgement The author wishes to thank the Leverhulme Trust for the award of a Leverhulme Research Fellowship, which facilitated this research. References Auer, J. E. (1993) ‘Article nine: renunciation of war’, in P. R. Luney and K. Takahashi (eds) Japanese Constitutional Law, Tokyo: University of Tokyo Press. Bernard, M. and Ravenhill, J. ( 1995) ‘Beyond production cycles and flying geese: regionalization, hierarchy, and the industrialization of East Asia’, World Politics 45, 2: 179–210. Cumings, B. (1984) ‘The origins of the Northeast Asian political economy: industrial sectors, product cycles and political consequences’, International Organization 38, 1: 1–40. Funabashi, Y. (1995) Ajia Taiheiyō: APEC to Nihon (Asia Pacific: APEC and Japan), Tokyo: Chō Kōronsha. Hirashima, S. (1999) ‘Ajia tsūka kiki no honshitsu to kokusai kinyū shisutemu kaikaku’ (The essence of the Asian monetary crisis and reform of the international financial system), Senshū Keizai Gakku Ronshū 34, 2: 1–36. Hook, G. D. (1996a) ‘Japan and the construction of Asia Pacific’, in A. Gamble and A. Payne (eds) Regionalism and World Order, London: Macmillan. —(1996b) ‘Japan and contested regionalism’, in I. Cook, M. Doel and R. Li (eds) Fragmented Asia: Regional integration and national disintegration in Pacific Asia, Aldershot: Avebury. —(1998) ‘Japan and the ASEAN Regional Forum: bilateralism, multilateralism or supplementalism?’, Japanstudien 10: 159–88. —(1999) ‘The East Asian Economic Caucus: a case of reactive subregionalism?’, in G. D. Hook and I. Kearns (eds) Subregionalism and World Order, London: Macmillan. Hook, G. D., Gilson, J., Hughes, C. and Dobson, H. (2001) Japan’s International Relations: Politics, economics and security, London: Routledge. Ishiyama, Y. (2000) ‘“En no kokusaika” ronsō o seiri suru’ (Collating opinions on the internationalization of the yen) Kokusai Kinyū 1 February: 22–5.

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Izaka, F. (1999) ‘Higashi Ajia no tsūka kiki’ (Monetary crisis in East Asia), Tōkai Daigaku Seiji Keizai Gakubu Kiyō 31: 143–51. Johnson, C. (1995) Japan: Who Governs? The rise of the developmental state, New York: W. W. Norton. Kojima, A. (2000) ‘Gankōgata keizai hattenron. Akamatsu orijinaru. Shinkōkoku no kyatsuchiapu purosesu’ (The flying-geese model of development. Akamastsu’s original. The catch-up process of developing countries), Sekai Keizai Hyōron March: 8–20. Komine, T. (2000) ‘East Asian economies recovering from the crisis and the Japanese economy’, Kokusai Kinyū 1 January: 72–6. Korhonen, P. (1994) Japan and the Pacific Free Trade Area, London: Routledge. Maull, H. W. (1990–1) ‘Germany and Japan: the new civilian powers’, Foreign Affairs 69, 5: 91– 106. Murase, T. (1999) ‘Honshitsu o sakeru en no kokusaikaron’ (ue) (Opinions on the internationalization of the yen which avoid the key issues), Vol. 1, Sekai Keizai Hyōron September: 29–43. Nakatsuji, K. (2000) ‘Remaining Cold War perceptions in new crises: the United States and Japan’s foreign economic initiatives in East Asia’, Ritsumeikan Journal of International Relations and Area Studies 16, March: 23–40. Sato, K.(1999) ‘The international use of the Japanese yen: the case of Japan’s trade with East Asia’, World Economy 22, 4: 547–84. Shiraishi, T. (2000) ‘Nihon no Tōnan Ajia seisaku no saikentō’ (Reconsideration of Japan’s Southeast Asian policy), Kokusai Mondai 480, March: 53–64. Soderberg, M. (1996) ‘Japanese ODA: the business perspective’, in M. Soderberg (ed.) The Business of Japanese Foreign Aid: Five cases from Asia, London: Routledge. Yamada, H. (2000) ‘“Saiteigi” mondai o meguru kōsatsu’ (2) (Thoughts on the problem of ‘redefinition’), Shūdō Hōgaku 22, 1 and 2: 395–447.

3 Japan in Europe Asian and European perspectives Christopher W. Hughes Introduction Viewed from the perspective of trilateralism, so often used to illustrate the position of the US, Europe and Japan relative to each other in the global political economy, the weakest bilateral side of the triangle is undoubtedly Japan–Europe relations (Wilkinson 1986:31; Dent 1999:76–117). Moreover, it is apparent that there is a fundamental imbalance in bilateral Japan–Europe relations themselves. Generally it has been economic relations which have formed the focus of bilateral relations between the two, and when it comes to political relations, more deliberate energy has been devoted to efforts to establish a meaningful European political presence in Japan and Asia than vice versa. But despite the traditional fondness of academics and practitioners for pointing out the asymmetries of Japan–Europe relations in both the trilateral and bilateral contexts, it is apparent also that in recent years certain scholars have tried to extricate Japan–Europe relations from the confines of trilateralism in order to refocus attention on the growing importance of bilateral relations between the two in their own right, and that also there have been significant developments with regard to the theme of Japan’s political meaning in Europe (Bridges 1992:230–1; Gilson 1998). For even though Japan’s approach towards and meaning in Europe has often been primarily economic, it is clear that accompanying this also are a number of issues loaded with political meaning. The interrelated issues of Japan’s rise as an economic superpower and as an economic partner or adversary vis-àvis Europe in the global trading system, and the penetration of Europe’s economy by Japanese transnational corporations (TNCs) with concomitant wrangling over investment levels and transplant locations between the Japanese government and TNCs on one side, and Europe’s various regional, national and supranational government institutions on the other, are all inherently political in nature and impact upon Europe’s political economy (Darby 1986:216). Hence, Japan’s economic engagement in Europe has drawn it inevitably into a process of political engagement, and generated for Japan an evergrowing political presence and identity in Europe. Indeed, this chapter seeks to demonstrate how, since the 1970s, Japan can be perceived as having come to assume three identities which have a political and security meaning for individual European countries, the growth of the EU and the project of European integration, and the stability of the periphery of Europe. These identities can be termed roughly as those of a peril, partner and participant. The identity of a ‘peril’, or less dramatically that of an adversary, refers to the period of the re-establishment of Japan–Europe contacts between the late 1960s and 1980s, when Japan was often perceived as a disruptive and even a threatening presence to the

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economic vitality of individual European states and to the unity of Europe represented at the various stages by the development of the European Economic Community (EEC), the European Community (EC) and then the EU. In European minds, the Japanese threat to Europe was manifested externally by the seeming lack of reciprocity in Japan’s economic relations and its undermining of the international trading system, and internally by the position of Japanese TNCs as ferocious competitors in European markets and as actors able to create tension between the different levels of European government with their divisive FDI strategies. Japan’s identity as a ‘partner’ emerged in the late 1980s and 1990s, and is a result of growing confidence by both Japan and Europe in their place in the international system, the general maturing of relations between the two, and greater responsiveness to each other’s economic and political needs. This identity is manifested on both sides with the perception of Japan as an external actor which can work in partnership with individual European states and the EU to assist in the resolution of political and security matters of joint concern on the periphery of Europe, as well as elsewhere in the world. The identity of ‘participant’ is a product of the most recent contemporary period and perhaps indicates the future direction of Japan’s political meaning in Europe. It refers to Japan in the guise of its TNCs, which are again functioning as internal actors within Europe, but this time as ones increasingly acknowledged as part of the European political economy and helping to drive forward the process of EU integration. However, before moving on in the following sections to describe in more detail the background to the growth of these three identities, and providing empirical analysis on the impact of each on the political economy of Europe, it is necessary to state several provisos concerned with the problem of attaching such political identities to Japan. First, the claim is not made here that these three identities form an exhaustive list or watertight definitions of Japan’s political meaning in Europe in the post-war period, but simply that they are the ones most commonly given explicit and implicit expression in scholarship concerning Japan–Europe relations and in official documents produced by both sides. Second, it cannot be claimed that the perception of the three identities has been entirely clear or uncontested for either side. Hosoya Chihiro and other scholars point out that Japanese and European views of each have long been affected by a ‘perception gap’, and that the true identity of Japan and its approach to Europe (in much the same way as Japan’s approach to the US) has often been obscured by the political rhetoric resulting from trade friction and occasionally by unabashed cultural prejudice (Hosoya 1979:163; Yoshimori 1986:48). A particular problem for both sides has been how to distinguish who or what are the actors they are dealing with and the association between them. As will be elucidated in more detail below, the Japanese government and its respective ministries have often been in a quandary as to whether to deal with Europe as a collection of individual states and governments, or whether to deal with the supranational state of the EU and the EU Commission as its representative. Likewise, Europe has been in a similar predicament when it has attempted to forge its policy towards Japan – at times seemingly unsure as to whether ‘Japan’ is a government ministry such as the Ministry of International Trade and Industry (MITI), or Japanese TNCs, or a ‘Japan Inc.’type combination of the two. Third, and added to these problems, the perception of Japan in Europe has been further complicated by the fact that not everyone has always agreed with the various identities ascribed to Japan. The UK government, for one, has contested

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Japan’s image as an adversary since the 1980s because it has looked favourably upon the benefits of Japanese TNC investment for British industry; and it is certain that the Japanese state and TNC actors themselves disagree with any intimations of their presence in Europe as a threat. Finally, with reference to the problems of attaching political identities to Japan, it is not the case that any of the three identities described above have necessarily proved to be mutually exclusive or to have totally superseded each other. This chapter does argue for a broad chronological succession in Japan’s identity from peril, to partner, to participant, but at the same time it also has to be acknowledged that in European perceptions these identities and their positive and negative images can overlap, coincide and even reemerge after a period of dormancy. Hence, even though the Japanese Ministry of Foreign Affairs’ (MOFA’s) Diplomatic Bluebook was probably right to note in 1985 that the initiation of Japan–EU ministerial meetings had led to a change in the pattern of bilateral relations from ‘confrontation and friction’. to one of ‘dialogue and cooperation’, it can be seen that even in the late 1990s adversarial language is still used to describe Japan (Gaimushōhen 1985:72). Japan as a peril The period of increasing multi-polarity in the global political economy from the late 1960s to the mid 1980s – in part both a result of and a spur to the increasing importance of Japan and Europe as economic and political entities – created the conditions for greater Japan–Europe interaction, but also for many states in Europe the acquisition by Japan of the image of a peril to European unity. For, on the one hand, multi-polarity produced the necessary fluidity in the international economic and political system for Japan and Europe to enhance their contacts and confirm certain mutual interests and values. But, on the other, European perceptions of the instability of the international system and especially the relative economic weakness of Europe within it versus Japan meant that bilateral political relations between the two often came to be characterized more by testy confrontation than substantive cooperation. However, this is of course not to say that Japan was aware of, or deliberately sought, the image of Europe’s adversary. Instead, the genuine hope as expressed by Japanese government policy-makers was for improved Japan–Europe cooperation based on the shared values of liberal democracy and free trade. Japanese policy-makers also saw these shared Japanese and European values as reinforced by shared geo-strategic interests on the periphery of Europe with regard to the issues of the stability of the Middle East and oil supplies, and the USSR’s deployment of SS-20 intermediate nuclear missiles in Europe which exerted a possible impact upon the nuclear balance in the Far East and Japan’s alliance with the US (Drifte 1986:61–3, 1990:48–58; Mendl 1984:84–113). As a result, from the mid-1960s onwards the MOFA Diplomatic Bluebook continued to stress the importance of Japan–Europe cooperation for the ‘peace and stability’ (heiwa to antei) of the increasingly multi-polar international system, and Japan moved to strengthen political dialogue with individual European countries by the establishment of regular bilateral foreign minister meetings between Japan and the UK (1963), France (1963), Germany (1965) and Italy (1965). In addition, MOFA was relatively quick to foresee that

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EC plans for greater integration and a single currency could give it the potential to function as a unitary economic and political actor, and formal Japan–EC contacts were initiated with the occasional visits of Japanese prime ministers and foreign ministers to Europe and of EC Commission presidents and commissioners to Japan; the agreement on twice-yearly high-level consultations between Japan and the EC Commission in 1973; the establishment of the EC’s delegation to Japan in July 1974; and regular Japanese Diet– European Parliament (EP) interparliamentary conferences in 1978. Japanese recognition of the rising importance of Europe also produced the first moves towards joint political cooperation on Europe’s periphery. In 1980, the Japanese and EC ambassadors to Iran submitted a joint statement to its government requesting the release of the US embassy hostages (Gaimushōhen 1981), and Japan and Europe displayed a certain degree of solidarity on the issues of Afghanistan and Poland. But despite these joint efforts, it is also apparent that in this period Japan and Europe failed to establish foundations for deeper political and economic cooperation, and that limitations in Japan’s approach to Europe led to its assumption of the identity of a perilous presence for European unity. The chief limitation that Japan experienced in its policy towards Europe was related to the issue of the ‘perception gap’ mentioned earlier, and Japan’s uncertainty over whether to negotiate on economic issues with individual European states on a bilateral basis, or with the EC as their collective representative. For although Japan had recognized early on the potential of the EC as a single actor, in practice it was unable to deal with it as such owing to the EC’s own institutional shortcomings and internal disputes amongst its members over the correct trade stance to adopt towards Japan (Rothacher 1983:295). Japan’s inability to recognize and negotiate with the EC as a single actor was further compounded by the weakness of institutional linkages between the two. The relative infrequency of Japan–EC Commission top-level contacts, as compared with the regular ministerial meetings between Japan and other European states, encouraged Japan to devote more attention to the latter when conducting bilateral trade negotiations. Furthermore, even though the Japan–EC interparliamentary conferences provided a useful forum to discuss matters of joint political interest, they may have done little to alter the weak Japanese perception of the EC as a unitary actor because the number of those Japanese Diet members taking an active part in the meetings and with significant expertise on the EC was minimal (Fujikawa 1991:230). Japan’s indistinct or delayed recognition of the EC as an effective political and economic actor in this period is shown finally by its decision not to establish until 1979 a delegation to the EC separate from its embassy in Brussels. Coupled with Japan’s inability to treat the EC as its main negotiating partner in Europe, the other main limitation in Japan’s approach to Europe at this time was its blindness to the political implications arising from the growing trade imbalance with Europe and what many Europeans saw as its predatory trading policies (Lake 1986:137). While the EC and many individual European states clearly viewed trade frictions as a political problem to be resolved by direct Japan–Europe negotiations, the Japanese government ministries stuck rigidly to the line that disputes over trade resulting from the legitimate business prowess of its TNCs were unrelated to political matters and should be resolved within the multilateral forum of the General Agreement on Tariffs and Trade (GATT) (Hosoya 1979:166).

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Hence, in this period Japan’s approach towards Europe was dominated by its inability to negotiate with the EC, a preference for bilateral bargaining with its constituent members, and non-recognition of the political consequences of trade imbalances – all of which were to create the conditions for Japan’s identification as a threat to Europe’s unity and security. As noted above, Europeans perceived a strong link between Japan–Europe economic and political issues, and viewed Japan’s unwillingness to accept this principle, and its persistence with bilateral negotiations, as a form of ‘divide and rule’ policy and a challenge to European aspirations of unity (Nester 1993:250–4; Gilson 1998:228). The EC Commission adjudged Japan’s lack of reciprocity in trade to be a threat to a GATT regime already under strain, and in private bodies such as the Trilateral Commission some Europeans viewed Japan as a ‘free rider’ on the international system and far from being a ‘natural ally’ (Gill 1990:200). In turn, Japanese TNCs were also seen as tending to have a corrosive influence upon European unity by attacking the very symbols of European industrial strength, such as the car industry (Lehmann 1992:43), and by using FDI projects to generate unsightly internecine competition for jobs and investment between European states. With the notable exception of the UK’s government and certain sections of its industry, during the initial stages of increasing Japanese investment in Europe during the early 1980s most EC member governments and large firms viewed Japanese TNCs as an alien influence to be shut out from the European political economy. Hence, after Fujitsu acquired an 80 per cent stake in UK-based International Computers Limited (ICL) it was excluded from the European Information Round Table, and in 1991 Japanese manufacturers did not receive an invitation to join the newly formed Association of European Automobile Manufacturers, even though Ford, General Motors, Saab, Volvo and other ‘foreign’ manufacturers with operations in Europe were admitted (Grant 1993:36; McLaughlin and Jordan 1993:145). The perception of the Japanese government as a threatening outsider and Japanese TNCs as in some way in league with it as internal agents is reflected in the hostile rhetoric directed towards Japan in this period by some prominent European figures. Although clearly not representative of other much more sober thinking on Japan in Europe, accusations that the UK was a Japanese ‘Trojan Horse’ within Europe, or comments by a French Minister of Trade that the UK’s support for Nissan’s plans to expand its production capacity in Europe showed a lack of ‘Community solidarity’, are reflective of the threat that Japan’s presence in Europe was seen to pose for European unity (Darby 1986:225). Indeed, criticism of the UK and the use of conflict and invasion metaphors to illustrate the state of relations between Japan and Europe were common in this period: ranging from the Nakasone-like claims of the President of Peugeot Société Anonyme (PSA) in 1990 that the UK was ‘a Japanese aircraft carrier just off the coast of Europe’ to the UK’s description as an economic collaborator with Japan, somehow suggestive of wartime betrayal, and through to reports of former French Prime Minister Edith Cresson’s extraordinary labelling of the Japanese as ‘ants’ and ‘outcasts’, which conjure up images of a ‘yellow peril’ (McLaughlin and Jordan 1993:144; Lehmann 1992:43; Bridges 1992:231; Mason 1994b: 36). This identification of Japan as a threatening presence to Europe’s economic and consequently political security in the rhetoric of politicians and business people is also demonstrated by the type of defensive policies initiated by many European countries and the EC towards Japan. In the 1950s the aim for many countries in Europe, the UK

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included, was to deny Japanese entry to GATT, and then when that proved unsuccessful to apply Article 35 of GATT to discriminate against Japanese imports (Strange 1993:84– 5). By the early 1980s, as seen above, the aim shifted to completing the internal market and to strengthening Europe’s bargaining power against Japan: viewed by Japan as a ‘fortress Europe’ and protectionist approach to bilateral trading relations. Thus, it is this siege mentality on the part of many of Europe’s governments and business communities which forms one explanation for the negative political and security meaning of Japan in Europe during this period. The only irony is that Japan’s perception as a threat compelled Europeans to recognize the need to coordinate more fully their economic, political and security interests, and so had an indirect and ultimately positive effect upon progress towards European integration. Japan as a partner As the Cold War drew to a close in the mid to late 1980s, the changing international situation witnessed the further rise of Japan and Europe in the international system, the rebalancing to some extent of economic and political relations between the two, and, as a consequence, the emergence of a new identity for Japan to work as a partner with individual European governments and the EU on a number of political and security projects on Europe’s periphery. Japan’s rise in the international system to the position of an economic superpower during the 1980s was accompanied by a greater degree of assertiveness in its foreign policy. The turning point perhaps came with the advent of Prime Minister Nakasone Yasuhiro’s administration and the Williamsburg summit of 1983, when Japan displayed its willingness not just to identify itself as a member of the West but also to take more concrete political action alongside the US and Europe in support of Western security. Moreover, the end of the Cold War and the outbreak of the Gulf War further forced Japan towards shouldering international responsibilities commensurate with its economic power. Japan’s assumption of a higher international profile and growing distinctiveness as a political partner was matched also by EC efforts to acquire the status and capabilities of a unitary political actor in this period through the programmes of European Political Cooperation (EPC), the 1986 Single European Act (SEA) and the 1991 Maastricht Treaty and moves towards a Common Foreign and Security Policy (CFSP) (Segal 1993:126–8). In a similar fashion to Japan, the end of the Cold War brought for the EU new international responsibilities and problems. The EU was faced particularly with the problems of the reconstruction of post-Cold War Eastern Europe and conflict in the former Yugoslavia which it eventually came to realize could only be tackled in cooperation with the US and Japan. This international climate gave rise to the mutual recognition by Japan and Europe of each other as potential political and security partners. Japanese policy-makers noted that the SEA was an attempt to give Europe one voice (hitotsu no koe) on economic and political matters, and in 1984 the Diplomatic Bluebook stated explicitly for the first time the links between Japan–Europe relations and global peace and security policy (heiwa to anzen hoshō) (Gaimushōhen 1984:38). For its part, and as shown by the Poitiers incident and the 1991 Elements of Consensus negotiations, Europe was increasingly prepared to use economic pressure to force Japan to recognise the EU as an international actor and

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the Commission as its representative in economic negotiations (Mason 1994a: 432). Subsequent breakthroughs in negotiations with Japan and greater European confidence in bilateral dealings also seem to have encouraged the EU to take a less confrontational attitude towards Japan – signified by the EU Commission’s 1988 White Paper and the 1994 policy paper ‘Europe and Japan: The Next Steps’, both of which argued for fuller relations with Japan (Gilson 1998; Tanaka 1995:15; European Commission 1996:352). Increasing mutual recognition and understanding produced higher and more regular channels for Japan–Europe security and political consultations, with twice-yearly Japan– EU troika ministerial meetings since January 1983; annual Japan–EC ministerial meetings since May 1984; and, following the 1991 Joint Declaration on Relations Between the European Community and its Member States and Japan, annual Japan–EU leadership summits. The Joint Declaration itself represents the long-awaited and increasing convergence between the stated joint values of Japan and Europe and the ability of both as political actors to instrumentalize them. The preamble notes democratic and liberal economic principles as a powerful incentive for cooperation, and the importance of Japan–EU ‘partnership’. The remainder of the document lays out areas for bilateral political and security cooperation in the European sphere on the issues of economic support for Eastern Europe, conservation of the environment and natural resources, terrorism, and international crime and narcotics. All of these issues are essentially post-Cold War and ‘civilian’ in nature, and perhaps offer a different and stronger basis for joint cooperation than the type of military security relationships that both Europe and Japan have maintained with the US (Maull 1990–1; Funabashi 1991–2; Nuttall 1990:144; Bronstone 1997). For Japan, cooperation with Europe in these areas is advantageous because of the limitations that its pacifistic principles place upon Japan’s exercise of military force overseas. For the EU, it is advantageous because even though in theory it has access to military force via the Western European Union (WEU), the processes of CFSP are still insufficiently developed to withstand the stress of attempts at concerted military action, and the EU is clearly better able to articulate economic power for security purposes. Furthermore, the theme of ‘civilian’ political partnership between Europe and Japan is reproduced explicitly in bilateral agreements between individual European states and Japan, such as the 1996 Japan–Germany Partnership Action Plan. The idea and agenda of partnership outlined above have fed through into some significant policy initiatives by Japan and Europe in Eastern Europe, the Middle East and the former Yugoslavia. During the Cold War, Japan’s economic links with Eastern Europe were limited owing to Co-ordinating Committee for Export Control to the Communist Bloc (COCOM) restrictions, and Japan showed only marginal political interest with the visit of Nakasone to Poland, East Germany and Yugoslavia in 1987. However, the end of the Cold War increased Japanese interest in the region, with a concern for the support of political reforms in East European countries, and the possible economic opportunities presented by these countries as low-cost manufacturing bases close to the EU. Limited market opportunities and other business problems have discouraged Japanese investment in Eastern Europe, and particularly in the former Soviet republics. For instance, in 1991 just 0.5 per cent of total Japanese investment in Europe was in Central Europe, and the only large-scale investment project was the Magyar– Suzuki factory in Hungary. Hence, as James Darby notes, Japanese corporations were

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‘unwilling to create a new field of confrontation with Western partners in this region’, and content to leave the economic development of this region to US and European companies (Berenyi 1996:241). But even if on the private business level there has been less Japanese interest in Eastern Europe, on the government level Japanese policy-makers have attempted to work with US and European partners to help stabilize the newly democratic states of the region and to contribute in this way to European security. In late 1989 the Japanese government joined the G-24 group of states to discuss multilateral economic assistance to Eastern Europe, and in May 1990 Japan was a founding member of the European Bank for Reconstruction and Development (EBRD): holding around 8.5 per cent of total shares in the bank, and becoming the second-largest individual contributor after the US (Weber 1994:19). Japanese bilateral aid to Russia has been hampered by the issue of the Northern Territories, but in January 1990, following the visit of then Prime Minister Kaifu Toshiki to Eastern Europe, Japan pledged close to US$2 billion in economic aid for Poland and Hungary (van Ham 1993:179; Gaimushōhen 1990:205–6). As stated earlier, the Middle East has been a region where Japanese and European political and security interests have long coincided, and both have generally favoured the Arab and Palestinian cause over that of Israel during the Middle East peace process. In the 1990s, the EU has supported the peace process as the top aid donor to the Palestinians. In October 1993 it promised up to US$2 billion for the development of the West Bank, paid for the monitoring and conduct of Palestinian elections in January 1996, and in total provided up to 45 per cent of all international economic aid to the Palestinians (Hollis 1997:22). Japan has been less directly active in the peace process but nevertheless supportive of US and EU policy by providing up to US$250 million in aid to the Palestinians as of 1996 (Gaimushōhen 1997:85), and by Prime Minister Hashimoto’s statements to Prime Minister Netanyahu on his visit to Japan in August 1997 that the closure of the West Bank is damaging to the peace process (Asahi Shinbun 26 August 1997). The greatest area of security concern to the EU, and which has given rise to the greatest amount of Japan–EU security cooperation, though, is the former Yugoslavia. During the conflict the EU assumed both a ‘civilian power’ role in attempts by the troika and various joint EU–UN mediators to broker a cease-fire in the summer of 1991, and a limited military role following the deployment of WEU and North Atlantic Treaty Organization (NATO) forces in the Adriatic and on the Danube to monitor the enforcement of economic sanctions (Nuttall 1994:21; Klein 1998:271–2). Japanese policy-makers initially were clearly uncertain in what ways Japan could contribute to resolving the conflict. MOFA sent a fact-finding mission to the former Yugoslavia in January 1994, and in response to requests by the UN Secretary-General’s special representative in the Balkans, Akashi Yasushi, MOFA officials were reported to see the dispatch of the SDF to Macedonia on a UN preventative diplomacy mission as ‘worth investigating’ (Asahi Shinbun 17 January 1994). However, this proposal for a Japanese military contribution was effectively quashed by doubts about whether deployment in Macedonia contravened Japanese PKO restrictions and by domestic opposition to the overseas dispatch of the SDF. Another MOFA team sent to Macedonia and Albania in April 1994, and the visit of Foreign Minister Kōno Yōhei to Europe to meet with officials from the New Yugoslavia, Croatia, Bosnia-Herzegovina and Macedonia in May 1995,

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though, determined that Japan’s contribution should be primarily financial and civilian in nature, and focused on humanitarian aid. Thus, Japan provided US$3 million dollars in aid for the UN Protection Force (UNPROFOR); US$2.8 million to the UN Volunteers (UNV) and US$168 million to the UN High Commission for Refugees (UNHCR); and as part of a preventative diplomacy effort dispatched three observers to Organization for Security and Cooperation in Europe (OSCE) operations in Macdeonia and supplied financial aid to Albania (Yagi 1996:24). Japan has also made a contribution to European security by extending economic and human resources for the reconstruction of Bosnia. International efforts for peace implementation in Bosnia again have followed dual military and civilian tracks consisting of the Implementation Force (IFOR) under NATO and the WEU, and the Peace Implementation Council (PIC) under the G-7, Russia, the Organization of Islamic States, the EU and Japan. Foreign Minister Kōno attended the London conference in December 1995 which established the PIC, and in subsequent negotiations Japan agreed to provide close to one-tenth, or US$100 million, of its necessary funding for reconstruction projects in Bosnia. Japan has dispatched officials to the PIC secretariat and Japanese aid has been devoted to such projects as the restoration of the electric power infrastructure in Bosnia (Asahi Shinbun 7 September 1996). Finally, Japan’s civilian contribution to the resolution of the Bosnian conflict was confirmed by the MOFA dispatch of a twenty-nine-member team under the auspices of the OSCE to monitor elections in Bosnia in September 1996 (Yagi 1996:18–24). Japan as a participant The most recent metamorphosis of Japan’s political identity in Europe into that of a participant is interlinked with the activities in the region of Japanese TNCs, which through their FDI strategies, provision of employment opportunities, increasing transfer of technology and R&D facilities, and replication of keiretsu supplier relations within Europe, have become increasingly integrated into the European economy and (defying many predictions to the contrary) ‘good insiders’ (Thomsen and Nicolaides 1991:109; Bridges 1992:233). But at the same time, and in the same way as other ‘native’ and foreign corporations present in Europe (Jackson and van Schendelen 1987:1–17; Grant et al. 1989:72–90), the position of Japanese TNCs as part of the economic landscape since the early 1980s has made them inevitably also part of the political landscape, powerful insiders and able to conduct their own form of diplomacy with European governmental institutions. However, one of the main differences between the position of Japanese TNCs in the early 1970s and 1980s and Japanese TNCs in the 1990s seems to be that Japanese corporations are now no longer seen as an internal peril to European unity, but as equal participants which, together with other European actors, can form a coalition to push forward the process of European integration. The political influence of Japanese corporations is manifested in their role alongside foreign TNCs as effective lobbyists of the various strata of European government. The ability of Japanese corporations since the 1980s to negotiate directly and cut deals with regional and national governments was well illustrated by Nissan’s investment strategy in the northeast of England (Wickens 1987). Moreover, in the 1990s, and matching

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increased recognition of the EU Commission as a key player in economic negotiations, Japanese TNCs have concentrated on lobbying activities in Brussels, and along with companies such as British Petroleum, Royal Dutch Shell, ICI, Ford and British Aerospace have become part of what Alan Cawson describes as the ‘network of corporate influence’ in Europe (Andersen and Eliassen 1991:177; Mazey and Richardson 1993:7; Cawson 1997:199). Japanese TNCs are able to lobby the EU Commission either through becoming accepted into national industrial associations of member states, as in the UK, where many Japanese firms have been allowed to enter the British Radio and Electronics Manufacturers’ Association (Cawson et al. 1990:236–7), or more directly through the EU Commission’s increasingly pluralist policy-making channels and by maintaining a corporate office in Brussels (Grant 1993:27–46). The success of Japanese TNC lobbying activities is not always guaranteed. For instance, the electronics firm Matsushita, despite being the only firm still to manufacture compact disc (CD) players inside Europe and using its liaison office in Brussels to try to influence EU competition policy, does not appear to be able to influence the EU Commission to the extent of ‘indigenous’ manufacturers such as Philips which have in fact shifted their production of CDs and other products to sites outside the EU (Cawson 1997:199). But in other cases it is clear that the political influence of Japanese TNCs on the EU and individual member governments is very extensive. The most notable example of Japanese TNC political power is the political rumpus in the UK generated by Toyota’s decision over whether to site a new automobile plant in France or the UK, and the remarks of Toyota’s Chairman Okuda Hiroshi in January 1997 to the effect that consideration of the UK could be jeopardized by its opposition to a single currency (Nikkei 31 January 1997). Although it was later reported that Okuda saw his own remarks as extreme, and probably they were not intended to influence the political situation in the UK, they did have significant political impact, coming as they did in the run-up to the UK general election. The Conservative government was forced to offer unconvincing reassurances that UK policy on the single currency would not adversely affect foreign investment in the UK, while Labour made some political capital from what it claimed was the government’s overly inflexible position on the single currency and the threat to the UK’s economic welfare. Furthermore, other sections of UK opinion and the UK’s European partners seem to have viewed the Toyota chairman’s comments not as an unwelcome intrusion by an outsider in European political matters, but as a frank statement by an important member of the European business community in support of arguments for the UK’s entry into the single currency and European integration. Hence, the Confederation of British Industry (CBI) was broadly supportive of the Toyota comments, and Leon Brittan, EU Vice-President and Commissioner for External Relations, used the occasion to warn the UK of the business implications of not joining the single currency. The political hubbub surrounding the Toyota incident certainly does not suggest that the presence of Japanese corporations in Europe is without controversy, or, as the subsequent victory of France over the UK in the competition for Toyota’s new plant showed, that it now leads only to harmonious relations between the EU’s member states and regions. But what it does show is that Japanese TNCs are now more and more accepted as internal allies and participants in the struggle between EU members over the pace of European integration, and few see them as inherently alien or divisive influences as in the 1970s and 1980s.

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Finally, it is clear that Toyota’s FDI strategy has had a definite impact upon the course of UK policy towards the single currency. Unlike the universally rejected attempts of EU Commission President Jaques Santer to intervene in UK politics during the 1997 general election, the comments of Okuda seem to have had a meaningful influence on Labour Party strategy and its shift to a more flexible and economics-oriented policy on the single currency. The ever-increasing importance that the UK government attaches to Toyota and Japanese TNCs as key participants in Europe was shown by the January 1998 visit of Tony Blair to Japan in his capacity as UK Prime Minister and holder of the UK’s EU Presidency. Blair’s first act after arriving was to hold a summit conference not with Prime Minister Hashimoto, but with that other important political and diplomatic actor, the Chairman of Toyota, in order to confirm new investments in the UK (Asahi Shinbun 12 January 1998). Indeed, the seeking of business deals as one of the prime purposes of Blair’s visit, and his enthusiastic hard-sell of British CDs in a Tokyo store, marked a further reversal in the character of Japan–Europe post-war relations and President Charles de Gaulle’s famous description of Japanese Prime Minister Ikeda Hayato’s visit to France in 1962 as akin to that of a ‘transistor salesman’. Conclusion This chapter has argued that Japan’s growing economic presence in Europe since the 1960s has generated for it three distinct political identities of peril, partner and participant. Each of these has had a significant meaning for European political integration and security, with the general trend in the contemporary period towards deeper Japan– Europe cooperation on the European periphery and the acceptance of Japanese TNCs as part of the political and economic set-up of Europe. In addition, this trend looks set to continue as Japan and Europe find new fora for interaction in the Asia–Europe Meeting (ASEM) and the Korean Peninsula Energy Development Organization (KEDO), and the EU more than ever needs to call on the civilian power of Japan to complement the military power of NATO in dealing with a new Balkan crisis in Kosovo. Japan had to stand aside during the NATO campaign in Kosovo in 1999, but following the cessation of the bombing it has pledged a US$200 million aid package for humanitarian assistance and reconstruction in line with Prime Minister Obuchi Keizō’s conception of ‘human security’. However, at the same time, there are still limitations to the extent of current and future bilateral cooperation. Policy-making obstacles to pro-active diplomacy on both sides, geographical distance, and restricted popular understanding of the importance of Japan– Europe cooperation could all dampen the impetus for greater cooperation. Japan’s current incarnation as partner and participant might also prove to be a fragile status. For if Japanese investment in Europe should fall off significantly, the subsequent scramble by individual European states for declining shares of FDI could reignite old tensions and recreate Japan’s image as a divisive peril.

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References Andersen, S. S. and Eliassen, K. A. (1991) ‘European Community lobbying’, European Journal of Political Research 20: 173–87. Berenyi, J. (1996) ‘The role of Japan in Central Europe in an emerging multipolar world’, in J. Darby (ed.) Japan and the European Periphery, London: Macmillan. Bridges, B. (1992) ‘Japan and Europe: rebalancing a relationship’, Asian Survey 33, 3: 230–45. Bronstone, A. (1997) European Union–United States Security Relations: Transatlantic tensions and the theory of international relations, London: Macmillan. Cawson, A. (1997) ‘Big firms as political actors: corporate power and the governance of the European electronics industry’, in H. Wallace and A.R.Young (eds) Participation and PolicyMaking in the European Union, Oxford: Clarendon Press. Cawson, A., Morgan, K., Webber, D., Holmes, P. and Stevens, A. (1990) Hostile Brothers: Competition and closure of the European electronics industry, Oxford: Clarendon Press. Darby, J. (1986) ‘A new environment for public policy: Japanese manufacturing in Europe’, West European Politics 9, 1: 215–34. Dent, C. M. (1999) The European Union and East Asia: An economic relationship, London: Routledge. Drifte, R. (1986) ‘Japanese security policy and European security’, in G. Daniels and R. Drifte (eds) Europe and Japan: Changing relationships since 1945, Woodchurch, Ashford, Kent: Paul Norbury. —(1990) Japan’s Rise to International Responsibilities: The case of arms control, London: Athlone Press. European Commission (1996) General Report on the Activities of the European Union 1995, Brussels, Luxembourg: Office for Official Publications of the European Communities. Fujikawa, S. (1991) ‘Nichi! sōgo kankei no shinten to Nihon-EC giin kaigi no yakuwari’ (The development of mutual relationships between Japan and Europe and the role of the Japan–EC inter-parliamentary conference), Nihon–EC Gakkai Nenpō 11: 227–50. Funabashi, Y. (1991–2) ‘Japan and the new world order’, Foreign Affairs 70, 5: 58–74. Gaimushōhen (various years) Waga Kuni no Gaikō Kinkyō: gaikō seisho (Diplomatic Bluebook), Tokyo: Ōkurashō Insatsukyoku. Gill, S. (1990) American Hegemony and the Trilateral Commission, Cambridge: Cambridge University Press. Gilson, J. (1998) ‘Japan and Europe’, in P. Heenan (ed.) The Japan Handbook: Regional handbooks of economic development, London: Fitzroy Dearborn. Grant, W. (1993) ‘Pressure groups and the European Community: an overview’, in S. Mazey and J. Richardson (eds) Lobbying in the European Community, Oxford: Oxford University Press. Grant, W., Martinelli, A. and Paterson, W. (1989) ‘Large firms as political actors: a comparative analysis of the chemical industry in Britain, Italy and West Germany’, West European Politics 12, 2: 72–90. Hollis, R. (1997) ‘Europe and the Middle East: power by stealth’, International Affairs 73, 1: 15– 30. Hosoya, C. (1979) ‘Relations between the European Communities and Japan’, Journal of Common Market Studies 18, 2: 159–74. Jackson, R. J. and van Schedelen, M. P. C. M. (1987) ‘Politics and business: partners and protagonists in Western Europe’, in M. P. C. M. van Schedelen and R.J. Jackson (eds) The Politicisation of Business in Western Europe, London: Croom Helm. Klein, J. (1998) ‘Interface between NATO/WEU and UN/OSCE’, in M. Brenner (ed.) NATO and Collective Security, London: Macmillan.

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Lake, M. (1986) ‘EC–Japan: partners or rivals’, Nihon–EC Gakkai Nenpō 6: 136–45. Lehmann, J. P. (1992), ‘France, Japan, Europe and industrial competition: the automotive case’, International Affairs 68, 1: 37–53. Mason, M. (1994a) ‘The political economy of Japanese automobile investment in Europe’, in M. Mason and D. Encarnation (eds) Does Ownership Matter? Japanese multinationals in Europe, Oxford: Clarendon Press. —(1994b) ‘Historical perspectives on Japanese direct investment in Europe’, in M. Mason and D. Encarnation (eds) Does Ownership Matter? Japanese multinationals in Europe, Oxford: Clarendon Press. Maull, H. W. (1990–1) ‘Germany and Japan: the new civilian powers’, Foreign Affairs 69, 5: 91– 106. Mazey, S. and Richardson, J. (1993) ‘Introduction: transference of power, decision rules, and rules of the game’, in S. Mazey and J. Richardson (eds) Lobbying in the European Community, Oxford: Oxford University Press. McLaughlin, A. and Jordan, G. (1993) ‘The rationality of lobbying in Europe: why are Euro-groups so numerous and so weak? Some evidence from the car industry’, in S. Mazey and J. Richardson (eds) Lobbying in the European Community, Oxford: Oxford University Press. Mendl, W. (1984) Western Europe and Japan Between the Superpowers, London: Croom Helm. Nester, W. R. (1993) European Power and the Japanese Challenge, London: Macmillan. Nuttall, S. (1990) ‘The Commission: protagonists of inter-regional cooperation’, in G. Edwards and E. Regelsberger (eds) Europe’s Global Links: The European Community and inter-regional cooperation, London: Pinter. —(1994) ‘Keynote article: the EC and Yugoslavia – deus ex machina or machina sine deo?’, Journal of Common Market Studies Annual Review 32: 11–25. Rothacher, A. (1983) Economic Diplomacy Between the European Community and Japan 1959– 1981, Aldershot: Gower. Segal, G. (1993) ‘Europe and Asian-Pacific security’, in T.B. Millar and J. Walter (eds) AsianPacific Security After the Cold War, St Leonards, Australia: Allen & Unwin. Strange, R. (1993) Japanese Manufacturing Investment in Europe: Its impact on the UK economy, London: Routledge. Tanaka, T. (1995) ‘Ōshū rengō (EU) no tai Ajia seisaku: ōshū iinkai no bunsho o chūshin ni shite’ (The EU’s Asia policy: based on EU Commission documents), IIPS Policy Paper 145, Tokyo: Sekai Heiwa Kenkyūjo. Thomsen, S. and Nicolaides, P. (1991) The Evolution of Japanese Direct Investment in Europe, New York: Harvester Wheatsheaf. van Ham, P. (1993) The EC, Eastern Europe and European Unity: discord, collaboration and integration since 1947, London: Pinter. Weber, S. (1994) ‘The European Bank for Reconstruction and Development’, International Organization 48, 1: 1–38. Wickens, P. (1987) The Road to Nissan: Flexibility, quality, teamwork, London: Macmillan. Wilkinson, E. (1986) ‘The economic and non-economic dimensions of Euro-Japanese relations’, in G. Daniels and R. Drifte (eds) Europe and Japan: Changing relationships since 1945, Woodchurch, Ashford, Kent: Paul Norbury. Yagi, T. (1996) ‘Tettei kenshō kyū Yūgo jōsei: Nihon no yakuwari wa nani ka’ (Investigation of the situation in the former Yugoslavia: what is Japan’s role?), Gaikō Forum 92: 18–24. Yoshimori, M. (1986) ‘Psychological aspects of Euro-Japanese trade frictions: a Japanese point of view’, in G. Daniels and R. Drifte (eds) Europe and Japan: Changing relationships since 1945, Woodchurch, Ashford, Kent: Paul Norbury.

4 Europe in Japan A growing EU identity Julie Gilson Introduction Japanese government, business and individual networks now extend across the globe. The European continent has received much of the attention of these networks. Notwithstanding, within Japan itself, Europe’s presence remains limited: not only does an enduring post-war US impact on Japanese government, business and society concentrate Japanese attention across the Pacific, but also the very nature and identity of the European continent make it difficult to understand what ‘Europe’ actually signifies. Such historical and institutional realities ensure that ideas of Europe within Japan are built upon different moments of exposure to often ad hoc and uncoordinated efforts by a variety of political and economic representatives within Europe. At the beginning of the twenty-first century, a stream of European official and business delegates passes through Japan each year as part of a multi-faceted economic and political dialogue sustained by Japanese and European counterparts. At the highest official level, the head of state or government of the presidency of the EU’s Council of Ministers is accompanied by the president of the European Commission every year, in order to attend the annual summit meeting with the Japanese prime minister. This summit, inaugurated in The Hague in July 1991, rests at the apex of a dialogue which is now replicated at a number of different levels, and which includes a Japan–EU troika foreign ministers’ meeting.1 As a result of these and other non-governmental engagements, recent years have witnessed a greater Japanese willingness to conduct business directly with representatives of the EU in addition to their EU member state counterparts, even in areas of activity for which the EU per se is not fully mandated. This acknowledgement of the EU as an international actor has repercussions for the ways in which it formulates relations with Japan. This chapter examines how contemporary ideas of Europe within Japan obtain from the culmination of disparate activities on Japanese soil since the 1960s, and assesses how the role of the EC (now EU) has been central to the formation of those ideas during the last two decades in particular. The first section of this chapter examines how the very term ‘Europe’ has come to be (re)defined in Japanese policy circles and business domains. The second section traces the origins of this definition, by surveying the development of the European presence in Japan from the 1960s to the present day. The third section focuses more closely upon specific processes in Japan itself through which dialogue is channelled. The penultimate section broadens the study to assess briefly some of the implications of this bilateral relationship within the regional setting of East Asia. The concluding section speculates upon the future of Europe’s role in Japan.

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Defining ‘Europe’ In the international relations literature, Japan and the EU are difficult to reconcile in theoretical terms. Japan is usually understood (albeit with several caveats) as a nation state with most of the trappings of neo-realist power. Its borders are easy to define, except for the contested ‘Northern Territories’, its elected government represents a specific group of people, and its growing international activities reinforce the notion that Japan desires to enhance its economic as well as political international stature. The EU, on the other hand, while not simply an overly large version of this traditional nation state, cannot easily be classified as merely representing a collective of individual states. It functions around an increasingly broad array of EU-level institutions and legal competencies, has its own parliament and currency, and has begun to assert its identity as an international actor in an increasing number of global and regional fora. However, while it has evolved as an important interlocutor in the international arena, this growing status is not reflected in a coherent internal EU foreign policy, so that third (that is to say, non-EU) countries remain confronted by complex and frequently changing internal EU structures. The Amsterdam Treaty of 1997 may have gone some way to changing that status, by introducing a High Representative for the EU’s foreign policy. Nevertheless, the system of CFSP formulation remains complex and opaque to many outsiders. The gradual development of such structures has resulted in the establishment of de facto relations which have been sustained by a number of different channels. Today, these disparate relations have become part of a more clearly recognizable relationship between Japan and the EU per se. From a Japanese perspective, it is clear that in the 1990s the ‘European Union’ increasingly became synonymous with the very notion of ‘Europe’ itself, as the competencies and international presence of the EU grew. Moreover, the collapse of Cold War divisions in Europe and the ensuing clamour for EU membership by the countries of Central and Eastern Europe consolidated a view in Japan that the expanding EU represents the European continent tout court. Japanese businesses have been conscious of the need to expand dealings with these new, low-cost conduits to the EU market, and at the same time the Japanese government and NGOs have recognized an opportunity in Europe to play a burden-sharing role in the reconstruction of economic and societal infrastructures. To date, no such incentives have prompted an increase in European activities in Japan. Rather, attempts to penetrate Japanese markets and business networks have tended to remain ad hoc and based upon individual needs and aspirations. While recent years have witnessed a growth in European interest in conducting business in Japan, the EU-centric concerns of the former Eastern bloc countries of Europe ensure that any European interest emanates primarily from the countries of the EU. Historical roots The 1950s–1960s The EU, successor to the EC and before that the EEC of 1957, is a very new partner for Japan. Nevertheless, several of its constituent member states retain contacts with Japan

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that date back to the arrival of Portuguese and Spanish missionaries and Dutch traders in the sixteenth and seventeenth centuries. Later agreements, such as the high-profile Anglo-Japanese Alliance of 1902, signalled Japan’s arrival at the high table of international affairs, while its agreement to sign the Anti-Comintern Pact with Germany in 1936 was to lead, in contrast, to the nadir of comprehensive defeat in 1945. These chequered contacts with various countries of Europe set the stage for what continues to be a rich and differentiated array of relations with the individual nations of Europe today. Indeed, the 1970s saw Japan master the art of playing one European state off against another, trading advantages with the nation most beneficial to Japan at any one time. Not only did this strategy demonstrate a thorough knowledge of European affairs on the part of Japan’s political and business elite; it also illustrated the inability of EC member states to project a united front in Japan at that time. This is not to suggest, however, that no progress had been made by the Europeans in Japan. Following the re-establishment of diplomatic bilateral relations in the 1950s, European embassies were instrumental in the promotion of trade links with the growing Japanese economy. The formation of the EEC did little to alter this approach until the European Commission gained a mandate to act in matters of the Common Commercial Policy (CCP) on behalf of all member states at the beginning of the 1970s. Instead, Japan continued to do business with Europe through ad hoc initiatives. For example, in the early 1960s Japan signed several trade agreements with selected countries of Europe, including the key founding members of the EEC (Germany, Italy, France, Belgium, the Netherlands and Luxembourg), as well as the UK. Despite such national endeavours, even Japan’s key partner in Europe, the UK, did not establish its Invest in Britain Bureau in Japan until the 1970s, a decade which was to see a number of developments in European activities towards Japan (Strange 1993:116). The 1970s During the 1970s, a dual process was occurring in European approaches towards Japan: on the one hand, the European Commission gained the right to deal on behalf of member states in trade policy; on the other, intergovernmental structures prevailed and a series of bilateral trade agreements were agreed between the member states and Japan. The Commission was active during this decade of rapid developments in the European project in promoting greater ties with Japan. Successes included its negotiation with the Japanese government of an ‘orderly marketing’ policy in 1970 and an agreement with Keidanren in 1971 to implement ‘orderly marketing’ measures (Daniels and Gow 1983:225–9: Gilson 2000). In addition, Commission endeavours on the ground in Tokyo precipitated the establishment in March 1974 of a more permanent structure for cooperation, in the form of the EC Commission delegation. According to the president of the Commission and the head of the Japanese Mission to the European Communities who signed the agreement to set up the delegation, this new de facto embassy would serve as a ‘permanent liaison … to intensify the dialogue and establish closer links with Japan’ (EC 1972:10). As a result, the Japanese side, too, gradually came to realize that benefits could be gained by dealing with the nascent EC as a unit. As the decade wore on, however, it became clear that European unity would most often be used in the pursuit of Japanese market opening measures, and by the end of the 1970s trade disputes were destined to

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become the central pillar of Japan–EC relations for the foreseeable future. In spite of, or perhaps because of, such conflicts, by the end of the 1970s the Japanese government reported more and more frequently on its negotiations with the EC per se and representatives of Japan and the EC were able to meet in an increasingly familiar number of bilateral arenas. At an EC–Japan level, this period was also important for bringing together the political communities of Japan and the EC, when in 1978 the EP began to send delegations to visit Japan. What is more, following its first elections in 1979, the EP set up a standing delegation for relations with Japan, while in Japan the Diet in the same year set up the Japan–EC Parliamentary League of Friendship. This league has been headed by a number of high-level politicians, including Hata Tsutomu (prime minister in 1994), Nakayama Tarō (foreign minister between 1989 and 1991) and Kakizawa Kōji (foreign minister in 1995). This group has dealt with a host of political issues, although it remains without negotiating powers. Alongside these growing interinstitutional relations, member states of the EC continued to conduct their own trade promotion and to pursue bilateral deals with their Japanese counterparts. These activities represented only a small fraction of European trading, however, and in 1979 there were still only about 1,500 European businessmen in Japan, compared with about 10,000 Japanese businessmen in Europe (Piening 1997:151). What is more, levels of investment in Japan by EC firms remained small, despite growing by approximately 16 per cent during the 1980s. These low levels of European success in Japan further stimulated EC-level actions, such as the introduction of the EC-wide trade promotion programme (EXPROM) to target assistance at specific sectors (such as textiles), which were finding it difficult to enter the Japanese market, as well as the European Commission’s launch in 1979 of the Executive Training Programme (ETP), which enabled young European businesspeople to spend eighteen months in Japan learning the language and gaining direct experience of working in Japanese firms. The focus of European attention at the end of the 1970s, however, remained upon the tariff and non-tariff barriers that Japan continued to erect against importers and inward investors, and it was not until the middle of the following decade that attention was redirected towards European efforts to penetrate Japan. The 1980s The 1980s were to witness several changes to the nature of Europe’s presence in Japan. These were stimulated to a large extent by the presence of Jacques Delors as president of the European Commission, and by the subsequent drive towards the SEA of 1986, which was to herald plans for a single European market in 1992. Publicity in Japan emanating from the potential ‘fortress Europe’ that such a market would create ensured that the question of ‘Europe’ entered public debates during the mid-1980s. This, combined with the SEA’s proposal that cooperation be intensified between member state embassies and the Commission delegation in third countries, promised the deepening of Japan–Europe relations in the 1980s. However, since such activities were left to take place on a case-bycase basis, changes in Europe during this decade did not in fact translate into a higherprofile presence for Europe in Japan.

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For its part, however, the European Commission underwent a shift in its approach to Japan in 1985, when it acknowledged that Japanese visible import barriers, such as tariffs, had been reduced to some extent, and began to direct its criticisms against the societal practices (e.g. the keiretsu system) which lay behind such barriers in the first place (Bridges 1999:25). In addition, this period witnessed a number of attempts to promote actively European exports and investment in Japan and several promotional campaigns were launched to that end. These included the British ‘Opportunity Japan’. campaign of 1988 which was followed by others, such as the French ‘Le Japon, c’est possible’ equivalent. A Community-wide campaign would only be realized in 1994 when the Commission launched the first ‘Gateway to Japan’ programme. Prior to that, the nonprofit EC–Japan Centre for Industrial Cooperation was established in 1987, in Tokyo (and its counterpart was set up in Brussels), in order to assist European investment and cooperation in Japan. Between 1987 and 1990 EC exports to Japan grew at an annual rate of approximately 25 per cent. Unfortunately, since about half of those exports issued from the luxury goods sectors, and included clothes, paintings, motor vehicles and alcoholic drinks, once Japanese economic growth began to slow down, the demand for these products declined (Bridges 1999:28). The last few years of the 1980s did see a steady annual growth (of about 20 per cent) in EC FDI in Japan, but the investment gap remained wide as Japanese FDI in Europe far outstripped European efforts in Japan. What is more, by 1987 the US had invested ten times more in Japan than the US$1.2 billion of the EC (Mason and Turay 1994:76). Problems continued to plague prospective European investors and exporters to Japan, and were to lead to a number of trade disputes between the EC and Japan during the 1980s. Several well-known cases could be cited, and include the Commission’s complaint during the first half of the decade against a particular (ad valorem) tax on alcoholic drinks which particularly penalized higher-quality products such as whiskies and brandies. The acrimony surrounding this problem even led British Prime Minister Margaret Thatcher to bring up the subject directly with Prime Minister Nakasone Yasuhiro in May 1986, and in November 1987 a panel of GATT found in favour of the EC. Notwithstanding this decision, Thatcher had to intervene again in 1988, this time by demanding of Prime Minister Takeshita Noburu that Japan implement GATT’s ruling. The ad valorem tax was consequently abolished, but further actions in Japan (to introduce a whisky with a lower alcohol content which would place it into a different tax bracket) saw this problem carry on into 1995 when the EC lodged its first WTO complaint, against Japanese liquor taxes. The nature of the problems encountered by European exporters and investors in Japan continued to be varied, and included problems associated with a strong yen, as well as keiretsu-type barriers. Critics accused the Japanese of using this system to promote price fixing and to rig deals to ensure that access to outsiders was restricted (van Wolferen 1990). The most contentious issues, however, lay between Japan and the US, and the EC was no more than a bystander to the introduction of the Structural Impediments Initiative (SII) by the US in 1989–90. This initiative directed strong criticisms at Japanese nontariff barriers, most notably the distribution system and other aspects of the Japanese economy and trade (Bourke 1996). The European Commission hoped to benefit from US pressure on Japan, but was reluctant to bind European states to reciprocal arrangements in

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the way that the US had done. At the same time, and in the light of dramatic increases in world flows of FDI, the European Commission followed the US in targeting Japanese trade barriers. Such issues were to cloud more concerted efforts to improve Japan’s relations with Europe at the end of the 1980s and a change of tone would only be heard in the following decade. The 1990s and 2000 In 1991 the Japanese government’s White Paper ( JIIA 1992) for the first time included an assessment of the ‘Political Relationship’ with the Community, thereby indicating that the EC was no longer regarded as an economic entity alone. As a result of the collapse of communism in Europe after 1989 and the further consolidation of the EC (and, after 1993, EU) integration it was clear that the Japanese government could no longer ignore the continent of Europe as a political as well as an economic force on the international stage. In a speech to the Diet in 1991, Foreign Minister Nakayama Tarō said that the end of the Cold War conflict required the building of Europe ‘around the EC’ and noted that ‘Japan intends to take this opportunity to deepen its dialogue with European nations, particularly with the EC, in political, economic, cultural and many other areas, and to further strengthen its cooperative relations, including cooperation in problems of global magnitude’ (JIIA 1992). From a Japanese perspective, it was evident that the mechanisms of the Community (and later, Union) had become the default setting for Tokyo’s understanding of ‘Europe’. For its part, the EC, which became the EU in 1993, adopted a less confrontational approach towards Japan during the 1990s. Following the signature of the Hague Declaration in July 1991, a growing political relationship with Japan was used to locate trade issues within a broader context (Gilson 2000:89–120). In December 1994, the European Council (heads of state of the EU member states) approved a Commission document entitled ‘Towards a New Asia Strategy’, whose aim was to promote the EU’s profile in Asia (Gilson 2000:114). Japan remained at the centre of the projected notion of Asia, and was to benefit in 1996 from a high-profile visit by European Commission President Jacques Santer. At the same time, the publication of a brochure explaining the nature of Japan–EU relations aimed to disseminate information about the EU to a public audience in Japan. By the middle of the 1990s, a steady flow of EC products was finding its way to Japan. In addition, European products were being aided by MITI’s Global Business Partnership, which had been launched in 1992, as well as regional and prefectural efforts within Japan to promote inward investment (Bridges 1999:38). In spite of raising the profile of Japan–EC relations, the Hague Declaration did not resolve all of the trade problems between the two blocs. Criticisms of Japanese trade practices continued to be made by the European Commission and the European Business Community (EBC, combining European chambers of commerce in Tokyo). Moreover, it was only during this decade that the European Commission began to provide support for investment in Japan by European companies (Bourke 1996). The Commission, in conjunction with EXPROM, also produced the Guide for European Investment in Japan in 1990, which provided the criteria which needed to be considered prior to investing in

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Japan, and which included labour access, land availability and price, distance to customers and suppliers, as well as transport infrastructures (Bourke 1996:169). While ‘Europe’ had become more popular in Japan during that period, leaders of individual European countries were at pains to make their own high-level visits to Tokyo. Most notably, German Chancellor Kohl and French President Chirac travelled there in the second half of the 1990s and their remit was singular: to expand trade links between Japan and their own countries. Thus, alongside a growing recognition of the role of the EU, national representatives from Europe continued to compete for trade with Japan. These differing approaches do not always sit comfortably alongside one another. Since the middle of the 1990s, relations between Europe and Japan have tended to be low-key in nature. Problems associated with domestic recession and the 1997 currency and financial crises in Asia have dominated Japanese concerns: in Europe, the need to address the processes of ‘deepening’ and ‘widening’ of the EU have tended to predominate. These respective concerns have ensured that the Commission delegation and national member states continue to carry out their daily routines in Tokyo in the absence of significant governmental pronouncements regarding Japan–Europe relations. While the financial crisis eventually provoked European claims that faith in the Japanese economy would remain, the apparently slow response from the EU, and Japanese criticisms of it, demonstrated some of the continuing weaknesses in the bilateral relationship. National embassies in Tokyo may indeed seek greater cooperation as a result, but on matters of substantive development, government input from both Europe and Japan will be required to raise the profile of this set of relations. EU-level versus member state interests in Tokyo The contradictions between the role of the EU and its constituent members can be seen most visibly in Tokyo, which accommodates all fifteen member state embassies and the Commission delegation. In Tokyo, member state embassy officials are employed first and foremost to look after national interests, while the Commission delegation deals with EUlevel affairs. To this end, many embassies have a specific section (sometimes in a different location) for developing national trade promotion activities with Japan. The Commission, for its part, may act as an umbrella beneath which national promotions take place, such as occurred during the so-called Cooperation Week in Tokyo in 1997 (Gilson 2000:73). While common foreign and security policies of the EU member states remain under the control of national governments, the close proximity of EU member state ambassadors and political counsellors in Tokyo makes some overlap of activities with the delegation inevitable, particularly since the delegation itself has greater resources than some of the smaller member state embassies. The delegation’s very presence in Tokyo since the mid-1970s means that it now retains a comprehensive network of contacts in Japanese government and business circles and that its resource capacity provides it with ‘a network more extensive than that of many member states, several of whom have been seeking ways of reducing at least the costs and in some cases the size of their diplomatic services’ (Edwards and Nuttall 1995:95). The presence of regional representatives in Japan has also been important in promoting European trade and investment on Japanese soil. By 1990, the EC already had

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twelve regional EC associations across Japan. These serve as a means of gaining access to local government officials, business networks, as well as academic and media circles, and are also utilized to encourage European companies to establish themselves in these areas (Julius 1990). In addition to these, regional bodies from Europe, ranging from Nordrhein-Westfalen, Devon and Cornwall to Alsace, Valencia and Flanders, are also represented in Japan, and proliferated during the 1980s in particular (Bourke 1996:142). These representatives have different aims, which include: attracting Japanese investors to visit, trade with and invest in their region; running investment promotion seminars, providing information and undertaking public relations activities; as well as offering trade assistance and promoting industrial cooperation and the region itself. As Bourke notes, moreover, each of these representations reflects the varied nature of national governmental approaches to import and inward investment promotion: when in power, British Prime Minister Thatcher went directly to Nissan and later discussed trade issues directly with Prime Minister Nakasone; the Spanish embassy, like the British one, coordinates the numerous Spanish business activities in Japan; but, in contrast, Germany’s federal system leads to competition amongst German companies to gain government support for particular Länder. These initiatives on the ground in Japan promote de facto European cooperation vis-à-vis their Japanese partners, but ensure that it is distributed unevenly across region and sector within Japan. Changing business interests Extending diplomatic ties are complemented by a host of business and non-governmental activities between Japan and the member states of the EU and between Japan and the EU itself. However, on these levels, too, it is difficult to perceive a European-wide presence, since nationally based companies and industries pursue the Japanese market independently of their competitors in the rest of Europe. Names such as Louis Vuitton, Christian Dior, Michelin, Siemens and Nestlé represent the European success stories in the Japanese market. Moreover, national approaches to Japan promote their own specialized products. For example, key French products destined for the Japanese consumer include cognac, spirits and mineral water alongside aircraft and contracts to reprocess Japanese nuclear fuel. From Germany automobiles, pharmaceuticals, medical supplies, auto parts and medical equipment are exported to Japan. They are promoted, inter alia, by cooperation amongst national chambers of commerce, ministries of finance and the Japan External Trade Organization (JETRO) in Japan. National programmes to promote business in Japan now include the UK’s ‘Action Japan’ campaign, Germany’s ‘Japan Initiative’ to boost exports to Japan, as well as France’s ‘Le Japon, c’est possible’. This renewed export promotion campaign was designed in order to conduct market surveys, initiate publicity activities and provide seminars for improving French business knowledge of the Japanese market. There is, nevertheless, also a European dimension to trade promotion in Japan by European enterprises. In addition to these national and, increasingly, European-level actions in and towards Japan, Europe’s presence in the rest of Asia also influences its relations with Japan at a number of different levels.

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Europe in East Asia in the 1990s and 2000 As reflected in its Towards a New Asia Strategy, the EU did attempt to broaden its approach to the nations of Asia in the 1990s. Responding to rapid economic growth in the East Asian region, the EU also utilized its better established relations with Japan in order to understand how to approach this region. The growing relations in this region have advantages and disadvantages for Japan’s relations with Europe. On an official level, a growing number of fora developing in the region offer representatives from Japan and Europe the opportunity to maintain a dialogue on a greater number of levels. Thus, Japanese officials encounter representatives of the EU itself in bodies such as the ARF, the ASEM process and the KEDO, which are presented here for illustrative purposes but which by no means represent the entire range of meetings in which both Japan and the EU participate. The ASEAN Regional Forum Representatives of the EU attend both the ASEAN Post-Ministerial Conference (PMC), as well as its more recent progeny, the ARF, to which it has belonged since it began in 1994. Indeed, the Foreign Minister of the rotating Council of Ministers is the only European in attendance at the ARF, since individual EU member states are not represented. Although the ‘EU’ is represented in the ARF, it has a qualitatively different role from that which it assumes in (for example) the KEDO and ASEM structures. Given that the presidency is responsible for representing all member state views, moreover, EU participation can become fragmentary and aimed at lowest-common-denominator compromises. Moreover, the fragmented nature of the ‘EU’ position in this forum is clearly shown by the fact that France and the UK formally applied to join the ARF. Without a more fully developed CFSP, and a more definite common strategy with regard to involvement in Asia, the confusion between the EU’s role and that of its member states in this region could increase. A clearer approach could arguably be achieved through the ASEM forum, in which political issues are fused with economic ones. ASEM The first ASEM was held in Bangkok in March 1996 and was followed by a second meeting in London in 1998 and a third in Seoul in 2000. The meeting brings together leaders from twenty-five nations and one organization (the EU), to discuss a variety of matters of mutual and international concern. Importantly, the forum offers the EU access to this region, in the person of the Commission president. Thus, it promotes an independent EU identity in a geographical region that remains largely unexplored by the EU member states. For the Japanese, ASEM provides a way of further developing Japan’s relations with European heads of state and other national representatives, as well as officials of the EU itself (Gilson 1999). Unlike the ARF, ASEM hosts an EU participant alongside member state representatives and, for this reason, it can be difficult for the participants to achieve consensus. To date, problems have arisen over issues such

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as human rights (particularly in East Timor and Burma (Myanmar)) and over ways to resolve the Asian financial crisis after 1997. This interregional forum affects the European presence in Japan in a number of ways. Not only does it enable Japan and the EU – as member states and as a unit – to meet in a forum which does not have the participation of the US, but it also demonstrates that ‘Europe’ is becoming increasingly consolidated in international affairs as the EU. Korean Peninsula Energy Development Organization KEDO was founded in March 1995 by the US, Japan and the Republic of Korea (South Korea), in order to implement part of a US–Democratic People’s Republic of Korea (North Korea) agreement to reduce the latter’s nuclear-weapons-producing capacity. At its inception, many EU member states joined or agreed to join KEDO as non-executive members, and since then both the US and Japan have solicited further European participation by addressing the EU directly. Since 1996, the EU has been urged by them to become an executive board member and to replace its national contributions with an EU fund (Drifte 1996:2). Following its decision in December 1995, the EU established the issue of Korea as a joint action of the CFSP, as a result of which, and as a pre-ASEM gesture, the EU agreed in February 1996 to make an initial contribution of US$6.3 million to KEDO. Participation in this forum thus serves several purposes for the Japan–EU bilateral relationship. In the first place, reduced financial assistance from the US in KEDO put pressure on the Japanese to find additional contributors, while a similar process is under way in Europe, as the US intensifies calls for the EU to assume a greater share of the regional burden of ‘policing’ and rebuilding the former Yugoslavia and the states of Central and Eastern Europe. Moreover, as Northeast Asia and Eastern Europe develop both economically and politically, Japan and the EU are able to act as points of mutual contact for one another in their respective regions. National interests and the impact of regional engagements The regional fora illustrated above function alongside the pursuit of national interests in the Asian region (JCIE 1999). Bilateral relations between EU member states and Asian states include political and security concerns, as exemplified by the British security treaty with Brunei and its participation in the Five Power Arrangement with Malaysia, Singapore, Australia and New Zealand. On an economic level, European leaders like former German Chancellor Kohl and French President Chirac promoted national trade interests in the region while simultaneously reiterating their commitment to the greater European grouping prior to the first ASEM meeting (The Straits Times 2 March 1996). On a societal level, programmes such as the Japan Exchange Teaching (JET) Programme send young people to Japan on exchanges to teach students at Japanese junior and senior schools, while other programmes include the UK–Japan Voluntary Sector Exchange Programme inaugurated in 1996 between the Daiwa Anglo-Japanese Foundation and the JCIE, which was designed to promote public seminars. These various activities form an integral part of Europe’s economic and political presence in Japan and Asia more widely.

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At the same time, however, the examples of growing Asian regional contact between representatives of the EU and the Japanese government are important in redefining the parameters of Japan–EU relations in several ways, and in determining the potential significance of ‘Europe’ in Japan. First, as shown in the cases of the ARF, ASEM and KEDO, the EU as an international actor in its own right is becoming more and more visible. While this role is particularly pronounced for the ARF and KEDO, European participation within ASEM is defined by EU membership. Similarly, participation by the EU in these fora complements its bilateral relations with other Asian countries, such as with South Korea and the members of ASEAN, and has even precipitated a new dialogue with China, whose bilateral agreement with the EU was signed at the time of the second ASEM summit. This growing evidence of an EU-level interlocutor reinforces the position of the EU within Japan. Second, participation by Japan and the EU within regional fora enhances Japanese national perception that Europe may become a legitimate counterbalance to its relationship with the US in the region. European participation in KEDO demonstrates how the EU serves as an additional source of financing and resources, while the US absence from ASEM brings this particular point into sharp relief. Increasingly, Japan’s European partners may be viewed as important allies in resolving Asian economic and political problems. Third, European joint participation in these fora may engender a greater propensity towards EU-level agreement on issues of concern within the Asian region. This, in turn, supported by a well-equipped delegation in Tokyo, may increase the pressure for European governments to seek common ground on a larger range of issues regarding Japan. Finally, and notwithstanding the apparently slow start seen by the euro, greater participation in regional projects by the EU will inevitably be demanded as the single European currency becomes more firmly embedded internationally, and as the EU expands in membership. This development is likely to result in an increase in both the EU’s visibility and credibility within Japan. Conclusion Japan’s relations with Europe have developed as the result of decades of ad hoc encounters between different national and European-level sectors within Japan and Europe. The Hague Declaration of 1991 represented a codification of these varied activities, and since that time ‘Europe’ has come increasingly to function alongside member state initiatives within Japan. At the same time, as national interests continue to compete within Japan, the growing visibility of the EU within Japan and Asia more widely is likely to affect the nature of that competition in the future. Note 1 The troika is the procedure whereby the current, previous and next presidency countries work together in order to provide continuity in EU affairs between the six-monthly presidencies.

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References Bourke, T. (1996) Japan and the Globalisation of European Integration, Aldershot: Dartmouth. Bridges, B. (1999) Europe and the Challenge of the Asia Pacific, Cheltenham: Edward Elgar. Daniels, G. and Gow, I. (1983) ‘The European Community and Japan’, in J. Lodge (ed.) The European Community and the Challenge of the Future, London: Pinter. Drifte, R. (1996) ‘The EU’s stake in KEDO’, European Institute for Asian Studies Briefing Paper, No. 96/1. EC (1972) Bull-EC (Bulletin of the European Communities) 10–1972: 10. Edwards, G. and Nuttall, S. (1995) ‘Common foreign and security policy’, in A. Duff, J. Pinder and R. Pryce (eds) Maastricht and Beyond: Building the European Union, London: Routledge. Gilson, J. (1999) ‘Japan in ASEM: establishing interregional or intraregional agenda’, Asian Survey 39, 5: 736–52. —(2000) Japan and the European Union: A partnership for the 21st century?, London: Macmillan. JCIE (1999) Online. Available http//:www.jcie.or.jp (accessed November 1999). JIIA (1992) White Paper 1990–1, Tokyo: JIIA. Julius, D. (1990) Global Companies and Public Policy: The growing challenge of foreign direct investment, London: Pinter. Mason, T. D. and Turay, A. M. (eds) (1994) Japan, NAFTA and Europe, London: Macmillan. Piening, C. (1997) Global Europe: The European Union in world affairs, Boulder, CO: Lynne Rienner. Strange, R. (1993) Japanese Manufacturing Investment in Europe: Its impact on the UK economy, London: Routledge. van Wolferen, K. (1990) The Enigma of Japanese Power, New York: Vintage.

Part II Globalization in economy and business

5 Globalization and oriental capitalism The global meaning of Japan Jaw-Yann Twu Introduction In this chapter, oriental capitalism is defined geographically as embracing Japan, the NIEs, ASEAN and China. They may be called JANAC, or NAC for the last three regions and country. Another keyword used here, namely globalization, is regarded as a dynamic process of integrating these economies into the world market. It signifies that their domestic markets have been fully incorporated into the international division of labour in terms of both trade and capital investment. In other words, the economic growth of JANAC has pushed the world market from the West towards the East and the rapidly developing markets of East Asia. In this process, Japan’s position in the world market has grown in importance. From the perspective of an individual economy in the JANAC group, oriental capitalism refers to the progress of the national economy towards globalization at home. However, from the viewpoint of the world market, it implies that, in the development of global capitalism, its centre of gravity is moving from Atlantic Europe and the eastern seaboard of the US to the East Asian region. Of course, as these two aspects of oriental capitalism can be regarded as two sides of the same coin, they should be understood simultaneously. With the above as a prelude, this chapter examines three related issues in globalization and oriental capitalism. First, how has NAC integrated itself into the world market or become a part of the globalization process? Second, what are the reasons for NAC’s rise in the world from the 1970s to the mid-1990s? Third, how can we explain the apparent success of the NAC’s integration into the world market? Answering these questions should provide a deeper understanding of the development process of oriental capitalism in the 1990s. It should nonetheless be noted that Japan is not included in this section, as it was already an industrialized country at that time. Rather, this chapter will describe the role Japanese capitalism played in the process of NAC globalization; that is, the global meaning of Japan will become clear by examining the role Japan played in promoting the development of oriental capitalism. Finally, this chapter will explore why East Asia suffered currency turmoil starting in 1997 under NAC and Japan’s influence. The crisis suggests oriental capitalism is facing a critical turning point, although the full implications of the crisis cannot be fully examined owing to space limitations.

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NAC globalization The pattern of NAC globalization The pattern of NAC globalization, or the form of integrating NAC into the world market, is based on the success of what can be called a pattern of ‘foreign capital inducement and export-oriented industrialization (FCI.EOI)’. To explore the reasons for the FCI.EOI pattern of success in East Asia, but not in Latin America or Africa, we need to pay attention to the role Japan played in the process of NAC globalization. The so-called FCI.EOI pattern of development means to introduce foreign capital (including technology and equipment) and utilize cheap domestic labour in the production process, and sell domestic products to the world market. This pattern also means an ‘adopt open-door policy’ and to place priority on foreign capital investment and export-oriented industries. However, an open-door policy is fraught with difficulty: for a start, achieving satisfactory results in promoting exports as well as improving the balance of payments takes time. For instance, increasing the import of foreign raw materials and equipment can worsen the balance of payments. In concrete terms, it is likely to bring about the following six difficulties or syndromes: namely (1) the host country’s currency (e.g. Korean won, Taiwanese yuen) devaluation against the dollar – in other words, the depreciation of the national currency may occur as a result of foreign pressure, which leads directly to a worsening in the balance of payments; (2) inflation in the domestic market due mainly to currency depreciation; (3) the widening of the gap in national income between the rich and the poor as a result of inflation; (4) the increased financial burden of the central government and budget deficits as a result of the colossal sums spent on public works projects, especially infrastructure; (5) the external debt resulting from the increase in deficit financing; and (6) serious unemployment resulting from an influx of migrant workers from rural to urban areas, but without sufficient urban employment opportunities (Twu 1990:249–51). These problems are all intermingled. They are problems which have stalked many developing countries as they start to adopt an FCI.EOI policy. In this context, they may be said to face the ‘open-door policy syndrome’. In the development process of oriental capitalism, the initial challenge NAC faced was how to overcome or mitigate this syndrome so as to enter the world market and respond to globalization. Many Third World countries in Latin America and Africa have not joined the globalization process in the same way as Asia (at least this pitfall was avoided by the NAC before the Thai baht depreciation of July 1997). The reasons for NAC’s successful integration into the world market are thus worthy of further investigation. My hypothesis is that the intermediate role Japan played in the process of integrating the NIEs into the world market is crucial (Twu 1988:22–8). Japan not only introduced high technology from the US, but also exported secondhand machinery and equipment to South Korea and Taiwan. With such machinery and equipment at knock-down prices, as well as low-cost domestic labour forces, the NIEs gained the opportunity to produce and sell their manufactured products to the US market. In this way a growth triangle (GT) among the US, Japan and the NIEs was formed. Since the 1970s, the occurrence of two oil crises (in 1973–4 and 1979–80) as well as the remarkable rise in the value of the Japanese yen, with its high points in 1977–9 and 1985–7, and the decision of the US to

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open its domestic market to developing countries (the general preference measures from 1976 to 1988), all further promoted the formation and evolution of this GT. Meanwhile, internally, the NIEs’ land reform (Taiwan and South Korea) in 1949–51 and exchange rate reform, by which a multi-exchange rate was unified into a single exchange rate in 1957–62 (Taiwan) and 1965–6 (South Korea), laid the foundation for the development of export-oriented industries. Externally, US aid in terms of financial support for South Korea and Taiwan, which originated in the US Cold War strategy of containing Chinese communism in the 1950 and 1960s, also proved helpful. In addition, the NIEs’ development ideology of FCI.EOI was basically identical with the principle of IMF and GATT: liberalization, non-discrimination and multilateralism. In short, although these internal and external conditions are clearly important, it would have been difficult for the NIEs to enter the world market without Japan’s help as an intermediary. In other words, without Japan’s intermediary role today’s oriental capitalist development would not have taken place. This is perfectly clear if we compare East Asia with the case of Latin America or Africa, without an intermediary country like Japan. Entering an era of FDI The development of oriental capitalism did not permit the economies to stay at the stage of FCI.EOI for very long. Next came the era of FDI. By following the NIEs, ASEAN and China also adopted the FCI.EOI policy. As a result, the NIEs rose to a higher position, i.e. they shifted from being in the position of foreign capital inflows to that of capital outflows as the host investor. Besides the NIEs, Malaysia, Thailand and China also promoted FDI. Such a tendency is pointed out by the Economic and Social Survey of Asia and the Pacific, published by the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) in 1997: In 1995, China, Hong Kong, Malaysia, the Republic of Korea, Singapore, Taiwan and Thailand accounted for almost 100 per cent of the total outflows of all developing economies of the region and 88 per cent of the outflows of all developing countries. Foreign investment from these economies grew by 238 per cent between 1990 and 1995, with FDI from China, Malaysia and Thailand having grown very rapidly in the last few years. Each of these seven economies had over $2.5 billion of FDI outflows in 1995, except Thailand, which had around $900 million. In Hong Kong, the Republic of Korea and Taiwan, FDI outflows now exceed inflows. FDI outflows from Malaysia, Singapore and Thailand were 40 per cent or more of their inflows in 1995, whereas China’s FDI outflow was 9 per cent of its inflows. (UN 1997:149) It is still uncertain how the above situation will change following the Thai currency turmoil of July 1997. Since the late 1980s, however, the Asian economy has faced a new era of FDI as a region of capital outflow (Twu 1997a: 20–30). The NIEs, in particular, have become the host of capital outflows. Indeed, the NIEs are very important to ASEAN owing to the large share of FDI directed by them to the ASEAN economies. Such

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important changes indicate that the evolution of oriental capitalism has reached a new stage. A number of important points about the evolution of oriental capitalism should be emphasized. First, the significance of ASEAN and China’s integration into the world market, particularly China’s reform and increasing economic openness, are of farreaching historical significance. Without China’s participation in the GT, as mentioned above, the evolution of oriental capitalism would not have occurred in the real sense of the term. In that case reference could only be made to Japanese capitalism, the NIEs’ form of capitalism or the ASEAN pattern of capitalism separately. As it is, ‘oriental capitalism’ can be used to discuss the current development facing the East Asian economy. Second, after the NIEs’ emergence as hosts for capital outflows in the region, they have replaced Japan as the intermediary in the GT. With the NIEs’ intermediaryfunction among the US–Japan–NIEs in the 1980s, ASEAN’s and China’s integration into the world market became easier, as both were able to avoid or mitigate the ‘open-door policy syndrome’ discussed above. Third, the change of the GT pattern from a single structure to a complex one spurred the evolution of oriental capitalism in the direction of multiple channels. There are three major channels in the complex GT, as follows (Twu 1997b: 28): 1 An import channel for ASEAN and China, namely Japan → NIEs (Hong Kong and Taiwan) → ASEAN and China; in this case, NIEs play an intermediaterole for imports to ASEAN and China. 2 An export channel for ASEAN and China, namely ASEAN and China → NIEs → US. 3 Both import and export channels side by side within JANAC. These can be divided into two branch channels: (a) NIEs → ASEAN → NIEs, (b) Japan → ASEAN → NIEs. Here attention must be paid to China’s position in the complex pattern; that is, China has not entered channel 1 completely, but still remains in channels 1 and 2. The formation of channel 3 was mainly due to the new investment position of the NIEs, which have provided a large quantity of FDI outflows to ASEAN. Together with Japan’s FDI to ASEAN and the NIEs, a new international division of labour has been formed. According to the annual White Paper of the MITI issued in 1996, both Japanese and NIE enterprises have set up a complex international division of labour within the Asian region. China has not joined this international division, however. If China could join and make a positive contribution to such new division of labour in the future, the evolution of oriental capitalism would advance still further. As a consequence, Asian economic resilience, particularly against Europe and the US, would increase as well. In short, the fact that the NIEs became the hosts for capital outflows to the region – the suppliers of FDI – led to a major structural change related to the international division of labour in the East Asian economy. Indeed, together with China’s integration into the world market, a Chinese Economic Area (CEA) has been gradually formed (OECD 1997:52, 132). The NIEs’ exports to China, particularly using China as a stepping-stone for entry into the US market, promoted not only an increase in Chinese exports to the US, but also an increase in the NIEs’ imports from Japan. As noted, the NIEs’ trade surplus with Japan has increased rapidly. What is more, NAC has become the world’s largest

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export base since its exports exceeded those of the EU in 1993. In this way, oriental capitalism has been able to expand rapidly. With the transition from foreign trade to FDI as well as the integration of these economies into the world market, the position of oriental capitalism is growing in importance in the world market. This can be clearly seen in the East Asian currency crisis following the devaluation of the Thai baht, which seriously affected the European and US stock markets. Before discussing this, however, an examination of the global meaning of Japanese capitalism in promoting the evolution of oriental capitalism is needed. The global meaning of Japanese capitalism in promoting oriental capitalism The characteristics of Japanese capitalism As already mentioned above, Japanese capitalism played an important pioneering as well as intermediary role in promoting the development of oriental capitalism in the NAC. It is due to this pioneering and intermediary position that Japanese capitalism greatly affected the position of oriental capitalism in the world market. Compared with other advanced economies in Europe and North America, Japanese capitalism before the first appreciation of the yen in the late 1970s can be summarized by three keywords, backwardness, precocity and centralization; or at least that is the view of the Uno school at the University of Tokyo (Ōuchi 1962:303–9). These three factors are not independent but intertwined in a complex trinity. For this reason, it is inappropriate to separate one from the other and pick each one for separate study. But for the sake of simplicity, the following summarizes the main points of each. Historically, backwardness was manifested as ‘the last empire’ of Japanese capitalism in the world of the Great Powers; concretely, this occurred with the Meiji Restoration of 1868 and the colonial occupation of Taiwan in 1895. Second, the precocity of Japanese capitalism can be seen in the short period of twenty-eight years between the Meiji Restoration and the occupation of Taiwan, when Japanese capitalism moved rapidly from restoration to imperialism. In that short period, Japan introduced and duplicated the capitalist system of Western Europe. For instance, its colonial policy in Taiwan and the Korean peninsula was basically an imitation of the capitalist system under French and German fascism. This was deeply rooted in its backwardness, as backwardness and precocity represent two sides of the same coin. As for centralization, it has been commonly recognized that the Japanese government played a very powerful role in promoting Japanese capitalism. It was, in many ways, almost unique among advanced capitalist countries. According to the Uno school, strong state intervention in the economy is an inevitable outcome stemming from the nation’s backwardness and precocity. Rather than discussing these characteristics in detail, it is more important to examine how these characteristics of Japanese capitalism affected Japan’s FDI in Asian countries after the Second World War.

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The business characteristics of Japanese colonial policy before the war and the management features of its FDI in Asia after the war The main business characteristics of Japanese colonial policy before the war can be seen in the following two points (Twu 1995). First, during the colonial period, Japanese imperialism moved heavy and chemical industries to the colonial region. It expanded them by a large-scale infusion of financial and human resources. There was thus a buildup of the colonial railway, communication, machinery and energy (power) industries in Taiwan and on the Korean peninsula. For instance, Japan constructed a 15,000–20,000 kW power plant at Taiwan’s Sun Moon Lake in the 1920s, along with a power station in presentday North Korea, and a world-class (110,000 kW) hydraulic power plant in Manchuria (three provinces, including Heilongjiang, Jilin and Liaoning in northeastern China) in 1941 in order to support the northeast regional industrialization for military expansion. Second, Japan’s emerging zaibatsu (financial cliques) went to the colonial regions in order to open up and manage the new industries and businesses. They colluded with the warlords in order to expand mainly the military supplies industry in the colonies. Generally speaking, colonial industry and business served the purpose of supporting the industrial expansion of the colonial power, Japan. At the same time, the colonial regions also provided the consumer market for the manufactured products of the imperial power. Through these two channels, the imperial power derived double benefits from the colonial regions. However, Japanese colonial business operated in a converse way: that is, the new financial clique used the colonial regions as the base to expand its heavy and chemical industry. What is striking about post-war FDI in Asian countries is the revival of these two key features of Japanese capitalism. A study the author was involved in shows that firms invested in by Japan in East Asia, either in the electronics or automobile industries, all competed with Japanese enterprises in the same country, scrambling for the same market (Itagaki 1997a, 1997b; Twu 1997b: 25–63, 1997c: 94–114). This phenomenon as a feature of Japanese direct investment in East Asia is particularly salient in contrast with the case of European and US multinational corporations. The next feature of Japanese post-war investment in Asian countries is that most Japanese businessmen exuded a strong self-confidence; they believed that Japanese management was the best in the world. With this kind of absolute confidence and sense of superiority, Japanese enterprises overseas applied all of their own management and business methods just as if operating a domestic factory. For instance, their productive activity was copied directly from the Japanese domestic versatile worker (one worker can take on many duties without help from others) and small-group circle activities (only four or five workers form one unit but carry out all the functions on their production line). Another example is of sending several hundred local workers to the corporation in Japan (i.e. the model workplace) to learn and duplicate the production and working procedures as carried out in Japan. Such application and duplication (some ‘adaptation’ was also necessary) was totally without change; in other words, it did not seek to respond to the local culture. The idea of sending hundreds of workers to learn in the home corporation is quite alien to European and US multinational corporations. Another feature that can be pointed to is the market share of the products made by Japanese overseas enterprises. In 1992, for instance, 38.6 per cent of the total electronic

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products manufactured by Japanese multinationals in the NIEs and 47.6 per cent of those in ASEAN were exported to third countries, whereas only 22.1 per cent of those in the NIEs and 27.6 per cent in ASEAN were exported to Japan (MITI 1993:82; Dobson 1993:47–51). Undoubtedly, this is broadly consistent with the export-dependent or export-oriented industrializing policy of the NIEs and ASEAN. It fits the development ideology of the IMF and WTO for promoting liberalization, non-discrimination and multilateral relationships, as mentioned above. From the above, therefore, the evolution of oriental capitalism can be seen to be based on the common principle of foreign capital introduction and export orientation as well as on the ‘flying geese’ pattern of development, in which Japanese capitalism was the lead goose. In such a development process, a new international division of labour was formed, as shown in the channel model above. Japan, with Japan–US as the axis, played a key role. What is more, not only was the NIEs’ and ASEAN’s industrialization involved, but also China’s socialist market economy was introduced into the world market. This development of oriental capitalism rose to a peak with exports from NAC exceeding the amount of EU external trade in 1993. In short, from the development history of oriental capitalism it can be seen that it started under a colonial system before the war and was further pushed to expand by the post-war IMF–WTO (previously GATT) system. Oriental capitalism under the umbrella of the US dollar Nevertheless, the East Asian currency crisis starting in July 1997 implies that, in spite of the promotion of globalization under Japanese capitalism, the development of oriental capitalism also occurred under the umbrella of the US dollar. Without a regional currency like the euro, oriental capitalism, including the source economy of Japan, is like a mirage. Now it depends on the Chinese currency, the yuan, to withstand the pressure of Asian currency depreciation. If the yuan depreciates in the near future, oriental capitalism, including Japan’s, could be in peril of collapse. It is thus essential to keep an eye on changes in the yuan exchange rate, since it could bring down Japan, the NIEs and ASEAN. By the end of 1997 China introduced and utilized FDI to the value of about US$220.1 billion (of which 66.3 per cent was from Hong Kong, Macao and Taiwan). At the same time, its foreign exchange reserves reached US$145.0 billion by the end of 1998, while the total amount of imports and exports was already over US$323.9 billion in 1998. Finally, external debt was US$146.7 billion at the end of 1997. Such statistics indicate that China is gradually becoming an international financial superpower. In the 1997 Asian currency crisis, for instance, China took the unprecedented step of providing US$2.0 billion as a part of the IMF emergency financial bailout of Thailand, of which US$1.0 billion was provided by the Hong Kong local government, as well as US$2.0 billion to South Korea. This certainly represents China’s concern over the Asian currency crisis and also implies the important position of the Chinese yuan in international financial markets. According to the development of China as a late-comer, it could be argued that Japanese capitalism represented one side of oriental capitalism as a pioneer and China’s socialist market economy is supporting the development of oriental capitalism on the other side. However, even with China’s economy as an important part of the world market – important as it provides not only a market for FDI, but also an import market for other

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countries – the fact that the liberalization of investment and the trade of countries pursuing oriental capitalism is based on the US dollar remains. It is, therefore, hard to avoid losses due to the fluctuation of the US dollar exchange rate. In this sense, the largest weakness for the globalization of oriental capitalism can be said to be the absence of an Asian common currency as in the EU. Since the development history of oriental capitalism in Japan and NAC is still short, it is difficult for ASEAN and APEC to work out such a policy owing to the fact that ASEAN has not yet formed a sound regional market, on the one hand, and the US, as the centre of APEC, cannot tolerate another common currency, except the US dollar, on the other. In such circumstances, forming a common currency in Asia faces enormous difficulties. In order to maintain sustainable growth in oriental capitalism, along with stability and prosperity, it is necessary to set up a stable Asian regional currency. From the perspective of the scale of foreign exchange reserves, Asia possessed five of the world’s biggest countries in 1999, namely, Japan (US$271.6 billion), China (US$154.7 billion), Taiwan (US$102.7 billion), Hong Kong (US$89.7 billion) and Singapore (US$74.4 billion). The total of the above foreign exchange reserve amounts to US$693.1 billion, which not only exceeds that of the EU-4 (Germany, the UK, France and Italy), at US$150.7 billion, by 4.6 times, but also exceeds that of the IMF quota of US$200 billion by about 3.5 times (IMF 1999; Central Bank of China 1999). JANAC, as the world’s most plentiful region in terms of foreign exchange reserves, but with only fledgling ideas for forming a common Asian currency, reveals the external dependence of oriental capitalism and the ‘hollowness’ of Japanese capitalist globalization. Although Asian countries have moved into an era of FDI, the region’s international division of labour and position in the world market still remain fragile as regards regional resilience. It is worth wondering how the five Asian countries and regions, with their huge foreign exchange reserves, will respond after the euro’s inflow into foreign exchange markets from July 2002. If they take the necessary action, such as increasing their central reserve bank’s euro reserve ratio, then the current extent of market dependence on the US dollar will be greatly reduced. The characteristics of oriental capitalism and its future prospects The Asian currency crisis The 1997 Asian currency crisis, which had a major impact on foreign exchange markets as well as on the stock markets of NAC (Table 5.1), seems to have been brought under control since the beginning of 1999. From the situation so far, we may find the following points of relevance in analysing the characteristics of oriental capitalism. First, why did the Asian currency turmoil take place in Thailand first, with a substantial depreciation in the Thai baht against the US dollar, rather than in the other main ASEAN countries, e.g. Indonesia, the Philippines or Malaysia? The Thai economy seemed to be no worse off than those three countries (ASEAN-3). What was crucial was the internal turmoil in Cambodia after 17 June 1997. This destroyed the Thai baht economic area around the Indo-China peninsula, including Cambodia, Laos and Vietnam. As a result, the Thai baht lost the support base for lucrative exports. That the coalition of the ASEAN-10

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encountered a setback because of the Cambodian turmoil further served to undermine the Thai economy. From such a process it can be suggested that the development of oriental capitalism was supported by the border area, involving the Thai and Indo-China peninsula, through which

Table 5.1 Financial crisis’s impact on the main economic dimensions of the NIES, ASEAN and China (1997–8) (%, US$100 million) Exchange Stock rate market Accumulation Regression Export

GDP

Foreign exchange reserve

a

97

97

b

a+b

ba

97

98

98

98

NIES South Korea

55.5

Taiwan

21.2

21.5

42.7

0.3

5.3

9.4 6.8

4.8

835.0

903.4

0.0

50.9

50.9

50.9

4.1

7.5 5.3

5.1

753.0

803.0

21.3

47.2

68.5

25.9

0.0 12.1 9.0

0.3

712.9

749.3

Indonesia

85.6

53.1

138.7

32.5

7.3

8.6 4.9 13.7

174.0 235.2

Malaysia

48.4

59.5

107.9

11.1

0.6

6.9 7.5

207.9 255.6

Hong Kong Singapore

62.4

117.9

6.9

5.0

2.8 5.0

5.8

204.1

520.4

ASEAN

Philippines

43.3

46.0

89.3

Thailand

56.6

51.2

107.8

0.1

16.7

16.8

China

7.5

2.7 22.8 16.9 5.2

0.5

5.4

87.4 107.8

2.9

5.0 1.3

9.4

268.9

295.4

16.6 21.0

0.5 8.8

7.8 1,399.0 1,449.6

Sources JETRO (1998), Keizai Kikakuchō (1999).

rich resources flowed first into ASEAN and NIEs and then into Japan as well as the US via the NIEs. Such a relationship was clearly revealed during the largescale depreciation of the Thai baht in 1997. Second, why did the baht depreciation extend to the other ASEAN-3 currencies and pose a threat to the ASEAN project? The causes of such large-scale currency turmoil need to be understood by reference to the position of ASEAN in the world market. ASEAN was faced with competition on two fronts: from China and from APEC. China is a competitor as it has adopted the same economic policy as ASEAN, i.e. the ‘introduction of foreign capital and export orientation’. At the same time, its export structure is similar to ASEAN’s. In fact, the amount of China’s FDI inflow has exceeded that of ASEAN since 1992. Meanwhile, the amount of China’s exports threatens to catch up with the ASEAN-4; it was at 75–7 per cent in the mid-1990s, compared with around 50 per cent in the mid-1980s. With the increase in Chinese competitive capacity, the advantage gained from the superiority of the ASEAN-4 has been undermined to a great extent. On the other hand, the competitive pressure stemming from APEC has come from the Bogor

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89

Declaration’s call for ‘liberalization of (foreign direct) investment and trade’ in 1994, which requires developing countries to liberalize by 2020. This implies that it is unnecessary to keep ASEAN’s own regional market after 2020, when ASEAN also belongs fully to APEC. This is likely to mean the death sentence for ASEAN, because ASEAN as a regional scheme would by then have no reason to maintain its own internal market. Actually, the time for ASEAN to realize the liberalization of investment inflow and trade has been moved forward to 2002, not 2008 as originally planned (Yamakage 1997:199–201). The currency crisis occurred against the background of such pressure that ASEAN countries have actually had no enthusiasm for, and did not cooperate well in, developing their own regional market. Although such a market had existed for thirty years since ASEAN’s inception in 1967, intra-ASEAN trade amongst the ASEAN-4 was only 4–7 per cent for seventeen years from 1982. Even if Singapore is included, the percentage was still below 20 per cent. By acting towards the external world based on a common front, and each doing things in its own way, ASEAN’s competitive capability has been gradually weakened. As a result, it evidently cannot withstand the dual pressure from China and APEC at the same time. In this sense, the currency turmoil revealed the vulnerability of ASEAN: the internal reaction of vulnerable oriental capitalism. Third, why was the impact of the currency turmoil serious for South Korea but light for Taiwan and Singapore and almost negligible for Hong Kong (though the Hong Kong stock market was hit)? Such a situation implies a difference between the NIEs and ASEAN; the ASEAN-4 were destroyed as a whole, whereas the NIEs were hit one by one. Simply speaking, the reason why the South Korean won was weaker than the Taiwanese dollar and the Singaporean dollar is that South Korea did not use China’s market as a channel for earning foreign exchange. For instance, Taiwan has earned a trade surplus of more than US$10 billion annually since 1993, with a peak in 1997 of US$22.5 billion. This trade surplus was indeed made possible by the large investment from Taiwanese firms in mainland China. In this sense, South Korea cannot be compared with Taiwan; although there is mutual trade between South Korea and China, in this case South Korea had a trade deficit of about US$7.5 billion before 1992, a small trade surplus arising after 1993. However, the total trade surplus in 1997 and 1998 was only US$6.8 billion and US$5.5 billion respectively. This in no way compensated for the trade deficit accumulated in the past. Such a situation has not basically changed even taking into consideration the fact that Hong Kong became a part of mainland China in July 1997. There are many reasons for South Korea’s failure to earn substantial foreign exchange from the Chinese market, but one important reason is that the economic power of the Chinese diaspora in South Korea was limited, as most of them (about 80 per cent) come from the Shandong province of China. In this sense, they were at a disadvantage in seeking to enjoy southern China’s regional economic reform and openness. Besides, South Korea’s dependence on Japan was excessive. Further, its competitive capability to export to the US market has been weakened since 1994, when South Korea’s trade with the US went into the red. All of these factors exerted a negative influence on the Korean won. The important position of China’s market for countries like South Korea, other NIEs and even the whole area of oriental capitalism has grown significantly. How to promote an earnings surplus in the Chinese market in the near future is thus an important topic to improve the international divisions of labour within oriental capitalism.

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90

Fourth, what kind of role did Japanese capitalism play in the currency turmoil? As is well known, Japan relies heavily on the East Asian market; for instance, about 84.7 per cent of its current account balance, 69.6 per cent of its trade balance and 40.1 per cent of its capital account originated from Asia in 1996 (see Table 5.2). The scale of its financial loans to Asia was first among the advanced countries (US$114.7 billion, about 30.1 per cent of the total outstanding amount, and if Hong Kong and Singapore’s offshore loans are included, the amount would reach US$249.6 billion, about 65.5 per cent of the total; see Table 5.3). However, Japan’s actions in seeking to alleviate the latest East Asian currency crisis did not go much beyond the IMF financial bailout, although the so-called New Miyazawa Initiative, with US$30 billion or more of public finance, was initiated at the annual meeting of the International Monetary Fund/the International Bank for Reconstruction and Development (IMF/IBRD) in Washington in October 1998. Japan’s approach seems effective in spurring recovery after the crisis, but not enough to prevent the crisis happening again. This is not only because of its limited supply of emergency liquidity, but also because there are no changes in international payments with the US dollar settlement system. The negative response by Japan was not only due to the domestic economic recession that caused a big drop in imports from NAC, especially the 20.0 per cent decrease from Indonesia and 17.6 per cent from Malaysia in 1998 (Table 5.4), but also due to its inactive economic diplomacy in Asia. In essence, Japan’s

Table 5.2 Japan’s balance of payment with the Asian region (1996–8) Current account Amount (US$ 100 million)

Percentage

1996

1996

1997

1998

1997

1998

Total

71,579

114,363

157,846

100.0

100.0

100.0

Asia

60,661

71,473

38,829

84.7

62.5

24.6

NIEs-4

66,616

81,431

57,496

93.1

71.2

36.4

Korea

15,889

13,382

2,391

22.2

11.7

1.5

Taiwan

12,997

19,344

21,305

18.2

16.9

13.5

Hong Kong

24,052

31,529

26,007

33.6

27.6

16.5

Singapore

13,678

17,176

7,793

19.1

15.0

4.9

ASEAN-4

14,590

15,178

1,741

20.4

13.3

1.1

Thailand

10,441

8,023

2,709

14.6

7.0

1.7

Indonesia

4,215

1,835

6,751

5.9

1.6

4.3

Malaysia

4,213

4,625

1,420

5.9

4.0

0.9

Philippines

4,151

4,365

4,363

5.8

3.8

2.8

Globalization and oriental capitalism

China

19,669

23,758

20,814

91

27.5

20.8

13.2

Trade balance Amount 1996

Percentage 1997

1998

1996

1997

1998

Total

90,966

123,103

159,844

100.0

100.0

100.0

Asia

63,339

70,750

47,058

69.6

57.5

29.4

NIEs-4

68,527

81,590

65,681

75.3

66.3

41.1

Korea

16,300

15,433

5,401

17.9

12.5

3.4

Taiwan

13,023

19,130

20,839

14.3

15.5

13.0

Hong Kong

24,735

30,110

26,739

27.2

24.5

16.7

Singapore

14,469

16,917

12,702

15.9

13.7

7.9

ASEAN-4

13,040

11,930

105

14.3

9.7

0.1

Thailand

9,415

6,804

2,236

10.4

5.5

1.4

Indonesia

5,658

4,297

7,721

6.2

3.5

4.8

Malaysia

4,713

4,511

1,503

5.2

3.7

0.9

Philippines

4,570

4,912

4,087

5.0

4.0

2.6

17,411

21,203

19,135

19.1

17.2

12.0

China

Capital account Amount 1996

Percentage 1997

1998

1997

1998

1999

Total

29,934

143,469

154,077

100.0

100.0

100.0

Asia

11,992

76,434

107,561

40.1

53.3

69.8

NIEs-4

16,053

39,062

78,027

53.6

27.2

50.6

Korea

3,975

1,764

3,944

13.3

1.2

2.6

Taiwan

2,633

2,936

448

8.8

2.0

0.3

13,618

30,257

64,658

45.5

21.1

42.0

Singapore

4,173

7,633

17,761

13.9

5.3

11.5

ASEAN-4

16,027

24,533

14,110

53.5

17.1

9.2

Thailand

8,193

12,291

4,954

27.4

8.6

3.2

Indonesia

3,920

6,113

8,026

13.1

4.3

5.2

Hong Kong

The political economy of Japanese globalization

Malaysia

92

528

3,969

72

1.8

2.8

0.0

Philippines

3,386

2,160

1,202

11.3

1.5

0.8

China

3,278

7,393

7,097

11.0

5.2

4.6

Source Ōkurashō (Ministry of Finance) (1999).

Table 5.3 Amount outstanding and proportion of loans provided by Japanese banks to other countries in 1997 (US$ million) Japan’s ratio to the total loans by BIS to Outstanding Percentage each country and region (%) Total

163,435

100.0

14.6

To developed countries

23,643

12.1

To developing countries

135,625

17.5

Asia

114,745

70.2

30.1

China

19,589

17.1

31.0

ASEAN-4

66,373

57.8

40.4

Thailand

33,180

28.9

56.4

Indonesia

22,018

19.2

37.7

Malaysia

8,551

7.3

31.1

Philippines

2,624

2.3

13.3

20,278

17.7

21.5

3,516

3.1

10.4

216,368

100.0

29.6

Hong Kong

76,272

35.3

36.0

Singapore

58,649

27.1

30.1

NIEs South Korea Taiwan Offshore

Sources Keizai Kikakuchō (1998); BIS (Bank for International Settlements) (1997).

diplomatic policy never defied the US and never risked doing anything without following the US line. Even oriental capitalism was always under the umbrella of US capitalism. There has been no real independence. Therefore, the main reason why the development orientation of oriental capitalism in respect of the current dual world-wide trends of globalization and regionalization is still not clear is that Japanese capitalism is muddleheaded. Indeed, it has not kept pace with the US in taking responsibility for and sharing the cost of maintaining the order of the world market.

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93

Conclusion The rise and setback of oriental capitalism in the world market is an important research topic in economics and actually represents a big challenge to economic methods of analysis. The challenge emerges in the following two aspects. First, with the lack of a systematic social science ideology in East Asian society, we are still compelled to adopt the methodology and paradigm of Western economics to analyse oriental capitalism. Therefore, it is hard to avoid some unsuitable or one-sided views. Actually, few European and North American countries experienced the same lessons as Asian countries did in the process of economic

Table 5.4 Change in Japan’s trade with the NIES, ASEAN and China (1998) Export countries

Decrease (1997=100)

Amount (bn)

Indonesia

45.5

Korea

63.6

Thailand

Import Countries

Amount (bn) 95.7

4,844

2,005 Philippines

95.5

579

69.3

1,222 Thailand

92.3

1,068

Malaysia

69.2

1,216 Korea

89.4

1,577

Singapore

78.8

1,930 Taiwan

88.4

1,336

Hong Kong

89.4

2,949 Singapore

86.8

616

Philippines

90.2

83.1

226

China

99.6

2,621 Malaysia

82.4

1,133

100.2

3,340 Indonesia

80.0

1,416

Taiwan

560 China

Decrease (1997=100)

948 Hong Kong

Source Japan Tariff Association (1999).

development (McVey 1992; Nakamura 1994; Safarian and Dobson 1996). For instance, none met the economic difficulties originating from currency appreciation or turmoil as Asian countries did recently. Moreover, they never expected that, after making the transition to newly industrialized countries from developing countries, some of them would become suppliers (investors) of FDI. European and North American countries have theorized about multinational enterprises but lack theory about small and mediumsized enterprises in the NIEs operating FDI, not to mention China’s ideas of a ‘socialist market economy’ as well as ‘one country, two systems’. Therefore, Western-centric economics should now go further, to take such varied and variable forms of capitalism into account. Such variety is also the main obstacle preventing oriental capitalism from developing its own scientific system. Second, economics is, after all, based on the national economy and all related paradigms; even the international division of labour, comparative production (labour) cost, tariff and foreign exchange are derived from the category of the national economy. This means that existing economics only studies from the perspective of national

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economies, rather than the world (regional) economy. In this sense, no analysis based on such economics can avoid nationalism and patriotism. This is perhaps why we can easily find many economists who are academic patriots. With such an inclination, oriental capitalism also bears the imprint of Asian superiority; for instance, the previously backward and disparate Asia has now come to be seen as an organic whole with a glorious future and unlimited economic growth potential since the 1980 and 1990s. Socalled ‘Asian values’ may also be a kind of Asian superiority complex. If such views should dominate academic economics, then the objective and historical laws of economics as a social science would be thrown into doubt. In this sense, the rise and setback of oriental capitalism represents a challenge to the existing discipline of economics. Finally, we should point out that the latest Asian currency crisis also revealed the limitations of Asian ‘dictatorship for expansion’ – the rapacity of imperial families and the protracted imperiousness of dictators were not fostered by capitalism. Such ‘backward’ Asian characteristics as feudalism (dictatorship), speculation (e.g. the bubble economy and casino businesses) and corruption brought to light the contemporary features of oriental capitalism. Therefore, whether or not oriental capitalism can further develop into a sound form of capitalism and maintain its position in the world market in the twenty-first century, or will fall into crisis after a short period of glory, will totally depend on eliminating such ‘backward’ issues as feudalism, speculation and corruption, realizing political democracy, guaranteeing human rights, strengthening international cooperation (including sharing the cost of maintaining the world order) and improving the international division of labour in Asia. To study such an important subject, international cooperation and coordination (e.g. between Japan and China), understanding and respect from Western society, and mutual exchange on the basis of equality are surely required. References BIS (1997) Consolidated International Banking Statistics, 1997. Central Bank of China (1999) Financial Statistics, November. Dobson, W. (1993) Japan in East Asia: Trading and investment strategies, Singapore: Institute of Southeast Asian Studies. IMF (1999) International Finance Statistics, December. Itagaki, H. (ed.) (1997a) Nihonteki Keiei-Seisan Shisutemu to Higashi Ajia (Japanese business management/production system and East Asia), Kyoto: Minerva Shobō. —(ed.) (1997b) The Japanese Production System: Hybrid factories in East Asia, London: Macmillan. Japan Tariff Association (1999) The Summary Report on Japan’s Trade, August: 8–9. JETRO (1998) Tsūshō Hakusho (White Paper on trade), 30–3. Keizai Kikakuchō (Economic planning agency) (1998) Annual Report on the Japanese Economy, 111. —(1999) Overseas Economic Data Monthly, September: 97–124. McVey, R. (ed.) (1992) Southeast Asian Capitalism, New York: Southeast Asian Program, Cornell University. MITI (ed.) (1993) Dai 22 kai, Wagakuni Kigyō no Kaigai Jigyō Katsudō (No. 22, Business activities of Japanese enterprises abroad), Tokyo: Ōkura-shō Insatsukyoku.

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Nakamura, T. (ed.) (1994) Higashiajia Shihonshugi no Keisei (Formation of East Asian capitalism), Tokyo: Aoki Shoten. OECD (1997) Economic Outlook, 52, 132. Ōkurashō (1999) Statistics Monthly, September, Tokyo: ōkurashō. Online: available http://www.mof.go.jp/hop/1c004al.14.htm (accessed 18 November 2000). Ōuchi, T. (1962) Nihon Keizairon (jō) (Analysis of Japanese economy) (part one), Tokyo: University of Tokyo Press. Safarian, A.E. and Dobson, W. (eds) (1996) East Asian Capitalism: Diversity and dynamism, Toronto: University of Toronto Press. Twu, J.Y. (1988) NICS-Kōgyōka Ajia o Yomu (The NICS: examining industrializing Asia), Tokyo: Kōdansha. —(1990) Tōyō Shihonshugi (Oriental capitalism), Tokyo: Kōdansha. —(1995) ‘Sekai no shokuminchi taisei, Nihon no shokuminchi keiei, Taiwan no shokuminchika katei’ (The world colonial system, Japanese colonial management, and the colonial process in Taiwan), Social Justice (Sophia University), 14: 55–69. —(1997a) ‘Ajia keizaiken wa dō henka suru no ka’ (How will the Asian economic region change?), Keizai Seminar, July: 26–30. —(1997b)‘NIES, Kankoku, Taiwan no keizai to Nihon no tōshi’ (Economies of NIEs, South Korea and Taiwan, and the direct investment of Japan), in H. Itagaki (ed.) Nihonteki Keiei-Seisan Shisutemu to Higashi Ajia (Japanese business management/production system and East Asia), Kyoto: Menerva Shobō. —(1997c) ‘The Asian growth triangle: structure, change and perspective’, in H. Itagaki (ed.) The Japanese Production System: Hybrid Factories in East Asia, London: Macmillan. UN (1997) Economic and Social Survey of Asia and the Pacific, Bangkok: UNESCAP. Yamakage, S. (1997) ASEAN Pawa (ASEAN power), Tokyo: University of Tokyo Press.

6 Financial globalization and the unravelling of the Japanese model Philip G. Cerny Introduction The post-war Japanese model was predicated on the ability of Japan to resist the kind of globalizing, marketizing laissez faire represented by Thatcherism and Reaganism and the ability of Japanese firms, backed up by the state, to exploit that very globalization and marketization to expand their world market shares. At the core of the model was the financial system. John Zysman (1983) has argued that the financial system has constituted the core of each of the dominant national models of political economy in advanced industrial countries. Finance plays this role for several reasons (Cerny 1993, 1994, 2000b, 2000c). Governments, too, play a crucial role by providing a currency system and a set of national financial institutions (central banks, etc.), by regulating financial institutions and markets to prevent system failure and manage crises, and by manipulating fiscal and monetary policy in order to promote economic development and growth. This central role not only gives state actors paramount roles in determining the framework, operation and performance of particular national economic systems, but also gives states as institutional structures key trump cards in filtering and shaping the impact of international economic changes, i.e. of globalization. The Japanese bank-led system under pressure Some national economic systems are a priori more open and vulnerable to the ‘imperatives’ of financial globalization than others. Thus for ‘arm’s-length’ financial systems (Zysman 1983) or ‘financial market economies’ (Coudrat 1986) found in the US and the UK, globalization is in large measure an extension of national practices on to a wider playing field, leading to the Anglo-Americanization of international finance and to greater convergence of national and ‘global’ market practices. Many late nineteenth- and twentieth-century national financial systems such as that of Japan, however, were based on very different structures and practices. ‘Late industrializers’ wished not so much to see capital flowing freely across borders as to keep it at home. While protecting infant domestic industries from destructive foreign competition, such countries in addition adopted credit-based financial systems (Zysman 1983), also called ‘debt-based economies’ (Renversez 1986) or ‘overdraft economies’ (Loriaux 1991). Such systems were aimed at (1) keeping capital at home in order to promote the development of the

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domestic economy and to escape the financial market dominance of London and (later) New York, and (2) ensuring that investment flowed to industries that would come to constitute an independent, even self-sufficient, economic base for rapid ‘catch-up’. These late industrializing systems revolved around close triangular relationships between heavy Second Industrial Revolution industries, government bureaucratic agencies and large banks. Governments fostered the development of monopolistic or oligopolistic cartels; relations between firms were organized around not competition but market sharing and price fixing. Investment capital was provided not through open market transactions between buyers and sellers, but from negotiated – usually called ‘intermediated’ – relationships between closely intertwined institutions. Governments provided key financial backing, whether directly in terms of subsidies or indirectly in terms of guarantees, for bank loans to industry. Cheap, long-term capital, especially in the Second Industrial Revolution type of development where extremely large investments were needed in order to achieve viable economies of scale and scope (Chandler 1990), enabled Germany, Japan and later France to develop rapidly.1 It also fostered the development of political coalitions, interest group collaboration and bureaucratic practices which gave these governments a potential strategic role in promoting development – what Zysman (1983) called the ‘strategic state’ and Johnson (1982) labelled the ‘developmental state’. The key to understanding the credit-based economies is that they were bank led. Successful control and promotion of investment demanded that intermediary institutions, whether dominated by private sector banks or by governments or both, had to be able to provide investment capital that was both cheap and liquid. Large investments in the Second Industrial Revolution industries required large institutions with deep pockets, whether private or public. However, such institutions had also to be protected. Their whole rationale was to provide investment capital that was on the one hand guaranteed, in that it would not dry up because of a lack of liquidity in the markets, and on the other, below market cost, i.e. meant to ‘prime the pump’ of industrial development rather than to provide a market return to investors. Nowhere was the cartellized, bank-led model more fully imposed and entrenched than in Japan.2 The Japanese financial system was built upon several interlocking foundations (see Johnson 1982; Zysman 1983; Horne 1985; Suzuki 1987; Wright and Pauli 1987; Hartcher 1997; Katz 1998; Carlile and Tilton 1998; Pempel 1998a, 1998b; Malcolm 1998; Brown 1994, 1999; Vogel 1996, 1999). The first was the insulation of the system itself from outside capital. Both the availability of foreign exchange and its use were closely regulated and rationed by the government, especially the Ministry of Finance (MOF). Thus it was not possible for firms, especially in the twenty years following the Second World War, to pay for imports, to accept foreign investment or to send money abroad without approval, and such approval was very limited. The second was the rationing of domestic capital too through the direct and indirect control of MOF. Large loans had to be approved, and the MOF (and other ministries) kept a close watch to ensure that they went to the appropriate infant industries, especially the export sector. Such loans were also usually at discounted, non-market rates, supplemented by public sector financing mainly from savings held in the postal savings system (zaitō funds) and carried out via the MOF’s Fiscal Investment and Loan Programme (FILP). However, as Katz (1998) among others argues, from the 1970s onwards such low-cost, long-term loans went increasingly to the non-competitive,

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protected sector, as competitive firms found their own sources of capital from their export success. Indeed, much of today’s ‘bad loans crisis’ is usually said to result from a combination of banks both having too much to lend in recent decades and underpricing risk partly in order to gain market share, leading to a sharp increase in ‘non-performing’ loans to bad credit risks. The ability of banks to obtain guarantees, regulatory approval, rediscounting facilities and the like for such loans also implied state approval. This aspect was exacerbated from the 1970s onwards by the clientelistic special interest politics fostered by the Tanaka government mainly for electoral purposes. A third characteristic, much debated in the literature (contrast Hartcher 1997 and Brown 1999), has been so-called ‘administrative guidance’. Administrative guidance refers to a mix of formal and informal practices whereby banks and other firms regularly consult with their supervising ministries and are basically told how to run their businesses. More successful, profitable businesses have over time been able to make more independent decisions, especially if, say, export receipts have meant that they can finance their investments from retained earnings and they are no longer dependent on bank loans for investment or operating capital. Other firms have been more constrained. It must be emphasized, however, that administrative guidance is to some extent a twoway street. Japan’s post-war success came at least partly from the capacity of the statepromoted, cartellized, bank-led system to nurture infant industries and turn them into the powerhouses of Japan Inc. Brown (1999, esp. chapter 3) strongly emphasizes that businesses supplied the MOF with extensive information on their operations because they trusted the bureaucrats not to give away their proprietary competitive secrets; nontransparency was actually a source of strategic effectiveness. Writers like Johnson (1982) and Zysman (1983) have seen the combination of capital rationing and administrative guidance as giving the Japanese state its very ‘developmental’ or ‘strategic’ character. Indeed, it is often argued that the MOF today is divided on how far to change the system, with some more internationalist cadres in particular concerned to promote practices compatible with competitiveness in a more open, globalizing context.3 The fourth characteristic involves institutionalized networks of interlocking personnel among politicians, bureaucrats and business elites, cutting across the public and private sectors. Although these networks operate at many levels, prob-ably the best known has been the practice of amakudari.4 Although in decline today (FT 31 March 2000), amakudari is the practice of placing newly retired Japanese bureaucrats in senior positions – some more or less honorary, some influential – in the very firms in the private or semi-public sectors they had previously been supervising. Although practised in other sectors as well, this phenomenon has been particularly notable in the financial sector – with former MOF officials heading the list in 1999 (FT 31 March 2000) – thus sealing the web of personal and professional relationships between the bureaucracy and financial institutions. Some stronger institutions, such as former zaibatsu banks, have generally rejected such parachuting (Brown 1999), and in today’s context, when institutions increasingly want to be seen to be independent in a more open financial marketplace, amakudari is losing much of its influence and legitimacy. The fifth characteristic also represents a cultural and ideological attitude more than an economic calculus: the so-called ‘convoy system’. Change in the financial system was only allowed to proceed at the speed of the slowest ship in the convoy to protect the whole system. The convoy system led for many years to government-managed mergers

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of unprofitable institutions with larger institutions with deeper pockets. Prior to the 1990s, MOF-sponsored merger activity often sought to maintain the size, market share, loan portfolio and sometimes even the distinct internal structures of the failing institutions, including jobs. This seemed to work well when the larger Japanese banks were profitable and apparently internationally competitive prior to the bursting of the ‘bubble economy’ at the end of the 1980s, but the extent of the bad loans crisis of the 1990s has meant that many earlier mergers are now recognized to have undermined the soundness of the institutions doing the absorbing;5 more recent intervention by the MOF and the newer agencies spun off from it such as the Financial Reconstruction Commission (FRC) and the Financial Supervisory Agency (FSA) has at least ostensibly been predicated upon the condition that major restructuring should take place. At least three aspects of this recent restructuring are notable. In the first place, government bailouts of failing institutions have sought to restructure the latter’s loan portfolios. Bad loans (or ‘distressed debt’) are dealt with in several ways: writing them off; getting sounder institutions to assume them and seeking partners willing to restructure their own activities; and, increasingly, selling them off at highly discounted market prices (FT 8 May 2000). These methods involve a blending of Japanese practices with the way the US dealt with the later stages of the Third World debt crisis (the Brady Plan) and the Savings and Loans crisis of the late 1980s. Second, the big banks no longer have such deep pockets, being highly vulnerable to the bad loans crisis themselves, and have since the mid-1990s increasingly been forced into so-called ‘megamergers’ not so much by the government as by market forces, reducing the number of major commercial banks (called ‘city banks’) from eleven to four in the near future. The actual form of these mergers is still unclear, however – in particular, whether they will really create consolidated, synergistic institutions or just represent loose alliances. Third, firms outside the traditional banking sector – foreign banks and financial firms, on the one hand, and certain non-financial firms too – are playing an increasing role, especially as the Big Bang reform process has made it possible for financial holding companies to be set up across these boundaries. However, the convoy approach has also often been justified not only for its role in ensuring the safety and soundness of the banking system but also as a kind of social policy to protect jobs, both in the banks themselves and in the firms with which they are linked through their loan portfolios. It is this ‘stakeholder’ facet which is most under threat from financial globalization, because international investors and foreign firms are interested only in ‘shareholder value’ (return on capital) and not in subsidizing loss-making activities. The sixth characteristic derives from the organizational structure of Japanese industry in general, especially the keiretsu system. Modelled on the big pre-war zaibatsu trading houses which were partially dismantled by the post-war Occupation authorities, the keiretsu are basically conglomerates made up of firms which are sometimes formally merged, but more often held together by extensive cross-shareholdings. At the core of each has been a main bank which has played various coordinating roles involving not only the supply of investment capital but also other cartel-like interfirm arrangements on pricing, cross-subsidization of profitable and loss-making activities, arrangements with internal and external suppliers, wholesale and even retail distribution, etc. Main banks have been able to play these varied roles at different times because they have been at the nexus of a number of intersecting processes: (1) controlling the supply of investment

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capital in the bank-led Japanese system, including negotiations with bureaucratic agencies; (2) holding the deposits of firms within the keiretsu; and (3) managing crossheld shares themselves, sometimes buying or selling them as well as exercising them. Until recent years much of the trading on the Tokyo Stock Exchange involved the exchange of shares within or amongst keiretsu banks and firms for strengthening capital bases, reallocating resources within the conglomerate or developing new activities (a form of cross-subsidization), rearranging control, etc. Of course, such direct financial relationships were always underpinned by interpersonal networks which were far closer than those between industry and government and which were at the heart of the traditional system of employee loyalty even down to their consumption patterns. Employees of a particular keiretsu, for example, were expected to drink only the beer produced by that conglomerate’s own brewing company, and often could go an entire lifetime without tasting their competitors’ products. As with the rest of the cartellized system, the cohesion of keiretsu relationships was embedded in both direct financial controls and underlying cultural ties. With opening up to international finance and the sort of liquidity, negotiability and transparency required in the global market place, keiretsu are directly in the line of fire. And indeed, there are significant indicators today that keiretsu relationships are being downsized, crosscut and unwound (FT 9 November 1999). At the same time, however, as with administrative guidance, such marketization is a two-edged sword that can also provide conglomerates with the opportunity to restructure and even strengthen their internal and external links and control mechanisms on a more profitable, ‘shareholder value’ basis, like conglomerates in existing financial market systems. From the Big Bang to the twenty-first century: marketization from above and below Thus the post-war system was kept together by a range of mutually reinforcing financial linkages not only between the state (politicians as well as bureaucratic agencies) and firms, but also amongst and within firms themselves. However, as will be clear from the above-mentioned changes that are already occurring, the bank-led model has been in a problematic position with regard to financial globalization on all these levels. Globalization not only threatens the very cohesion of the state–bank–industry nexus at the heart of its capacity to act as a cartel, but also provides a powerful, globally expanding alternative source of capital and transnational systemic organization (Feldman 1986; Pempel 1998a, 1998b; Malcolm 1998; Hall 1998; Cunanan and Dowling 1998; Brown 1994, 1999; Iwata 1999; Horiuchi 1999; Kusano 1999). At one level, the challenge stems from the sheer amount of highly mobile international capital that is available today, dwarfing the capacities of domestically biased bank-led systems to provide cheap, liquid capital for investment in general. International capital flows free industry from dependence on bank loans, and state actors find themselves constrained by transnational financial market forces in macroeconomic and microeconomic policy making, limiting available policy alternatives (Cerny 1996). At a second level, however, the challenge comes from the changes in the structure of the financial system itself – that is to say, the process of marketization. For capital to be

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made available, both foreign market actors and internationally linked domestic market actors must be confident that their money will gain a market rate of return and that the financial instruments they have bought can be sold again at market prices (‘liquidity’). Finally, investment must be seen to flow into uses that are determined in the markets, not by state planners, ‘relationship’ bankers, or oligopolistic industrialists. This is particularly important at a time of rapid technological change. In the current Third Industrial Revolution, the focus on volatile and rapidly metamorphosing high-technology industries has been compared with the coming of electricity or the automobile; in other words, it involves a redirection of investment away from older industries (even leading to what Joseph Schumpeter called ‘creative destruction’ of existing fixed capital) and towards newer, more flexible, ‘post-Fordist’ industries. Indeed, this is exactly what is happening in Japan at the beginning of the twenty-first century. Richard Katz (1998) argued that Japan has developed a ‘dual economy’, i.e. an economy fundamentally structurally divided between the internationally competitive export sector – the focus of the ‘developmental state’ – and a backward, protected sector which is dragging the economy and the state down with its growing weight. But this does not go far enough. Japan now has what FT journalist Gillian Tett has called a ‘split economy’ (FT 10 February, 24 February 2000) – except that I would argue that it is a three-way split or ‘triple economy’. The internationally competitive export sector – the product of the era of bank-led catch-up – is still crucial, but, as Katz and many other authors have pointed out, is increasingly ‘hollowing out’; international competitiveness has drawn many of these industries to produce in other parts of Asia and the world rather than in Japan. The protected sector – including, today, the banks as well as agriculture, distribution, construction and a range of other uncompetitive industries – is still being protected, but is under increasing pressure to restructure, driven by the need to seek capital from outside traditional channels. And a third sector is not only emerging and challenging for dominance – the market-financed high-tech sector. The internationally competitive export sector has for some years grown steadily more independent from its bureaucratic sponsors because it no longer needs their capital. On the one hand, it is in a position to finance many of its investment needs from retained profits and has been more willing to direct these investments to production facilities outside Japan. On the other hand, its very competitiveness, increasing profitability and internationalization mean that such firms already have easy access to international capital, without the constraints of bureaucratic ‘administrative guidance’. They have ‘grown up’, and treating them as infant industries according to the traditional Japanese model is not just counterproductive but irrelevant. Their restructuring increasingly comes through international channels. The protected sector, meanwhile, has become more and more dependent on traditional domestic channels of support. Restructuring of vast swathes of subsectors and firms would lead to extreme consequences for production and employment. Japan has already been going through a crisis of demand for some years, with consumption levels stagnating despite regular attempts by the government to reflate the economy; retrenchment in the protected sector would hit demand hard. At the same time, the volatility of political coalitions in the 1990s made the predominant Liberal–Democratic Party (LDP) much more dependent on support from that sector, especially from agriculture, as other parties (and ‘floating’ or ‘disaligned’ voters) increasingly dominate

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the expanding urban voting base (Pempel 1998a). Unemployment, having steadied at 4.7 per cent in late 1999 – less than in Europe, but above US levels – would be badly hit by closures in this sector, as it has already carried the burden over the past couple of decades for the hollowing out of the export sector. New sectors may be able to pick up some of this slack, as would a revival of manufacturing, but probably not enough actually to reduce overall unemployment levels in the medium term. In this situation, governments around the turn of the century have relied on regular reflationary packages and a very loose monetary policy (including, until recently, a zero-interest-rate policy); however, with the public debt burden far higher than in other industrialized countries, such an approach may be difficult to sustain in the medium term. In this context, the roles of both state and private sector are problematic. The state is split between the political imperatives of maintaining the protected sector (both financial and industrial), on the one hand, and the imperatives – economic and political – of both restructuring that sector and promoting the development of an internationally linked, marketized financial system. Evidence of schizophrenic reactions to this dilemma abound. The Big Bang programme initiated by the Hashimoto government in 19966 has for the most part been legislated for, but different parts of it have been variously either pursued more aggressively or neglected and postponed, depending on the shifting balance of influence among and within political coalitions and factions, bureaucratic agencies, and competing private firms and sectoral interests. State actors, having initiated the programme in order to try to control the process of financial deregulation liberalization (Vogel 1996), are increasingly being whipsawed by accelerating trends in the financial markets and the Third Industrial Revolution themselves. Some of those trends have come from abroad from what the Japanese call gaiatsu or external pressures, whether from the US government or from international markets themselves; some defenders of the traditional system point to foreign intervention as a twenty-first century version of Commodore Perry’s ‘black ships’ which first opened Japan to external trade in 1853. However, this chapter asserts that the most important changes have come from internal pressure – what has sometimes been called naiatsu (in a neologistic response to gaiatsu: Brown 1994; Kusano 1999). Naiatsu has been generated by both endogenous causes such as sclerosis in the protected sector and crosscutting, globalizing pressures, especially from those sectors most entangled in international markets and from internationally exposed and market-oriented domestic elites in both business and government. Within the political system and the bureaucracy, there are first the growing differences between more internationalist and more domesticist bureaucrats, especially within the MOF and the Bank of Japan (BOJ). Second, there are the political calculations which led the Hashimoto government in 1996 to initiate the Big Bang reforms for fear of missing the liberalization boat altogether as the post-bubble recession dragged on. Third, although the projected breakup of the MOF as such has not yet taken place, there have been growing interagency and intra-agency disputes as particular regulatory functions have been spun off through organs such as the FRC and FSA. This was reflected, for example, in the recent change of direction at the former when the director implied publicly that a soft landing might be arranged for smaller regional banks in trouble (Nikkei Weekly 28 February, 6 March 2000; FT 26–27 February, 7 March 2000). Finally, there have been growing political pressures from new constituencies, including both individual and institutional savers and lenders such as mutual funds and pension funds who increasingly

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look to invest at international market rates. Other pressures come from urban voters who resent the transfer of government funding to protected sectors, especially agriculture, rural construction, etc. Indeed, the LDP, out of power for a while in the early 1990s and now only ruling through a shaky and potentially volatile coalition, is increasingly a rural party, a trend that was consolidated in the elections held on 25 June 2000. The LDP is also split between those who see further liberalization as inevitable and those who seek to backtrack on reform for electoral purposes (FT 14 January 2000). The main pressures for change, however, have come from the private sector. Doors set ajar at all levels – by gaiatsu, by the Big Bang reforms and by the globalization of financial markets themselves – are being levered further open. The key actors here are foreign firms and investors seeking to enter or expand within the Japanese market, domestic firms and investors seeking to exit the vicious circle of the protected sector, new entrepreneurs seeking to expand venture capital activities especially in newtechnology sectors such as the internet or to import practices such as hostile takeovers, old firms restructuring and downsizing in the face of international competition whether in industrial sectors like the automobile industry (Nissan) or through bank megamergers, young consumers turning to fashionable high-tech products that are often not reflected in official statistics, and the like. Two kinds of reforms are generally crucial in such a context (Cerny 1993). The first is the decompartmentalization of financial markets themselves. One of the major ways governments across the developed world have attempted to prevent market failure has been to legally separate different kinds of markets from each other to prevent the kind of contagion or domino effect across markets seen in the 1929 Wall Street crash. In Japan, via Article 65 of the Securities and Exchange Law of 1948, as in the US Glass–Steagall Act of 1933, the main regulatory barrier to be erected was the prohibition of commercial banks from dealing in securities and of securities firms and investment banks from engaging in commercial banking activities (i.e. taking deposits from the public). Furthermore, banks have sought to catch up and to compete with securities firms – with the former’s greater capitalization and financial strength giving them a competitive edge despite the latter’s innovative lead. Indeed, while banks remain the main sources of capital even in financial market economies, it is their increasing need to enter into and compete within wider financial markets which has led to a marketization and securitization of banks themselves. The US has only recently completed a long reform trajectory stretching back to 1975 by finally repealing the Glass–Steagall Act in 1999 (Cerny 2000b; Litan and Rauch 1998), whereas the UK underwent a very rapid structural transformation in the first socalled ‘Big Bang’ in 1983–6;7 the French also underwent a fairly rapid transformation in what was called the ‘Little Big Bang’ (Cerny 1989). Although financial liberalization in Japan can be traced back to the late 1970s (Horne 1985; Feldman 1986; Suzuki 1987), far deeper and more entrenched barriers between different types of institutions operating in compartmentalized markets formed a fundamental building block of the traditional cartellized system (Brown 1999). It was not until the Big Bang that significant progress began towards lowering compartmental barriers within Japan.8 As in the US, a major main means to this end has been to allow different firms to merge into federalized holding companies made up of partially or wholly owned subsidiaries operating in different market sectors. Such subsidiaries have to be characterized by certain levels of internal compartmentalization, called ‘Chinese walls’ or ‘firewalls’, among different

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market sector activities – as well as between financial firms and non-financial firms which may become involved in cross-ownership relations. Combined with a range of changes in accounting practices – especially with firms being increasingly obliged to keep and publish consolidated accounts – compartmentalization is rapidly on the way out in the key area of the separation of banking and securities businesses. Japanese financial services firms are currently in the throes of profound structural changes allowing them to engage in new forms of arbitrage fundamental to competitiveness in the globalizing financial market place. With different markets opened up to arbitrage, the second key structuralre form is to enable market actors to compete fully on price and quality of service across those markets. The first stage was to deregulate interest rates. Although limited interest rate deregulation began in the late 1970s, a combination of administrative guidance and the convoy system ensured that Japanese bank sbasically charged the same interest rates until the mid-1990s. Indeed, the cultural inhibition against breaking ranks is still strong. However, a combination of the bad loans crisis, financial innovation, the lack of compartmentalization in global financial markets, and the rapid pace of change in Japanese securities markets has put such traditional practices very much on the defensive, and it is highly likely that they are on their way out except in small regional banks, agriculturalcooperatives, credit unions and the like – although even these institutions have been severely affected by non-performing loans and lack of profitability. But the most important reform leading to extensive price competition across the entire system – in the view of this author, based on long-term comparative study of financial market deregulation in a range of countries – is the deregulationof brokerage commissions in securities markets. Such deregulation was the centrepiece of the ‘May Day’ reforms carried out by the New York Stock Exchange in 1975, the Big Bang in the UK and the Little Big Bang in France. The most important financial innovations in recent decades have been in securitiesmarkets, and the freedom of market actors to negotiate commission in an increasing range of market sectors is probably the ultimate means of underminingcartel-like price fixing in the financial services sector.9 Since brokerage commission was completely liberalized in October 1999 (having been progressively deregulated over the previous two years), Japanese financial markets have been hit by a veritable avalanche of change. At the core of this process is a rapid and far-reaching process of marketization, propelled by both new sources of the supply of capital – undermining the cartellized bank-led monopoly from withoutat the same time as it has been collapsing from within – and mushrooming new varieties of demand. The first manifestation of these changes, mainly since the mid-1990s, was the increasingly visible entry of foreign financial firms into Japan. Furthermore, FDI into Japan between April and September 1999 jumped to a record 1.3 trillion yen (£8 billion), nearly equalling the full-year record set in the year to March 1999, with big investments going into the automotive, financial services and telecommunications sectors – a major development for Japan if still small compared with other major financial market economies. This surge was partly due to the liquidity crunch in the traditional financial sector, but it also reflected the restructuring strategies of Japanese firms as companies reshuffled their assets, the keiretsu system unravelled and the banking sector restructured (FT 10 December 1999). Foreign investors and firms are now increasingly welcomed by a growing range of market actors and the business media. Stories in the English-language

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Nikkei Weekly, for example, about the growing role of firms like Merrill Lynch, Goldman Sachs, GE Capital and others have abounded in the financial press. Even more impressive has been the rush of Japanese financial institutions to take advantage of these firms’ experience and skills through joint ventures and the like in areas such as mergers and acquisitions. These developments have also helped catalyse the rapid growth (if from a very low base) of the venture capital industry in Japan, a sector which virtually did not exist a few years ago, as well as the investment trust and mutual funds sector. In cultural terms, too, foreign firms are becoming fashionable as employers of high-flying Japanese graduates, once the province of the bureaucracy or the top Japanese institutions. In a recent survey of 1999 graduates, Merrill Lynch was rated the eighth ‘most promising’ company in Japan, up from 425th the previous year, ahead of all Japanese banks; it was also rated the 115th ‘place I most want to work’, up from 474th the year before, behind top Japanese banks like Tokyo Mitsubishi, but ahead of most other Japanese brokers and smaller banks – and at a similar ranking as in the US … More strikingly, applicants [to Merrill Lynch] have come from top universities that were once ‘off-limits’, such as Tokyo and Keio. (FT 19 November 1999) Furthermore, new forms of demand seem to be mushrooming. As in other countries, the new effervescence of Japanese markets has been to a large extent driven by the development of new technology and industrial sectors and said to be ‘breeding a new generation of entrepreneurs outside the confines of Japan Inc.’ (Far Eastern Economic Review 29 July 1999). For example, Japan, after an initial lag of several years, now has the most densely penetrated mobile phone market in the world (Nikkei Weekly 27 March 2000). Even venerable firms like Fujitsu and Sony are planning major restructuring in order to focus on internet-related activities – financing these partly by raising new capital on the financial markets (Nikkei Weekly 6 December 1999; FT 23 March, 31 March 2000). A recent FT survey entitled the ‘Japanese Internet Tsunami’ (tidal wave) (FT 3 March 2000) stressed that once brokerage commission was finally liberalized on 1 October 1999 ‘the gates were opened for a stream of internet brokerages looking to lure individual investors on to their sites by offering discounted commissions on trades’. In contrast to the Tokyo Stock Exchange of old, dominated by internal keiretsu trades, 29 per cent of total equity purchases in 1999 were by individual investors. Indeed, Matsui Securities, a leading online broker, says its trading volumes have leapt up since the liberalization of equity commissions … Now, its monthly trading volumes average around 300 billion yen, a sevenfold increase from the 40 billion yen volumes it recorded last September. As a consequence, the brokerage industry itself is being profoundly shaken up. The survival of many existing firms is in doubt (FT 3 March 2000), especially those smaller firms unable to compensate for lower margins on commission income through larger volumes of business, and the new megabanks are rushing to consolidate and restructure their brokerage subsidiaries (Nikkei Weekly 27 March 2000). Foreign firms have also been spearheading this change (FT 1 February 2000). Indeed, Gillian Tett argues that

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Japanese official economic statistics systematically underestimate the impact of these new sectors of the ‘split economy’ (FT 13 March, 17 March 2000). Thus ‘dot.com fever’ is not merely a market fad in Japan, but an indicator of deep structural change in the financial system. New financial startups, especially online trading firms, have been growing rapidly, putting increasing competitive pressure on existing financial firms (Nikkei Weekly 17 January 2000). Merger and acquisition activity has risen strongly, as keiretsu restructure and spin off less profitable activities and firms with high cash flows but relatively low market value and weak management are thought to be bargains in a more marketized environment(Nikkei Weekly 14 February 2000; FT 8 May 2000); even hostile takeovers, once ruled out, are on the agenda, if as yet embryonic. Non-financial firms are starting to make major inroads into the financial sector too. Current plans include those by Itō-Yokado, owner of the huge Japanese chain of SevenEleven convenience stores, to become a bank in order to utilize its twenty-four-hour automated teller machine (ATM) network in a country where until very recently ATMs had only been open during normal banking hours; indeed, Seven-Eleven already provides a service where internet consumers can order their goods online in the stores and return to pick them up there too, a useful innovation in a country where much consumer resistance remains to pure mail order purchasing. And Softbank, the internet investment group, is the leading suitor for the failed (and nationalized) Nippon Credit Bank, despite interagencydisagreements on some aspects of the sale (Nikkei Weekly 7 February 2000; FT 30 March 2000). Other changes in the system include the establishment of an extremely successful new exchange for young companies, the Tokyo Stock Exchange (TSE)-sponsored ‘Mothers’ market (Market for High Growth and Emerging Stocks) which has very low entry barriers, and plans for a launch later in 2000 of Nasdaq Japan, a joint venture between Softbank and the National Association of Securities Dealers of the US (Far Eastern Economic Review 8 July 1999). The latter will have much stricter listing requirements in order to facilitate cross-listing with Nasdaq US and the latter’s planned European venture (associated with the aborted merger of the London Stock Exchange and the Deutsche Börse), with the intention of creating a globally integrated exchange for high-technology shares (Nikkei Weekly 20 March 2000). And the Financial System Council, a high level advisory body to the MOF, has recently come out in support of transforming the TSE from a membership organization into a publicly held company, a reform similar to changes being carried out or considered by other major exchanges across the world. Marketization of the Japanese financial markets themselves is proceeding at an explosive pace. Although some of these changes may be associated with the stumbling quasirecovery in the Japanese macroeconomy, their main causes and their main significance for the future are structural and reflect the increasing microeconomic entanglement of Japan and the global financial economy. Conclusion Although these private-sector-led changes have been enabled by bureaucratic shifts and the Big Bang programme, pressures for them have not come from the state but from a combination of international market developments and technologicalchange. They are not

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dependent for their momentum on the state or, indeed, on the rapid or comprehensive conclusion of the entire Big Bang programme as originally envisaged. A combination of market decompartmentalizationand price competition within the financial services industry, along with rapid technological change and the reorientation of investors’ funds, has already created what this author believes to be unstoppable pressures for convergence and globalization. These changes can only accelerate further as funds shift from traditional uses to new uses, as the restructuring of the banking system itself proceeds and the new megabanks and holding companies (as well as other financialinstitutions) become more market driven and profit oriented, as individual investors pull out of the postal savings system (Nikkei Weekly 20 March 2000), and as the government eventually runs out of funding for further reflationary packages (FT 14 March 2000) after the 2000 elections for what has been called Japan’s ‘junkie economy’ (FT 6 December 1999). Although state actors still retain some choices, they are increasingly limited to the market-oriented parameters of the ‘competition state’ (Cerny 2000a). The old ‘Japanese model’ is dying on its feet and can no longer resist the restructuring imposed on it by the global financial market place. Acknowledgements I would like to thank the Nuffield Foundation and the Japan Foundation Endowment Committee for funding this research. I am particularly grateful to Seiji Endo, Glenn Hook, Susanne Lütz, James Malcolm, T. J. Pempel and Kurt Tong, among others, for indispensable advice. The Max Planck Institute for the Study of Societies, Cologne, provided valuable sabbatical support. Notes 1 The First Industrial Revolution revolved around textiles, coal power, iron and local railways; economies of scale were modest and technology was modular – each increment of production required mainly the addition of similar machines, more labour, etc. – and was normally financed through retained profits or locally procured bank loans (Hobsbawm 1969). The Second Industrial Revolution revolved around steel, petroleum, chemicals, oil, late railways, automobiles, aircraft, etc., and involved (1) large, integrated production facilities with vast technological economies of scale, (2) an extensive management superstructure (‘scientific management’) and (3) the need for mass marketing on a continental scale – the prototype firm being the Ford Motor Company (Rupert 1995). Huge investments were needed at all three levels (Chandler 1990), investments which could only be provided by big banks, especially investment banks like J.P. Morgan & Co. in the US or by state–bank–industry cartels in Europe and Japan, although in a continental economy like the US stock markets also played a major role. The Third Industrial Revolution (‘postFordism’) revolves around ‘high-technology’ production and information technology (IT), but with – paradoxically – even larger economies of scale combined with a return to modular forms of infrastructure and financing; these include ‘lean management’, flexible manufacturing techniques, flexible labour markets, the restructuring and downsizing of production systems and, in particular, the rapid expansion of securitized market financing, i.e. stock market flotations, venture capital, financial innovation (derivatives, asset-backed securities, etc.), stock options for management and the like; prototype firms include Silicon

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Valley-type ‘craft-based’ industries (Piore and Sabel 1984) and, today, the so-called ‘dot.com’ companies. 2 The best overall treatment of the Japanese model is Pempel (1998a), in which the author systematically develops a sophisticated comparative analytical framework. 3 The author gained a strong impression from a range of confidential interviews with MOF and BOJ officials, as well as wide-ranging interviews with employees of foreign and domestic financial firms, politicians, Japanese academics, journalists, etc., that there are indeed splits within both the MOF and the BOJ and that these are to some extent generational. These interviews were carried out in Tokyo between 18 May and 4 June 1999. 4 Beyond amakudari, other key practices include direct, everyday contact between MOF officials and industry liaison officers. Lobbyists in the ‘iron triangles’ and ‘policy networks’ characteristic of the US political system generally operate in a far more transparent way, especially as the most egregious cases have been subject to extensive scrutiny by thinktanks, journalists and academics over the years. In Japan, such scrutiny has only begun to emerge. Nevertheless, the Japanese system has become somewhat more transparent in recent years, partly driven by the fallout from well-known scandals such as when MOF officials in the mid-1990s were taken for dinner to Japanese clubs where they were served by very young waitresses without underwear, the so-called ‘no-pantie affair’. According to interviews carried out by the author, internal scrutiny of such links has been dramatically tightened up and systematized within the MOF. At another level, however, the major difference between US lobbying and Japanese bureaucracy/industry relations in the financial sector lies in the fragmentation of the former around a multitude of points of access located throughout the US executive and legislature, in contrast to the role of the MOF as ‘one big regulator’, supervising all aspects of the financial services industry as well as the budget and other functions (Brown 1999). 5 According to data collected by the FSA, Japan’s largest banks have written off 51 trillion yen (US$188 billion) in non-performing loans in the past eight years, equivalent to around 10 per cent of GDP. However, provisions are at the time of writing thought to involve around 80 per cent of banks’ non-performing assets, using profits, capital and injections of taxpayers’ money (Financial Regulation Report February 2000:20), allowing most institutions to return to profit in 1999 (FT 23 November 1999). 6 The most comprehensive list of Big Bang and related regulatory changes through 1997 can be found in Hall (1998). 7 The main form of compartmentalizing barrier in the UK prior to the Big Bang was the prohibition of stockbrokers from trading on their own account, leaving such activities to ‘jobbers’ (market makers). 8 Pressures for lowering barriers also came from the fact that Japanese institutions operatingabroad, mainly from the 1980s onwards, were able to combine various kinds of operations in ways prohibited in Japan. In doing this, their employees gained crucial skills and often altered their cultural attitudes towards Japanese systems, creating a reservoir of naiatsu-type pressure for deregulation. 9 Of course, it can be argued that oligopoly (or oligopsony) power is merely transferred from financial services firms like banks and securities houses to their ostensible customers, i.e. the most powerful firms in the economy generally. Thus competitive conditions in the financial services industry would, in effect, be increasingly shaped by conditions in the wider economy, especially by the most powerful firms in terms of global clout and profitability.

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References Brown, J. R. Jr (1994) Opening Japan’s Financial Markets, London: Routledge. ——(1999) The Ministry of Finance: Bureaucratic practices and the transformation of the Japanese economy, Westport, CT, and London: Quorum Books. Carlile, L. E. and Tilton, M. C. (eds) (1998) Is Japan Really Changing Its Ways? Regulatoryre form and the Japanese economy,Washington, DC: Brookings Institution Press. Cerny, P. G. (1989) ‘The “little big bang” in Paris: financial market deregulation in a dirigiste system’, European Journal of Political Research 17, 2 (March): 169–92. ——(ed.) (1993) Finance and World Politics: Markets, regimes and states in the post-hegemonic era, Cheltenham, Glos., and Brookfield, VT: Edward Elgar. ——(1994) ‘The dynamics of financial globalization: technology, market structure and policy response’, Policy Sciences 27, 4 (November): 319–42. ——(1996) ‘International finance and the erosion of state policy capacity’, in P. Gummett (ed.) Globalization and Public Policy, Cheltenham, Glos., and Brookfield, VT: Edward Elgar. ——(2000a) ‘Restructuring the political arena: globalization and the paradoxes of the competition state’, in R. D. Germain, (ed.) Globalization and Its Critics: Perspectives from political economy, London: Macmillan. ——(2000b) ‘Money and power: the American financial system from free banking to global competition’, in G. Thompson (ed.) The United States in the Twentieth Century ( vol.2), London: Hodder & Stoughton. ——(2000c). ‘Embedding global financial markets: securitization and the emerging web of governance’, in K. Ronit and V. Schneider (eds) Private Organizations in Global Politics, London: Routledge. Chandler, A. D. Jr (1990) Scale and Scope: The dynamics of industrial capitalism, Cambridge, MA: Harvard University Press. Coudrat, C. (1986) ‘États-Unis: une économie de marchés financiers’, in F. Renversez (ed.) Les Systèmes financiers, Les Cahiers Français 224 (January–February), Paris: La Documentation Française. Cunanan, C. O. and Dowling, P. (eds) (1998) Japan’s Big Bang, Tokyo: Kozo System. Feldman, R. A. (1986) Japanese Financial Markets: Deficits, dilemmas and deregulation, Cambridge, MA: MIT Press. Hall, M. J. B. (1998) Financial Reform in Japan: Causes and consequences, Cheltenham, Glos., and Northampton, MA: Edward Elgar. Hartcher, P. (1997) The Ministry: The inside story of Japan’s ministry of finance, London: Harper Collins. Hobsbawm, E. J. (1969) Industry and Empire, Harmondsworth: Penguin. Horiuchi, A. (1999) ‘Financial fragility and recent developments in the Japanese safety net’, Social Science Journal Japan 2, 1 (April): 23–43. Horne, J. (1985) Japan’s Financial Markets: Conflict and consensus in policymaking, Sydney: Allen & Unwin. Iwata, K. (1999) ‘The Japanese big bang and the financial crisis’, Japan Review of Interanational Affairs 13, 1 (spring): 55–73. Johnson, C. (1982) M.I.T.I. and the Japanese Miracle: The growth of industrial policy, 1925–1975, Stanford, CA: Stanford University Press. Katz, R. (1998) Japan, The System that Soured: The rise and fall of the Japanese miracle, Armonk, NY, and London: M. E. Sharpe. Kusano, A. (1999) ‘Deregulation in Japan and the role of naiatsu (Domestic pressure)’, Social Science Journal Japan 2, 1 (April): 65–84.

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Litan, R. E. and Rauch, J. (1998) American Finance for the 21st Century, Washington, DC: Brookings Institution Press. Loriaux, M. (1991) France after Hegemony: International change and financial reform, Ithaca, NY: Cornell University Press. Malcolm, J. D. (1998) ‘The political economy of financial globalization: does Japan’s “Big Bang” herald convergence?’, Unpublished Ph.D. Dissertation, University of Sheffield. Pempel, T. J. (1998a) Regime Shift: Comparative dynamics of the Japanese political economy, Ithaca, NY: Cornell University Press. ——(1998b) ‘Structural gaiatsu: international finance and political change in Japan’, Paper presented to the annual meeting of the American Political Science Association, Boston, MA, 2– 6 September. Piore, M. J. and Sabel, C. F. (1984) The Second Industrial Divide: Possibilities for prosperity, New York: Basic Books. Renversez, F. (1986) ‘France: une économie d’endettement’, in F. Renversez (ed.) Les Systèmes financiers, Les Cahiers Français 224 (January–February), Paris: La Documentation Française. Rupert, M. (1995) Producing Hegemony: The politics of mass production and American global power, Cambridge: Cambridge University Press. Suzuki, Y. (ed.) (1987) The Japanese Financial System, Oxford: Oxford University Press. Vogel, S. K. (1996) Freer Markets, More Rules: Regulatory reform in advanced industrial countries, Ithaca, NY: Cornell University Press. ——(1999) ‘Can Japan disengage? Winners and losers in Japan’s political economy, and the ties that bind them’, Social Science Journal Japan 2, 1 (April): 3–21. Wright, R. W. and Pauli, G. A. (1987) The Second Wave: Japan’s global assault on financial services, London: Waterlow. Zysman, J. (1983) Governments, Markets, and Growth: Financial systems and the politics of industrial change, Ithaca, NY: Cornell University Press.

7 Americanization or Europeanization? The globalization of the Japanese economy Kudō Akira Introduction The internationalization of the Japanese economy has been proclaimed repeatedly even if this observation is limited to the post-war era. The specific meaning of internationalization has varied with each successive wave, but generally speaking, up to the end of the 1980s, the trend was from internal internationalization – the internationalization of the Japanese economy itself – to external internationalization – the international influence of the Japanese economy. The latter can be referred to as ‘international Japanization’. Considering the growing status of Japan in the global economy, such a trend was only natural (Ozawa 1995; Kudō 1994a, 1995a). From the beginning of the 1990s, however, a reversal has occurred: ‘internal internationalization’ has once again become the focus of debate. For example, major topics have included the opening of allegedly closed markets, the elimination of barriers to FDI in Japan, and an emphasis on international cooperation in economic policy. Certainly, debate about ‘external internationalization continues’, but its focus is less on the active international role of the Japanese economy than on its passive impact. Take, for example, the debate on the chaos that might accompany the widespread sale by Japan of US treasury bills (shortterm government bonds). Why the debate has shifted in this way requires analysis, but it is undeniable that the shift has in fact taken place. These issues have certainly taken on a new coloration in the 1990s, but basically they remain variations on a theme that has repeatedly appeared in the past. The older term ‘internationalization’ has also largely given way to the term ‘globalization’, but that is surely little more than a question of terminology. So does that mean that the question of the internationalization or globalization of the Japanese economy in the 1990s and early twenty-first century is unworthy of academic scrutiny? Two reasons suggest otherwise. First, the Japanese economy of the 1990s follows the unprecedented experience of the ‘bubble economy’ of the late 1980s. The present economy is marked with the scars the ‘bubble’ inflicted, which cut to the very heart of the economy’s structure. Second, after a period in which the decline of US hegemony was widely forecast, the 1990s have witnessed the re-emergence of a powerful US influence, or at least the feeling of such influence. The ‘bubble economy’ and its aftermath The boom of the late 1980s – the so-called ‘bubble economy’ – was a phenomenon unprecedented in Japanese economic history. This is clear from the unparalleled rise in

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stock and land prices, as well as from the many scenes of people and institutions both leading and being led in this sordid dance. The unsavoury facts are still emerging today, and, even more disturbing, some of the activities are actually being repeated. It is no exaggeration to say that the scars of the bubble era remain the guiding force of the Japanese economy in the 1990s and early twenty-first century, and they may be seen as the basic condition underlying the internationalization or globalization now taking place. Thus, we must perforce clarify the underlying causes of the bubble economy. Scholars have so far failed to reach a consensus on that point, and many issues remain unresolved. Such an attempt at clarification is therefore doomed to failure at present; but at least it is necessary to specify the basic issues that still need to be resolved. It is apparent that one of the pillars supporting the boom of the late 1980s was the international competitiveness of Japan’s manufacturing industries. In this sense, to refer to the ‘bubble economy’, which evinces an image of rising stock and land prices, is to point to only one aspect of that phenomenon. Nevertheless, as the peculiar characteristic of that phenomenon was the extraordinary speculation in stocks and land, the term ‘bubble economy’ remains the preferred expression. What caused the ‘bubble economy’? If the above term is to be retained, then above all the causes of that speculation need to be elaborated. Where, and how, was the speculative capital generated? And why was that capital directed towards speculation and not towards other investments? Behind the speculation lie various financial institutions, including the so-called non-banks. These institutions engendered the speculation, spurred it, and then ultimately were brought down by it. Thus, the credit created by these institutions was a major cause of the bubble phenomenon. But what caused this credit creation in the first place was the accumulated capital of manufacturing industry. This capital became excess to the needs of the manufacturing sector, and was used for speculative purposes via the medium of the above financial institutions, or else was invested directly. In the latter case, the investments took the form of equity financing or real-estate lending. At the time, the fashionable term to describe this was zai-tech (zai = finance). Nowadays the term has fallen into almost total disuse, but at the time large numbers of companies (as well as individuals) rushed into zai-tech activities. Indeed, only an exceptional minority failed to participate. Today, those companies are almost without exception industry leaders. Just why these companies did not participate is a fascinating as well as an important question. In any event, if the location and mechanism for the creation of excess capital were as described above, then the conclusion must be that the birth of the bubble economy lay above all in the following causes. First, the international competitiveness of Japanese manufacturing industry grew throughout the 1970s and the early 1980s in spite of – and partly as a result of – the two oil crises afflicting the global economy. The greatest reason for this competitiveness was manufacturing technology at the factory level, while the keiretsu system of intercorporate ties, which also encompassed smaller companies, was another important factor. The Japanese economy of this period has been aptly described as ‘collective capitalism’ (Lazonick 1990, 1991) or the ‘Japanese enterprise system’ (Fruin 1992). This competitiveness resulted in enormous trade surpluses, and caused Japan to accumulate huge amounts of capital. The industries that showed particularly

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strong international competitiveness were limited to production and assembly industries such as automobiles, electronics and related industries, but these represented global products – hence, large-scale capital accumulation occurred. Second, the capital accumulated by manufacturing industry, as well as other capital, was recycled through the credit-creating mechanism of the financial institutions to create still more capital, and much of this was directed into stock and real-estate speculation. However, the financial system itself was not at the time sufficiently developed to deal with this phenomenon. There was a huge imbalance between the expansion of capital and the underdeveloped technical and management skills of the financial institutions. This phenomenon closely parallels the US financial system at the time of the 1929 stock market crash. Indeed, the imbalance extended to the entire Japanese service sector. In other words, we must view the cause for the emergence and subsequent collapse of the ‘bubble economy’ in the imbalance between the ‘bright side’ represented by the skills of Japan’s manufacturing industry, and the ‘dark side’ represented by the administrative ineptitude of financial institutions and other service industries (including, incidentally, the administrative functions of manufacturing industry) (Yoshihara 1989). But in searching for the fundamental causes of the ‘bubble economy’, it is important not to be limited solely to the location and mechanism bringing about the emergence of excess capital. It is also necessary to consider why this capital was not directed towards investments other than stock and real-estate speculation. This is related to the question why, after the collapse of the bubble in the 1990s, domestic capital was directed not towards the reconstruction of the Japanese economy and society, but instead was invested overseas, particularly in US securities. It would be narrow-sighted to treat this simply as an issue of interest rates. For it is, at heart, a policy issue: the problem lies in the deficiency in, or even lack of, a will or strategy to reform Japan’s economy and society, as well as a similar lack of will or strategy to contribute to the global economy. Unresolved issues in the bubble economy’s wake To develop this point a little further, the bubble economy can be said to have left the following unresolved issues for the Japanese economy and society. First, the Japanese manufacturing system, which as we have seen has been termed ‘collective capitalism’ or the ‘Japanese enterprise system’, needs to be reformed. The strength of that system’s international competitiveness was built on the sacrifice of the individuality of employees as autonomous members of society – a phenomenon sometimes termed ‘enterprisism’ (Baba 1991). Indeed, the apostle of the Japanese ‘knowledge-creating organization’, Nonaka Ikujirō, has pointed precisely to the physical ‘exhaustion’ of Japanese workers as the system’s greatest defect (Nonaka and Takeuchi 1995). Again, Ronald Dore, who has praised the high efficiency of Japanese capitalism, says that he would prefer not to live in Japan (Fukada and Dore 1993). The reform of the Japanese enterprise system would probably have the effect of reducing the international competitiveness of Japanese manufacturing industry. That is unavoidable. Indeed, it is even desirable: first it will promote the ‘humanization’ of the domestic economy and society; and, second, it will reduce Japan’s trade surplus, which has been the cause of endless disputes with the US and elsewhere.

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Next, the financial sector – and, subsequently, the entire service sector – needs to be made more transparent in order to transform that ‘dark side’ of the Japanese economy. In particular, the imbalance between the quantitative expansion of the financial system and the underdevelopment of its qualitative technical and management skills needs to be addressed. In order to achieve this, internationalization or globalization is necessary, too. Globalization is not a meaningful objective in and of itself. Great harm would be caused by an unprincipled rush into globalization as a result of fears about the ‘hollowing out’ of the Tokyo financial market, itself caused by the transfer of massive sums of capital overseas. There are many speculative markets around the world today. It would be foolish to compete against them. The globalization of financial markets is in fact a means for the improvement of the Japanese financial sector. This process should contribute to the development of appropriate incentives for capital. Third, and related to the above two points, reform of the Japanese economy and society is necessary. For a long time, policy-makers and critics have argued that Japan must develop from an ‘economic great power’ to a ‘lifestyle great power’. Despite these calls both inside and outside the circles of power, however, little progress has been made. The current debates and policy initiatives on domestic reform do not adequately link the reform of the domestic economy with the reform of the Japanese enterprise system. There is lots of talk of the downsizing of government, privatization and deregulation. Lest we forget, however, the leading players in these initiatives are precisely those companies which form part of the much praised ‘collective capitalism’ or ‘Japanese enterprise system’ – in other words, the background against which these initiatives are taken is hardly a textbook fair market in which investors could place their trust. Unless the corporate system is reformed, trust in the market will fail to rise, and there will be no way to reform the economy and society. The fundamental platform for reform must surely be how to restore the fruits of the international competitiveness of Japanese manufacturing industry to the domestic economy and society. Indeed, this is the real significance of the present Japanese focus on corporate governance as a key aspect of those reforms. But under the present condition of the Japanese economy, what is occurring is a strengthening of ‘enterprisism’ and a concurrent decline in the much-touted ‘knowledge-creating organization’ at the corporate level. That, to be sure, is one of the major reasons for the deadlock over reform at the national level. Fourth, the rebuilding of Japan’s international economic relations is necessary. Japan still commands vast capital resources, with individual savings said to total some ¥1,200 trillion. The fact that much of this capital is currently invested overseas, and in the US in particular, is testimony to the undeveloped state of the Japanese financial system. It also highlights how the ‘economic superpower’ remains unable to understand its international responsibilities. This point was made abundantly clear by the 1997 East Asian financial, currency and economic crises. True, as the ‘bubble economy’ was an exceptional phenomenon, the 1990s can be seen as a period of returning to normality. But such normalization will only be possible through reform in the twenty-first century.

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Globalization or ‘Americanization’? The reform of the Japanese economy and society must be generated internally, but one problem remains. That is the phenomenon of gaiatsu or international pressure, specifically pressure from the US, which is referred to in this chapter as ‘Americanization’. In the 1990s, there was constant talk about the internationalization or globalization of the Japanese economy. Behind this theme lies the development of a global financial market in which capital, particularly speculative short-term capital, can be moved at will around the world. As seen above, there is certainly some logic to such a development. Nor is this simply a domestic concern: the capital cities of the US, Europe and Asia, as well as global financial institutions themselves, constantly harp on the same theme. This, in itself, is a form of gaiatsu. More specifically, however, the strongest and most effective calls for reform of the Japanese system have come from the US, which in the late 1990s enjoyed a period of great prosperity. In other words, what is currently taking place is actually ‘Americanization’ under the name of globalization. The economic crisis in East Asian countries following the 1997 depreciation of the Thai baht bolstered this trend. The Federal Reserve Board (FRB) Chairman, Alan Greenspan, referred to the ‘collapse of Asian mercantilism’, which he compares to ‘eighteenth-century British mercantilism’, and has emphasized the ‘excellence of American-style market capitalism’ (Nikkei 17 January 1998). This is a cry of victory for the US. Forms of ‘Americanization’ ‘Americanization’ is progressing on a large scale both at the corporate level and at the level of the national economy. At the corporate level, for instance, bold restructuring and the elimination of unprofitable divisions are moving rapidly forward regardless of the unemployment spawned as a result. Or, at least, these trends are being loudly proclaimed. Rapid management decision making, symbolized by bold takeovers, is lavishly praised. At the same time, emphasis on profits (return on equity (ROE), return on assets (ROA), etc.), shareholder returns and, to that end, management transparency and the establishment of corporate governance, are all being positively touted. The emphasis on profitability, which then Sony Chairman Morita Akio stressed several years ago, is now, on the basis of the US corporate model, becoming an accepted dogma. By contrast, Japanese technology, management and labour relations, which were lavishly praised in former times, are now held up as a model of ossification. The auto-maker Mazda is symbolic of this reversal: the company, which supports no less than 10 per cent of the population of Hiroshima prefecture where it is based, has fallen completely under the Ford umbrella, and it is now attempting to fight its way out of its difficulties by introducing Ford-style management. At the national level, ‘Americanization’ is even more evident. With the US as a model, intercorporate relations and corporate–government relations are being transformed through the relaxation or abolition of regulations, and through the promotion of

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competition. US companies and the US government are now able to intervene effectively in this debate with, for example, calls for the abolition of the Large-scale Retail Establishment Law. In the fields of society, lifestyle, culture, speech and research, US influence is strengthening before our very eyes. The paradox of ‘Americanization’ In this way, the impression has been created that, in the 1990s, US influence on Japan – ‘Americanization’ – has grown even stronger than in the past. If ‘Americanization’ is examined in its historical context, however, this impression is wide of the mark. The history of ‘Americanization’, even if the discussion is limited to relations with Japan, has a history of at least a century, although the first great wave did not hit Japanese shores until the 1920s (Sasaki and Nonaka 1990). Following this, in the aftermath of the Second World War, the influence of the reforms carried out by the Occupation forces in politics, the economy and society continued to reverberate throughout the 1950s and 1960s. Following the post-war reconstruction, the US was in every way a model for the Japanese economy and society, which was struggling to work its way up the developmental ladder. The productivity movement was a typical example (Sunaga and Nonaka 1995). Indeed, the 1950s and 1960s were the high-water mark of US hegemony, a fact which increased US influence. In the 1970s and 1980s, moreover, the decline of US supremacy, accompanied by the economic ascent of Japan, resulted in a weakening of the pressure for ‘Americanization’. Thus, the rise in US pressure in the 1990s (or at least, the impression of such a rise) may be seen as a reversal in the context of the overall history of ‘Americanization’. What is more, during this period US hegemony, particularly as manifest economically, was continuing to decline (Tateyama 1995). Seen in this light, this historic reversal appears paradoxical. Why has ‘Americanization’ recovered – or, at least, given the appearance of recovering? One argument is that, following the end of the Cold War, the US has become the world’s only superpower. It continues to wield ever greater political and military power, and no signs can be found of any other hegemonic power emerging to take its place. Second, US corporate competitiveness has recovered owing to the strength of the US information technology sector, which is in the vanguard of the Third Industrial Revolution. Third, with the current crisis of the West European welfare economies, the low level of welfare provision in the US no longer causes undue comment. The reason for the recovery of ‘Americanization’, however, must be seen primarily to lie in the situation of Japan itself. In the aftermath of the ‘bubble economy’, many managers and bureaucrats remain unable to find a way out of their troubles independently – hence, the US success story appeals as a model. At the corporate level, profitability, corporate governance and ‘economies of speed’ are the current catch-phrases, while at the national level, the mantra is deregulation. Problems of ‘Americanization’ Nevertheless, problems with this kind of ‘Americanization’ abound. To some extent, of course, it is necessary in order to promote reforms and a return to normality after the

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‘bubble economy’. In some cases, too, ‘Americanization’ should be welcomed. It forms an indispensable part of the learning process in the development of corporate management and the national economy. In no way should the Japanese adopt a narrowminded nationalism. Indeed, inflexible adherence to those once-praised models – ‘Japanese-style management’, ‘Japanese-style capitalism’ and so on – will lead Japan to its doom. The path to recovery does not lie in clinging to these outdated models. In this sense, it is necessary to return to the Japanese tradition of learning from foreign models. In the past, Japanese companies and bureaucrats exhibited a fervent desire to learn fully the technological, management and social systems of the advanced economies of Europe and the US. To this end, both the business and bureaucratic elite boosted their learning capabilities, aiming for innovation through imitation followed by improvement (Kudō 1995b). For ‘Japaneseness’ implies a process of constant learning and enhancement. In this sense, the fundamental cause of the ‘bubble economy’ is straightforward: companies and the government forgot their habit of learning, and relied too much on their own prior successes. To that extent, ‘Americanization’ offers a golden opportunity for the renewal of learning. In the longer term, however, the sacrifice of employees in favour of profits and shareholder value in pursuit of the US model clearly endangers the special features of Japanese management. Moreover, at the national level, ‘Americanization’ can potentially spawn a high level of long-term unemployment, a squeeze on wages, and the growth of inequalities in income and assets, thus tearing at the nation’s social fabric. There is also a danger that indiscriminate deregulation not only will result in excessive competition and market chaos, but also may threaten the environment and overall security. The US at present may truly be said to illustrate these sorts of dangers. Post-war Japan has often been labelled a land of ‘public weakness and private flooding’, and certainly it has failed to achieve a national consensus on the relationship between the public and private spheres. If under this condition Japan adopts unadulterated US-style deregulation, then the nation faces the danger of ending up with even more troubles than the US presently faces. Until now, learning from the US by Japanese companies and the government appears partial and selective. Toyota, for example, has publicly adopted the stance that ‘we will protect our workforce at all costs’, and ‘we will not undertake hostile takeovers’ (Nikkei 17 December 1997). Companies are selectively introducing US methods on top of their own technology and management. Moreover, companies which have undertaken such experiments seem to be for the most part restricted to a few corporate giants. However, if the current reforms do not bring results, and if the reason is seen to be an incomplete adoption of the US model, then ‘Americanization’ may make inroads on a much larger scale. At that time, associated problems will surely increase in salience. This is by no means a groundless fear. In recent Japanese–US relations (and this is by no means a new phenomenon), Japan has fended off the US ‘self-centred hegemony’ (Tateyama 1995) and ‘aggressive unilateralism’ (Sasaki 1997) through a series of ad hoc measures (Ozawa 1995). Seen in this light, concern should indeed be raised.

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Comparison with Europe In Western Europe, too, France and Germany – which are the nucleus of regional integration – have also been swept by waves of ‘Americanization’, but in those countries ‘Americanization’ has been a topic of academic debate since the 1970s (Berghahn 1986), and it is currently being openly attacked in journalistic circles (Albert 1991). In Japan, on the other hand, few critical voices have been raised. Although it has been possible for some time to engage in comparatively objective discussion of the US presence, such debates have begun in academic circles only recently. In the media the following comment by Iida Tsuneo is an exception: We Japanese have come to assume that ‘somewhere over the mountain’ lies an ideal system and set of rules. This ‘somewhere over the mountain’ has so far meant Europe and the United States, and particularly the United States. But recently, we have come to realize that that is nothing more than an illusion. That must be a sign of Japanese people’s ‘maturation’. But very recently, that ‘maturity’ has disappeared somewhere. (Mainichi Shinbun 24 November 1997) And ‘Without Japanese-style capitalism, what Japan?’ (Fukada and Dore 1993): such remarks are already being seen as mere blustering. Where this difference between Europe and Japan should come from is itself an interesting question. It may come from the difference in regional integration and in socioeconomic maturity, or it perhaps lies in the difference in historical relations with the US, which results in US pressure being more formidable in Japan. The history of Japanese– US relations from the black ships of Commodore Perry (1853) to the post-war Occupation (1945–52) has certainly served to breed an inferiority complex. What remains a far more serious problem, however, is that this pressure has not been sufficiently recognized or subject to criticism. Perhaps this is related to the fact that there has been insufficient recognition of the need for reform. ‘Europeanization’ as an alternative Since the US model suffers from a range of problems, there is ample reason to look also to Europe (by which is meant Western Europe, including the UK) when considering social and economic reform in post-bubble Japan. This statement immediately raises questions. Why must the Japanese learn from Europe? If an examination is made of the present state of corporate management and technology, or the condition of the national economy and welfare society, can we really learn anything from Europe? Surely Europe itself is undergoing the same flood of ‘Americanization’ as Japan. What is more, can it not be said that Europe itself has lost the desire and wherewithal to teach anything to Japan? These are all reasonable questions. ‘Europeanization’, as discussed here, is not mere romanticism. What kind of meaning does, or should, ‘Europeanization’ entail? And is ‘Europeanization’ possible, or, more

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precisely, how can it be made possible? The current state of Japanese–European economic relations in their historical context is examined below in order to throw some light on these questions. Regional integration as a reason for ‘Europeanization’ Since before the Second World War, Euro-Japanese economic relations have been characterized by a one-way flow of knowledge from Europe to Japan. However, even before then, a competitive relationship also existed (Kudō 1998a). This competitive relationship became stronger after the war. Then, following the first oil crisis, it developed into actual trade conflicts. At that time, the European economies were falling behind in the microelectronics (ME) revolution and the Third Industrial Revolution. They became the target of the economic endeavours of Japan, which was ahead in these areas. The long-term trade imbalance which emerged gave rise to repeated trade conflicts. The cause of this, in the final analysis, was the gap in competitiveness between Japanese and European manufacturers. This gap did not appear in all products, but only in those that formed the nucleus of global trade. In aerospace, cosmetics and foodstuffs, for example, Europe was the more competitive. As a result of these trade conflicts, as well as of the superiority of Japanese technology and management in the key fields of global trade, Japanese direct investment in Europe grew by leaps and bounds. Moreover, strategic alliances and industrial technology cooperation between Japanese and European big business also increased. Finally, at the government level, industrial, scientific and technological cooperation forged ahead (Kudō 1995a, 1995b). Behind these trade conflicts was continuing European integration. The 1992 market integration, the Maastricht Treaty, the deepening of political and monetary union, as well as the expansion of the EU to include former Eastern Europe and other countries, were to some extent a response by Europe to the economic prosperity and economic challenge posed by Japan. Increasingly, however, it came to represent rather a European economic challenge to Japan (Tanaka 1996; Schulz 1998; Kudō 1998b). For example, the monetary union towards which Europe is currently advancing is also a challenge to the future of the yen as a vehicle for international payments and reserves (Schulz 1998). European integration has spurred regional integration around the world, perhaps most strongly in the case of Malaysian Prime Minister Mahathir’s brainchild, the EAEC, as well as the US-led APEC, where both recognize the challenge of Europe. Although Japan occupies a predominant economic position in this contested region (Hook 1996), from the perspective of regional integration it remains in isolation. Caught between the two organizations, Japan is desperately searching for a way forward. The 1997 currency, financial and economic crises in East Asia have certainly once again confirmed Japan’s confusion in this area. At present, Japan is seeking an appropriate response to the European challenge. The issue is, above all, the need to rectify the imbalance in Japanese–European economic relations, particularly the trade imbalance. Also at issue are the expansion and strengthening of political ties, and Japan’s commitment to East and Southeast Asian integration. To that end, a deepening and expansion of Japan’s understanding of European integration – or, to put it more generally, learning from Europe or ‘Europeanization’ – is essential.

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Company–society relations as a reason for ‘Europeanization’ ‘Europeanization’ is not only necessary in the field of foreign relations, however. European companies and the European economy and society must also be the subject of Japanese learning. For a long time these were indeed models for Japan, but as the relationship between Japan and Europe became more competitive, at some point the tendency to disregard ‘learning from Europe’ became deep rooted. Amidst repeated trade conflicts, however, Europe has repeatedly been sending important messages to Japan – for example, in regard to working hours and market openness. It should be borne in mind, of course, that not all of these demands were justified, but surely there was a problem in the way that Japan has to this day piled up remedies in response to these complaints. In conflict, self-knowledge can be sought through the recognition of differences between the two parties. In essence, was not Europe asking Japan what kind of companies it should have, what kind of labour, what kind of liberalism, what style of management, and what kinds of relations between individuals and companies, companies and society, and companies and the government? Today, above all, as Japan struggles to come up with social and economic reforms to help it recover from the post-bubble crisis, and move it away from ‘enterprisism’ and towards a ‘lifestyle great power’, the nation needs to learn from Europe’s companies and its socio-economic system, particularly the latter. The standards of living, welfare, environment, safety, and land planning in Europe represent vital learning materials. One representative index is working hours. Each European country’s, as well as the EU’s, published goals may also be adopted as goals for Japan. The fact that European companies and the European economy and society are by no means always successful in achieving their results is no reason to abandon learning from them. On the contrary, the very fact that the countries of Europe – particularly continental Europe – are struggling to maintain their standards of living in the face of low economic growth and high unemployment, while being swept by the same wave of ‘Americanization’ as Japan, provides ample common ground to ensure learning from Europe is even more meaningful. Again, the fact that Europe is itself by no means enthusiastic about learning from Japan is not a reason to avoid ‘Europeanization’. Certainly, Europeans are reluctant to take Japan as a model. While it is true that, at the corporate level, ‘even those stubborn German companies have fairly seriously studied the Japanese system and actually adopted it in part with quite good results’ (Abo 1993), at the national level Japan continues to be the subject of sharp criticism (long working hours, export-led growth, closed keiretsu relationships, structural impediments, producer privileging, etc.), and hardly anyone argues that they should learn from Japan for the sake of improving the economy and society. It could even be said that the basis for European understanding of Japan lies with those who see Japan as representing the challenge of nineteenth-century barbarism to twentieth-century civilization (Hager 1984). The ideal situation of mutual learning between Europe and Japan seems a long way off. Nevertheless, rather than using the situation of the other side as a reason for abandoning learning from Europe, it would be better for Japan and, indeed, for the relationship between the two, if Japan were to take a close and objective look at what can be learned from Europe. Such learning would also help Japan to take a more objective stance towards the process of ‘Americanization’.

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European direct investment as a way of ‘Europeanization’ How, then, and by what means, should learning from Europe, or ‘Europeanization’, take place? The focus here is on corporate and economic reforms, although these are not unrelated to the fields of scientific and cultural studies. Even limiting ourselves to the economic field, individuals, corporations, the government and others can benefit from such learning, which may take place through a variety of means. Corporate direct investment may be the most powerful and appropriate of such means, because in the context of direct investments, the contacts between people are the closest and widest ranging both at the factory and the administrative level. In that case, European companies’ direct investment in Japan is the most effective. Of course, the opposite channel of Japanese investment in Europe can play a similar role. A lot can be learned by teaching; cases also exist where the desire for technologies and management skills unavailable within the company act as a catalyst for direct investment in Europe. In such a case the programme of learning is clear cut. However, this kind of Japanese direct investment in Europe is a roundabout way of learning from the point of view of Japanese companies collectively, even more so of the economy and society in general. It should be possible to learn more directly from European companies’ direct investments in Japan. FDI is an effective means of protecting employment and incomes, stimulating the regional economy and preventing ‘hollowing out’. That is the same for Japan as for Europe. But that is not the only significance of direct investment. Its significance as a means of learning is perhaps even more important. History and current problems of European FDI in Japan European FDI in Japan dates from before the Second World War (Yuzawa and Udagawa 1990), but with the passage in 1949 of the Foreign Exchange and Foreign Trade Control Law, and the 1950 Foreign Capital Law, which between them constituted Japan’s new system for dealing with foreign investment, European investment dropped off for some time. The reasons include the Japanese market’s lack of appeal, and the lack of a management environment favouring acquisitions. While Japanese companies were anxious to import technology and management skills, few were willing to contemplate handing over management control to foreign companies. Further, the Japanese government’s policy towards investment was restrictive and even prohibitive. Japan did not need capital, so companies acquired technology unaccompanied by management control by US companies. As a result, entrepreneurial skills remained in the hands of the Japanese (Gilpin 1975). The turning point came in 1967. The Japanese government’s comprehensive capital liberalization measures from 1967 to 1976 resulted – particularly from the mid 1980s –. in the growth of foreign, including European, investment in Japan. After peaking in 1992, investments began to decline (Kudō 1994a, 1995a). The leading European investors were the UK, Germany and Switzerland, and the leading industries were pharmaceuticals, chemicals, computers, electrical equipment and electronics. The motivation for investment was generally to establish a local base for manufacturing and marketing, as well as for research and development. Also notable was the acquisition of warehousing

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and wholesale and retail facilities by foreign distributors. The most common method of investment was acquisition of, or investment in, existing Japanese companies. A representative case from this period is German luxury car maker Bayerische Motor Werke’s (BMW’s) investment in the establishment of a dealership network. BMW increased its investment in Japan in order to create a direct sales system, enabling it to communicate directly with its customers in order to convey information on the excellence of its product. It resulted in greatly increased sales. Following that success story, both Daimler-Benz and Volkswagen established sales networks in Japan. During this period, European car makers’ share of total auto exports to Japan grew, with Volkswagen-Audi, Mercedes-Benz, BMW, Rover and Volvo coming to command almost 70 per cent of the import market. An example of investment in Japan for the sake of research and development is German chemical company Bayer’s setting up of a research centre. Examples in the service industry include many investments by finance and insurance companies, as well as investments by the UK’s Wembley (events and leisure planning and management) and the Virgin retail groups. European investment in Japan during this period was second only to the US. Nevertheless, on a flow basis, Japanese companies were investing ten times as much in Europe. The inequality between Europe and Japan in direct investment mirrored that in trade. Considering the size of the Japanese economy, inward direct investment remained particularly low. In Europe, this inequality, or excessively small investment level, became a political issue. Of course, just as with trade, no absolute objective standard exists of what constitutes ‘inequality’. However, as long as one side continues to make an issue of it, ‘equalization’ can only be ignored at peril. Moreover, since the expansion of Japanese investment in Europe is unavoidable as a means of averting trade conflicts, the only way to resolve the inequality is to expand European investment in Japan. For that reason, Europe is demanding the abolition of barriers to investment. Agenda for future study ‘Inequality’ is a problem not only on the European side. It is also a problem for learning from Europe – ‘Europeanization’ – by the Japanese side. The too-low level of European investment in Japan also means a too-low level of opportunities for learning. The first issue needing to be examined is, therefore, why European investment in Japan is so low. There are a variety of theories about this issue. Frequently mentioned are the geographical and psychological distance between Europe and Japan, although this is hardly an adequate explanation as Japanese investment in Europe remains high. In addition, high land prices, relatively low expected profitability ratios, high corporate taxes, the difficulty of hiring good-quality Japanese staff, and the difficulty of acquiring Japanese firms can be cited. The causes of this last point include a Japanese business culture which militates against acquisitions, cross-shareholdings between big companies, and Japanese companies’ consistent adherence to licensing rather than a willingness to give up management rights. All of these difficulties, though, with the exception of the hiring of good-quality staff, apply also to Japanese companies investing in Japan. It is therefore difficult to accept them as powerful explanations for the low level of European

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investment. Moreover, the hiring problem appears to have improved considerably in recent years. Incidentally, pre-war European companies which expanded in Japan also recognized barriers related to business culture (Kudō 1996). At the same time, the question still needs to be asked: how did Japanese companies investing in Europe deal with similar issues of business culture? Examples include the need for quality in response to high purchasing power (the push towards high quality and refined goods, the advance in taste and fashion, and strict delivery requirements); strict environmental protection (e.g. the obligation to recycle packaging materials); strict safety standards both for workers and consumers; and the existence of a specialist mentality with clear job descriptions in the workplace (Kudō 1994b). To some extent we may understand Japanese business culture as the reverse of these characteristics. In any event, as yet no theories are able to explain adequately the low level of European investment in Japan. We must look to a future analysis that includes not only the existence of barriers on the Japanese side, but also the motivations of European companies – for example, the relative excellence of European companies, their understanding of Japanese companies and the Japanese market, their Japan strategies, and their desire to learn from Japan. To that end, the analysis of individual case studies is indispensable. A second issue, related to these individual cases, is whether or not they really represent an opportunity for learning or ‘Europeanization’ and, if so, to what extent and in what way. Case studies might include the background and motivation for expansion in Japan; global strategy and the place of the Japanese market in a global and Asian context; methodologies of expansion (product exports, licensing, direct investment, as well as market research, negotiations with government and strategic allies, and decision making); choice of location; business, functional and competitive strategies; organizational development; relations with parent company; and others. From the perspective of this author’s research, a more important topic is the question of what impact these factors exert in each case on Japanese corporate management, markets, economy and society. In particular, the influence on distribution, marketing organization, technology, labour relations and management philosophy are crucial. A third issue for study is the willingness and ability of Japanese companies to learn from Europe. It can be assumed, from the limited impact of the much larger-scale Japanese investment in Europe, that the impact of European companies on the Japanese market and management is less tangible (Kudō 1994b). Therefore, if investment in Japan by European companies is to represent an opportunity for ‘Europeanization’, the active endeavour of Japanese companies is required. We must also look at what companies, central and regional government, and regional NGOs are doing to increase the attractiveness of Japan as an investment market, and removing barriers to inward investment. This will provide some indication of the willingness and ability of the Japanese side to learn. Looking at existing studies from the perspective of these concerns, a few observations are in order. First, existing case study research is not totally absent. However, for the most part these are practical, ‘how-to’ case studies. Moreover, most look only at the management side and do not deal with the factory or administrative line level. Among these, the most sophisticated is that by Yoshihara (1994). However, the purpose of this

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work is to understand the reasons for the success of foreign-associated companies, and it does not necessarily address itself to the concerns expressed in this chapter. Research specifically on these concerns still remains to be undertaken. Conclusion It has become clear to a wide range of observers that the Japanese economy and society must be reformed as a result of the ‘bubble economy’ and its collapse. At the same time, the 1990s were also the period of the Japanese economy’s globalization. Theoretically, at least, reform and globalization are linked. However, for the most part globalization has actually meant ‘Americanization’. To the extent that the need for ‘Americanization’ is allied to a domestically generated need for reform, it must be accepted. However, ‘Americanization’ does have clear demerits. Therefore, the Japanese economy and society must also look to alternative models of globalization. ‘Europeanization’ is one such alternative. Much can be learned from Europe in the cause of reform. This chapter has attempted to contribute to – or at least to suggest an agenda for – the study of ‘Europeanization’ through its most effective means, direct investment by European companies in Japan. References Abo, T. (1993) ‘Kaigai kigyō wa ima-demo “Nihongata” wo manandeiru’ (Overseas firms are still learning ‘Japanese style’), Economisuto 25 May: 24–7. Albert, M. (1991) Capitalisme contre capitalisme, Paris: Editions du Seuil. Baba, H. (1991) ‘Gendai sekai to Nihon kaishashugi’ (The contemporary world and Japanese companyism) in Institute of Social Science, University of Tokyo (ed.) Gendai Nihon Shakai 1: Kadai to shikaku (Contemporary Society 1: Problems and viewpoints), Tokyo: University of Tokyo Press. Berghahn, V. R. (1986) The Americanisation of West German Industry 1945–1973, Leamington Spa and New York: Berg. Fruin, M. (1992) The Japanese Enterprise System: Competitive strategies and cooperative structures, Oxford: Clarendon Press. Fukada, Y. and Dore, R. (1993) Nihongata Shihonshugi nakushite nanno Nihon ka (What Japan without Japanese-style capitalism?), Tokyo: Kōbusha. Gilpin, R. (1975) U.S. Power and the Multinational Corporation: The political economy of foreign direct investment, New York: Basic Books. Hager, W. (1984) ‘Free trade means destabilization’, Intereconomics, January/February: 28–31. Hook, G. D. (1996) ‘Japan and the construction of Asia-Pacific’, in A. Gamble and A. Payne (eds) Regionalism and World Order, London: Macmillan. Kudō, A. (1994a) ‘A partnership of imbalance: changes in Japan–European economic relations’, Annals of the Institute of Social Science 36: 57–91. —(1994b) ‘Nihon kigyō no chokusetsu tōshi to Yōroppa no keiei fūdo’ (Japanese direct investment in Europe and the European business climate), in Japan Center for International Finance (ed.) Tai Ōshū Chokusetsu Tōshi no Genjō (Current situation of direct investment in Europe), Tokyo: Japan Center for International Finance. —(1995a) ‘Nichiō keizai kankei no henbō’ (Changes in Japanese–European economic relations), in A. Kudō (ed.) 20 Seiki Shihonshugi: Haken no henyō to fukushi kokka (Twentieth century

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capitalism: changing patterns of hegemony and welfare states), Tokyo: University of Tokyo Press. —(1995b) ‘Japan’s technology transfer and business management: an analysis from the standpoint of business history’, Annals of the Institute of Social Science, No. 37. —(1996) ‘Cultural barriers facing exporters to Japan: German business in the interwar period’, in A. Godley and O. M. Westall (eds) Business History and Business Culture, Manchester: Manchester University Press. —(1998a) Japanese–German Business Relations: Co-operation and rivalry in the inter-war period, London: Routledge. —(1998b) ‘Yōroppa tōgō no shatei: haken daitai no kanōsei’ (The range of European integration: possibility of substituting hegemony), in Institute of Social Science, University of Tokyo (ed.) 20 Seiki Shisutemu: 6 kinō to henyō (Twentieth century system 6: Functions and changes), Tokyo: University of Tokyo Press. Lazonick, W. (1990) ‘Organizational capabilities in American industry: the rise and decline of managerial capitalism’, Business and Economic History, Second Series, vol. 19. —(1991) Business Organization and the Myth of the Market Economy, Cambridge: Cambridge University Press. Nonaka, I. and Takeuchi, H. (1995) The Knowledge-Creating Company: How Japanese companies create the dynamics of innovation, New York and Oxford: Oxford University Press. Ozawa, K. (1995) ‘Nichibei kankei no gyakuten’ (The reversion in Japan–US relations), in A. Kudō (ed.) 20 Seiki Shihonshugi: Haken no henyō to fukushi kokka (Twentieth century capitalism: changing patterns of hegemony and welfare states), Tokyo: University of Tokyo Press. Sasaki, S. and Nonaka, I. (1990) ‘Nihon ni okeru kagakuteki kanrihō no dōnyū to tenkai’ (Introduction and development of scientific management in Japan), in T. Hara (ed.) Kagakuteki Kanrihō no Dōnyū to Tenkai: Sono rekishiteki kokusai hikaku (Introduction and development of scientific management: its historical international comparison), Kyoto: Shōwad!. Sasaki, T. (1997) Amerika no Tsūshō Seisaku (US trade policy), Tokyo: Iwanami Shoten. Schulz, M. (1998) ‘The EMU and Japan: economic policy during globalization’, Unpublished manuscript. Sunaga, K. and Nonaka, I. (1995) ‘Amerika keieikanri gihō no nihon e no dōnyū to henyō’ (Introduction of American business management skills and their transformation in Japan), in H. Yamazaki and T. Kikkawa (eds) Nihon Keieishi 4: ‘Nihonteki’ keiei no renzoku to danzetsu ( Japanese business history 4: Continuity and discontinuity of ‘Japanese’ management), Tokyo: Iwanami Shoten. Tanaka, S. (ed.) (1996) EMS, Ōshu Tsūka Seido: Ōshu tsūka tōgo no shōten (EMS, European Monetary System: Focal point of European monetary integration), Tokyo: Yūhikaku. Tateyama, Y. (1995) ‘Pax Amerikana no kōzō’ (Structure of Pax Americana), in A. Kudō (ed.) 20 Seiki Shihonshugi: Haken no henyō to fukushi kokka (Twentieth century capitalism: Changing patterns of hegemony and welfare states), Tokyo: University of Tokyo Press. Yoshihara, H. (1989) ‘The bright and the dark sides of Japanese management overseas’, in K. Shibagaki, T. Malcolm and T. Abo (eds) Japanese and European Management: Their international adaptability, Tokyo: University of Tokyo Press. —(ed.) (1994) Gaishikei Kigyō (Foreign-affiliated enterprises), Tokyo: Dōbunkan. Yuzawa, T. and Udagawa, M. (eds) (1990) Foreign Business in Japan before World War II, Tokyo: University of Tokyo Press.

8 Japan as a model of the past? Kaizen, ‘lean production’ and the German car industry in retrospect Franz Waldenberger Introduction Japanese globalization suggests two closely connected connotations in the field of economy. There is, first of all, the importance of the Japanese economy resulting from its size, state of economic and technological development, and wealth. In the post-war period, this purely quantitative aspect of Japanese globalization acquired additional weight through the speed at which the economy grew. While still employing 40 per cent of its labour force in the agricultural sector in 1955, Japan developed within just three decades to an economy with one of the world’s highest levels of per capita income and with sectoral leadership in many cutting-edge fields of technology. Japan’s impressive growth did not take place in isolation. The other industrialized economies were forced to adjust to the rise of Japan, as can be seen by the history of trade conflicts that arose in response to the expansion of Japanese exports (Komiya 1999:32–41). Japan’s success as a late-comer proved a decisive challenge to the earlier developers of Europe and North America. In the industrially developed West, the physical confrontation with Japan’s economic success created a need for explanation, not to satisfy scientific curiosity, but to support the formulation of strategic responses. At the level of economic policy formulation, Japan inspired renewed and highly controversial discussions in the field of trade and industrial policy (Waldenberger 1998:21–2). At the enterprise level, the task was to make sense of the newcomer’s success in order to be able to respond to it. In this context, attempts to interpret Japan inspired new discussions on production systems, industrial relations, human resource development and the management of interfirm relationships (Dirks and Otto 1998:211–13). The meaning of complex phenomena such as the structure and performance of economic systems remains difficult to decipher. It is created through the efforts of human minds. Japan’s global success acquired meaning abroad when people were forced to construct their interpretations of it. The meaning thus generated was not universal, but conditioned by the context of the respective interpreters in two ways. First, it had to comply with their a priori knowledge and expectations. Second, it had to satisfy their interests. The last point underlines the selective nature of meaning. Given the complexity of Japanese economic success as the object of meaning, a gamut of interpretations was possible. As interpretations served the formulation of strategic responses, they were chosen so as to motivate and justify countermeasures. Thus, the meaning given to Japanese economic success had a strong instrumental bias. The present chapter will elaborate the general ideas sketched above. It will focus on the meaning of Japan as a model for successful management as proclaimed by the kaizen

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and lean production literature. These interpretations were developed to formulate strategic responses to the Japanese challenge at the enterprise level. Their impact as seen by their reception and instrumental use will be analysed with reference to the German car industry. Of course, today, with Japan’s economy stuck in a long and deep recession and with its second-largest car manufacturer, Nissan, receiving massive capital and management assistance from its French competitor, Renault, no one would look at Japan or at the Japanese car industry as a model of success. This course of events, however, only underlines the central argument to be developed here: namely, concepts like kaizen and lean production were only superficially meant to provide explanations of Japanese success – above all, they were developed as interpretations within which foreign competitors could frame responsive strategies. The concepts failed or were at least incomplete as theoretical explanations, but they were nevertheless successful in the sense of being influential on the instrumental side. The same is true for political ideologies and religious beliefs. They can offer meaning despite their poor explanatory power. The next section gives a brief account of the content and different usages of the concepts of kaizen and lean production. Both will henceforth be referred to simply as the ‘Japanese production system’ or, for short, JPS. Next, various aspects of the reception and instrumental use of the JPS model in the German car industry will be discussed. The main findings are summarized in the last part of the chapter. The ‘Japanese production system’ as a model Three uses of the term ‘model’ As the starting point for this analysis and with reference to the general comments made in the introductory part above, there is a need to distinguish three dimensions in the use of the term ‘model’. JPS, as propagated in concepts like kaizen or

lean production, serves: 1 as a description of distinctive characteristics of the organization of production in the Japanese economy and as an explanation for its successful development, 2 as a description of a universal ‘best-practice’ concept, i.e. a general prescription about how to organize and manage production, and 3 as a label for the restructuring strategies undertaken by foreign companies trying to cope with competition from Japan. It should be noted that every usage can be questioned. Does JPS really provide a comprehensive and accurate picture of the way production is organized in Japan? Can it explain Japan’s successful development? Does it consist of universally applicable principles or does it only function in the Japanese context? To what extent do the restructuring efforts of foreign competitors imply the introductionof JPS? Another important point to note is that, although generally used together, the statements implicit in 1 to 3 above do not depend upon each other. For example, JPS can be a ‘best practice’ inspired somehow by a comparative study of Japanese industry, but far from representing a useful picture of the overall situationin Japan. Or restructuring

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measures labelled kaizen might be able to solve some specific problems faced by industries outside Japan, although no set of universal best practices can be said to exist. There might even be a contradiction:if lean production is distinctively Japanese: how can it be best practice in a non-Japanese context? The descriptive power of JPS JPS does not stand for a single practice or institution, but for a whole system. Kaizen and lean production seem to incorporate the following essential elements: 1 Regarding the flow of materials, JPS makes wide use of just-in-time delivery, thus achieving low levels of inventory and savings of production space. 2 JPS applies total quality control strategies. 3 It is based on a special set of work organization principles such as work groups, job rotation, the decentralization and integration of productive, planning, repair and quality control functions. 4 In JPS the value-added stream is characterized by a low degree of vertical integration. Reliance on outside suppliers is high. 5 Relationships with suppliers are long-term oriented and cooperative, relying on an ongoing and intensive exchange of information. The empirical foundations for JPS suggest that it does not provide a comprehensiveaccount of the organization of production in Japan. The concepts were inspired by research into the Japanese automobile industry. The Toyota productionsystem is here exemplary (Nomura 1993). Given the heterogeneity of Japanese car manufacturers (Nomura and Jürgens 1995; Neumann 1996), JPS provides only the barest sketch of Japanese auto production. Although kaizen and lean production are supposed to be applicable to any production process (Imai 1997; Womack and Jones 1997), such claims should be viewed sceptically as part of the prescriptive nature of JPS. They are not founded on comprehensive empirical research. JPS is, nevertheless, congruent with many other descriptions of the Japanese firm, Japanese work organization, human resource development and patterns of innovation. It is more or less consistent with Aoki’s model of the Japanese firm and the subcontracting relationship (Aoki 1989), Koike’s comparative empirical research into the Japanese employment system (Koike 1988), the ‘organizational learning’ literature (Cole 1994) or the image of the knowledge-creating company proposed by Nonaka and Takeuchi (1995). There remains, however, one crucial difference: JPS is a management concept. It describes institutions and practices as being directly controllable by management. The institutional literature regards the characteristics of the Japanese employment system or the subcontracting system only to a limited extent as rationally planned and controlled. It stresses more their evolutionary and historical nature. From this perspective, the management practices of Japanese companies that JPS claims to be based on universally applicable principles are mere adaptations to a more or less given set of arrangements.

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The explanatory power of JPS The question of whether or not JPS depicts the real Japan should not be pushed too far. Descriptions remain abstract, and abstractions are not real. The question is whether JPS captures the quintessence of the ‘Japanese production system’ and whether this differs fundamentally from the corresponding quintessence of the production systems found in Western economies. The term ‘quintessence’ or ‘essential element’ is undefined as long as we do not know what purpose the description is to serve. One possible purpose is explanation. Can JPS promote our understanding of Japan’s economic performance? Explanation comes after the facts. To understand Japan’s economic performance we first need to show where and how it differs from the performance of other economies. Here JPS, and also many other accounts of Japanese economic development, invite basic criticism. They do not tell the whole story. They concentrate on success, but even in the overall successful development of the Japanese economy success was unevenly distributed. This is true not only of firms in the same industry, but also across industries. Indeed, there is reason to suppose that in Japan success has been more unevenly distributed than in other industrialized economies. This is demonstrated clearly by Japan’s highly specialized trade structure and by the high productivity differentials between export industries and domestic industries (Waldenberger 1997:46–7). If performance is so heterogeneous, how can we talk of one JPS? How can we proclaim this as a ‘best-practice’ model? The answer is: we can still talk of one JPS, but we cannot claim that it describes something akin to best practice. We have to conclude that there are circumstances under which JPS performs better, but also circumstances under which it performs worse than alternative models. Therefore, JPS needs additional conditions for its applicability. The contingent nature of JPS is most clearly revealed by the fact that, in the protracted economic crisis of the 1990s, traditional employment and subcontracting practices that lie at the heart of JPS seemed no longer to offer a viable business strategy for Japanese companies (Keizai Kikakuchō1996:332–87). JPS as a vision and a mission Concepts like lean production or kaizen are highly abstract descriptions of a complex set of institutions and practices in the production sphere. They abstract from details, from differences between manufacturers, and from changes in time. They claim to represent a typical case, but they construct an ideal case. The latter is due to the fact that these concepts not only serve as a simple description, they also serve as an explanation for superior production performance. An explanation for outstanding performance is easily transformed into a strategy of how to perform well. Thus, we observe a mutation from mere descriptions to general prescriptions. These can develop into a new system of thought on how to organize and produce goods. With enough momentum, they will generate a whole new movement of management ideas. This is precisely what happened with the concept of lean production. In short, it started off as a description and explanation and then developed into a vision and a mission. There seems to be one strategy to rescue the empirical content of JPS and at the same time propagate it as best practice. This is to suggest that JPS is an innovation that awaits

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diffusion not only outside, but also within the Japanese economy itself. This is more or less the argument of Womack et al. (1990) when they try to explain the productivity differential amongst Japanese car manufacturers. The strategy is also depicted by the term Toyotism, created as an analogy to Fordism. The latter underlines the pioneering function of Ford in the introduction of mass production. The term Toyotism suggests the same role for Toyota in the case of lean production. Like mass production, lean production is expected to spread to other companies, other industries and other countries. In this sense, JPS does not stand for typical Japanese management practices, but only for an innovation that originated in Japan. Is this satisfactory? The question then becomes: what is so special about Toyota? It could hardly be the institutional context shared with other Japanese companies. But deprived of this context, the Toyota success story degenerates into just another ‘how to be successful’ story. Because these stories define success independent of specific contingencies, they cannot offer more than highly abstract messages: ‘Try your best!’, ‘Think of everything!’, ‘Be nice to everyone!’; or as the kaizen philosophy puts it, ‘Avoid all waste!’, ‘Consider the whole value stream!’ Such prescriptions are stimulating and morally supportive, which is probably the most that can be expected in wanting to know how to be successful. JPS as a framework and instrument for restructuring in the German car industry Historical background: the competitor becomes a model The awareness of Japan as a serious competitor in the global automobile market reached Europe in the late 1970s and early 1980s, when Japanese firms, after having already shocked the North American market, directed their export efforts towards European countries. In a much shorter period of time, Japanese cars gained a 10 per cent share in the Common Market. In Germany, market share rose from to 1.7 per cent in 1975 to 10.4 per cent in 1980 and 15 per cent in 1985 (Nissan 1992:12). The first response was political. Quotas, later voluntary export restraints (VERs), complemented by local content regulations for Japanese production in Europe, were implemented to limit competition from Japanese manufacturers (Monopolkommission 1992:403). Here, Germany was an exception as it did not restrict Japanese imports. Only after 1991 did it benefit from the now EU-wide restrictions on Japanese car imports. Nevertheless, in the second half of the 1980s, the share of Japanese-made cars remained more or less constant even in Germany. Whether this was due to competitive factors or the result of strategic reasoning on the part of the Japanese auto industry, which might just have been reluctant to test the political limits of German economic liberalism, is an open question. It is interesting to note that, during the period when in terms of market penetration Japanese competition was especially evident, Japan was not seen as offering a new model for developing and producing cars. Instead, Japanese success was related to differences in the economic environment, not to superior and desirable management practices. It was seen to result from factors like a high degree of automation, a highly motivated

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workforce and an undervalued yen vis-à-vis the major European currencies (MeyerLarsen 1980:22). As a consequence, German companies pursued strategies of automation without any reference to a Japanese model. In some sense, it can be said, they placed their bets on the traditional mass production model. They introduced technological innovations, but little organizational innovation. In retrospect, some observers call the 1980s the lost decade. Two events radically changed the perception of Japan: the publication of the nowfamous Massachusetts Institute of Technology (MIT) study of the world automobile industry (Womack et al. 1990) and the downturn in the German economy starting in the early 1990s (see Figure 8.1). The impact of the MIT study was threefold. First, it presented shocking evidence of Japanese productive superiority in the assembly of cars. This complemented another comparative study by Clark et al. (1987) which had already shown that Japanese firms were much faster and more productive in the development of new car models. At first, doubt and disbelief surfaced among German car manufacturers. However, their own studies, although finding a

Figure 8.1 Profitability of German industry, 1983–96: ratio of pre-tax profit to book value of equity capital including reserves Sources Deutsche Bundesbank, Bilanz und Erfolgsrechnung Deutscher Unternehmen, various years; author’s calculations smaller gap, still revealed productivity differentials between 30 and 40 per cent (Nomura 1993:300). Obviously, Japanese competitors did something better. Second, Womack et al. offered a new perspective on the sources underlying the Japanese advantage. For them, it was not just a single factor or a single practice which turned out to be decisive; instead they argued that Japan’s productive advantage was the

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result of a completely different system of producing and organizing automobile production, a system they termed lean production. Third, these authors put their findings in a historical context with a universal dimension. They saw in the Japanese system nothing less than the origin of a second revolution in automobile production, the first being the introduction of mass production by Ford in the second decade of the twentieth century. The authors believed that the principles underlying the Japanese system were equally universal. This was no doubt their underlying reason for not opting for a Japanese name like kaizen, which had already been coined by Imai (1991) to describe more or less the same set of institutions and practices. The universalistic claim implied that any firm in the car industry could and should learn the Japanese way in order to survive. The message came just at the time when the German car industry was searching for ways out of the crisis following the ‘unification boom’. Put in the framework of lean production, Japan now appeared as a model, a solution for regaining profitability. German managers started to turn to ‘learning from Japan’. They did so not merely by reading books, but also by visiting Japan to collect first-hand information about Japanese production methods. But even here, the influence of JPS cannot be neglected. JPS appeared to be the route to the source of Japan’s strength. At the same time, it offered an interpretative framework for one’s own observations: they could be brought together as a consistent whole and given meaning. Rationalization and restructuring have been standard themes in the auto industry ever since its beginning, but even less enthusiastic observers note a difference. Not only did restructuring efforts from the early 1990s become directed towards introducing Japanesestyle management and organization practices, they also became more radical and far reaching (Schumann et al. 1994:49). Kaizen and lean production tended to monopolize restructuring discussions in the 1990s. The question of transferability It was argued above that, as a description of Japanese management practices, JPS cannot serve as a concept for best practice and that, as an explanation of Japanese success, it needs to be complemented by additional knowledge relating to the specific conditions behind the car industry’s good performance. For German manufacturers, the first point was irrelevant. It was obvious that JPS worked in the car industry, and this was their only concern. The second point should have caused more concern, however. Who knew whether or not JPS would work in the German case, given the different institutions of industrial relations and the very differently structured supplier industry? For several reasons, such considerations played only a minor role: 1 Japanese transplants in the US and Europe and also joint ventures between Japanese and US manufacturers not only suggested that JPS worked outside Japan; they implied that they could themselves become models for how to implement JPS in a Western context. 2 It was not necessary to ‘buy’ the whole package. In practice, JPS consists of various different techniques. It is only in the mind of the theorist that they create a coherent whole. But this theory is not binding in the minds of the German practitioners. They select those Japanese ideas that best fit the German context.

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3 German managers do not consider the Japanese context, because in general they have not experienced or studied it. They see things in Japan from the perspective of the German context. If what they see makes sense to them, no transfer problem arises. They might be aware of persuasion and restructuring problems, but these are less radical. They are controllable at company level and can in principle be overcome by management techniques. 4 Finally, owing to 3, even if transfer problems do exist, they can only be discovered ex post facto. After all, restructuring is a trial and error process. In other words, in order to understand the restructuring boom in the German car industry along the lines of the perceived Japanese model, all of these considerations have to be taken into account. Restructuring in the German context Rationalization and restructuring are old themes in the German automobile industry. It nevertheless seems that the strategies undertaken in the 1990s under the name of kaizen and lean production are different. They focused on organizational innovations, rather than on the introduction of new technologies. As a consequence, they tended to be more radical and far reaching. The following gives a brief overview of the restructuring measures initiated in the early 1990s. It is based on the report of a joint project between the German Metal Workers’ Union and the International Metal Workers’ Federation of Japan (IMF and IGM 1993; Ōhira 1994) and on Nomura (1993). Cutting layers of hierarchy Most German car manufacturers boasted at least six layers of hierarchy. Efforts have been made to reduce the layers above shop-floor level. Opel cut the number of layers in its new Eisenach factory from eight to six, while Porsche also came down from six to four. Volkswagen’s (VW) new organizational structure economizes on one layer. In terms of number of layers, the structures are now closer to the Japanese model. Decentralization of production decisions Complementing the aforementioned strategy, former management functions have been delegated to lower levels and to the shop floor. Work groups The MIT study revealed that group work and job rotation had hardly been used in European factories. In the new factories of Daimler Benz in Rastatt and Opel in Eisenach, however, German manufacturers have turned things upside down. In both factories the percentage of group workers is now 100 per cent.

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Changing role of the Meister At Ford, VW and Opel the former role of the Meister as production planner and controller has been changed to the function of a coordinator among work groups. Quality circles, kaizen All manufacturers and the majority of parts suppliers now have institutionalized groups and teams that collect suggestions for lowering costs and improving quality and productivity. Outsourcing German car manufacturers have been slashing the degree of vertical integration which has on average been twice as high as that of their Japanese competitors. Reorganizing the supplier network Outsourcing has been accompanied by the reorganization of the supplier network, resulting in a drastic reduction of first-tier suppliers per manufacturer from around 1,000 to about 500 companies. Research and development cooperation R&D cooperation between suppliers and manufacturers has been extended and deepened with the aim of shortening development time and avoiding parallel research. Are we all Japanese now? The president of the Opel factory at Eisenach is quoted as saying that he wants people who enter the factory to feel like they are walking into a Toyota factory (Hiroe 1993:30). The Opel Eisenach and the Daimler Benz Rastatt cases show that the introduction of ‘Japanese’ production methods has been most radical at newly built factories. However, despite the above quote, Eisenach was not built along the lines of a Japanese plant, but after a joint Toyota/General Motors (GM) factory run in the US. So it is after all not a pure Japanese imitation. The same, of course, is true of Rastatt, where German traditions and innovative ideas were combined with inspirations from Japan. The quantitative assessment given above says a lot about structural changes in the German auto industry, but it reveals little about the qualitative content and even less about their Japanese character. Restructuring proved most successful where the waste of the old system was most evident. For example, half a factory space at Porsche was saved by slashing inventory (Womack and Jones 1997:191–218). This does not mean that the corresponding changes were easy to implement. Quite the contrary; the different flow of production implied

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radical changes at the workplace, and people first had to be convinced that the alternatives were viable. Strategies were selective, necessarily, because of very different environmental conditions. The structure of Germany’s parts supplier industry differs greatly from the Japanese case (Hemmert 1993). Suppliers are more independent and stronger in R&D. These differences were not jettisoned in the restructuring process. Indeed, strategies like single sourcing or global sourcing even pushed the German system further away from the Japanese one. Japanese ideas of interfirm cooperation were thus implemented in a totally different setting of interfirm relations. Work groups were actually less revolutionary than might have seemed at first sight. Ideas similar to the concept of work groups had been discussed for years in German industry under the heading of humanization of the workplace and job enrichment (IMF and IGM 1993:2–8). Such methods of work organization had long been proposed by German labour unions; disguised as the Japanese model, management made them their own. Work groups also happened to solve a specific German problem. In the course of time, manufacturers had reached a situation where the number of qualified workers was much larger than the number of jobs. According to union figures, in the early 1990s seven out of ten qualified workers were ‘underemployed’, i.e. they had to do jobs below their level of qualification (IMF and IGM 1993:13–15). The delegation of management functions to work groups allowed the use of this potential. Japan knowledge as an instrument of power It would be wrong to think of restructuring as a wholly rational process. Restructuring has a highly political dimension. It implies redistribution of income, control and power. Also, it is not possible to think all the time of all the possible ways of improving performance. There are naturally fashions. At any point in time, only a limited set of concepts will be aired. So the first stage of the political game of restructuring is to influence and control the model along which restructuring will be discussed. In the first part of the 1990s the dominant concept was JPS. The empirical finding of Japan’s superior productivity and the different institutions and practices applied by Japanese companies were the main themes. If one wanted to influence restructuring trends, it was necessary to acquire or at least show Japan competence. One strategy pursued by German labour unions to reduce the restructuring pressures exerted by management was to play down the productivity advantage of Japanese companies and to show that not all of Japanese working and company life was desirable. Two books, published in 1995 and 1996 respectively, by Klaus Zwickel (1995), the head of the Metal Workers’ Union in Germany, and by Horst Neumann (1996), a member of the same organization, tried to do just this. In order to gain competence in the Japan debate, German labour unions travelled to Japan to collect first-hand information. The German Metal Workers’ Union even undertook a large joint research project with the International Metal Workers’ Federation of Japan to investigate differences between the German and Japanese production systems (Ōhira 1994). Such strategies reveal patently the instrumental and political part JPS played in the restructuring efforts of the German car industry.

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Conclusion In the introductory section, the argument was put forward that in the context of globalization, the meaning of Japan in the sphere of the economy has a strong contextual and instrumental bias. Meaning was created in the need to interpret Japanese economic success in order to develop counterstrategies. The argument was elaborated on the basis of JPS and the restructuring of the German car industry in the 1990s. It was pointed out that reference to JPS as a model is ambivalent and even contradictory. JPS cannot serve both as an explanation of Japanese success and as an example of universal best practice. The reason is straightforward: the former is contingent on circumstances specifically Japanese, whereas the latter is not. These theoretical considerations played no role in the German discussions. The common logic was: Japanese companies are more efficient and different. In order to become equally competitive German producers have to become more like them. Again, the problem of transferability raised by this line of argument did not influence the discussion. It did not prove relevant for the perception of restructuring strategies derived from the example of Japan. The unquestioned role of Japan as a model raises doubts as to whether the term ‘Japan’ was really taken seriously. If it had been, then more attention would have been focused on the specific context in which Japanese management practices functioned. One explanation for this neglect is that German managers were concerned primarily with the German context. Considering the Japanese context might have helped them to better understand Japanese management practices, but it would have been of little use in solving specifically German problems. Here, only the German context was relevant. It did still make sense to talk of Japan as a model, but it was a model constructed from a German perspective. It was made for the German case. In this sense, the ‘Germanized’ Japanese model inspired German restructuring strategies. Japanese production superiority, together with the feeling of crisis, exerted strong pressure on German auto makers to implement these strategies. Interested groups like trade unions could only hope to influence these strategies by influencing the perceived model of Japan. What does all this tell us about the global meaning of Japan in the context of globalization? Japanese economic success did give a decisive push for change and served as an important instrument to implement reforms in German industry. But it did so without being a model in a global, i.e. objective, sense. The model was a picture taken from Germany. As such it was local and instrumental in nature. References Aoki, M. (1989) Information, Incentives, and Bargaining in the Japanese Economy, Cambridge: Cambridge University Press. Clark, K. B., Fujimoto, T. and Chew, B. W. (1987) ‘Product development in the world auto industry’, Brookings Papers on Economic Activity 3: 729–71. Cole, R. E. (1994) ‘Different quality paradigms and their implications for organizational learning’, in M. Aoki and R. Dore (eds) The Japanese Firm: Sources of its competitive strength, Oxford: Clarendon Press.

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Dirks, D. and Otto, S. (1998) ‘Das japanische Unternehmen’, in Deutsches Institut für Japanstudien (ed.) Die Wirtschaft Japans. Strukturen zwischen Kontinuität und Wandel, Berlin: Springer: 211–44. Hemmert, M. (1993) Vertikal Kooperation zwischen japanischen Industrieunternehmen, Wiesbaden: DUV. Hiroe, A. (1993) ‘Nihonka o susumeru doitsu jidōsha sangyō’ (The German automobile industry introducing Japanization), Chōsa Kihō 25: 25–42. Imai, M. (1991) Kaizen: The key to Japan’s competitive success, New York: McGraw-Hill. ——(1997) Gemba kaizen: permanente Qualitätsverbesserung, Zeitersparnis und Kostensenkung am Arbeitsplatz, Munich: Wirtschaftsverlag Langen Müller/Herbig. IMF and IGM (1993) 3. Deutsch-Japanische Konsultation. Projekt 2, Frankfurt: Bericht der IG Metall. Keizai Kikakuchō (1996) Keizai Hakusho (Economic White Paper, 1996), Tokyo: Ōkurashō Insatsukyoku. Koike, K. (1988) Understanding Industrial Relations in Modern Japan, London: Macmillan. Komiya, R. (1999) Nihon no Sangyō/Bōeki no Keizai Bunseki (Economic analysis of Japanese industry and foreign trade), Tokyo: Tōyō Keizai Shinpōsha. Meyer-Larsen, W. (ed.) (1980) Auto-Großmacht Japan, Reinbek: Rowohlt. Monopolkommission (1992) Wettbewerbspolitik oder Industriepolitik. Hauptgutachten 1990/1991, Baden-Baden: Nomos. Neumann, H. (1996) Mythos Japan. Unternehmensvergleich zur Wettbewerbsstärke der deutschen und japanischen Autoindustrie, Berlin :Ed.Sigma. Nissan (1992) Jidōsha Sangyō Handobukku 1992/1993 (Automobile industry handbook), Tokyo: Nissan Jidōsha KK. Nomura, M. (1993) Toyotizumu: Nihongata seisan shisutemu no seijuku to henyō (Toyotism: maturityand transformation of the Japanese model production system), Kyoto: Mineruba Shobō. Nomura, M. and Jürgens, U. (1995) Binnenstrukturen des japanischen Produktivitätserfolges, Arbeitsbeziehungen und Leistungsregulierung in zwei japanischen Automobilunternehmen, Berlin: Ed. Sigma. Nonaka, I. and Takeuchi, H. (1995) The Knowledge Creating Company: How Japanese companies create the dynamics of innovation, Oxford: Clarendon Press. Ōhira, K. (1994) ‘Nichidoku kigyō no seisan hōshiki hikaku’ (A comparison of production methods in German and Japnese companies’), in Keizai Kenkyū (Meijigakuin Daigaku), 100: 151–73. Schumann, M., Beathge-Kinsky, V., Kuhlmann, M., Kurz, C. and Neumann, U. (1994) Trendreport Rationalisierung. Automobilindustrie, Werkzeugmaschinenbau, chemische Industrie, Berlin: ed. Sigma. Waldenberger, F. (1997) ‘Japan, Transformation eines Erfologsmodells’, in K. Lichtblau und F. Waldenberger (eds) Planung, Wettbewerb und wirtschaftlicher Wandel. Ein deutschjapanischer Verglieich, Cologne: Deutscher Institutes-Verlag. —(1998) ‘Wirtschaftspolitik’, in Deutsches Institut für Japanstudien (ed.) Die Wirtschaft Japans: Strukturen zwischen Kontinuität und Wandel, Berlin: Springer. Womack, J. P. and Jones, D. T. (1997) Lean Thinking, Banish Waste and Create Wealth in Your Corporation, London: Touchstone Books. Womack, J. P., Jones, D. T. and Roos, D. (1990) The Machine that Changed the World, New York: Rawson. Zwickel, K. (ed.) (1995) Vorbild Japan? Stärken und Schwächen der Industriestandorte Deutschland und Japan, Cologne: Bund-Verlag.

9 ‘Japanization’ and ‘globalization’ as metaphors for capitalist rationalization Hasegawa Harukiyo A defining characteristic of the last 200 years, extending even into the twenty-first century, has been the dynamics of Western global expansion. Its own logic dictated the style and geographic scope of such expansion, and created strategies to counter the feedback effect of its spread; other countries, on the other hand, were involved in a complex development process of their own through being drawn into the exogenous dynamics of the West’s quest for economic growth. In this process, Japan found itself creating a unique pattern. Originally taking the path to modernization in the Meiji period (1868–1912) by using Western globalization to catalyse its industrial base, it proceeded in the twentieth century to pursue its own globalization through imperialistic conquest in East Asia. The post-war period brought a further need to update its economy, and once again a catalyst was employed, in this case US capitalism. This ‘Americanization’ led to another phase of Japanese expansion – ‘Japanization’, a term used here to describe the spread of Japanese industrial methods and even industries themselves to other parts of the world economy. In the 1990s, with Japanese economic momentum slowing down, major Japanese companies then modernized their corporate structures in line with the prevailing globalizing paradigm emanating from the US, placing Japan in a position of being both the source and the recipient of globalization processes. This chapter aims to address this dual character by looking at the way an external system can be and has been used as a catalyst for internal capitalist rationalization. Under particular scrutiny will be examples of ‘Japanization’ in the UK in the mid-1990s and US-led globalization in Japan in the latter part of the decade. There is nothing new or unexpected in emulating the relative advances of external cultures, and capitalist development is not free from this dynamic of history, as indicated in terms like ‘Westernization’, ‘Japanization’ or ‘globalization’. Such emulation acts as a spur to local innovation – in capitalist terms, refreshing the national economy as well as its constituent enterprises. Hence, Japan’s emulation of Fordism in the late 1950s and 1960s led to the variant known as ‘lean production’ (Womack et al. 1990), Toyotism (Dohse et al. 1985), ‘Toyotizumu’ (Nomura 1993) or ‘innovation-mediated production’ (Kenney and Florida 1993), which then inspired the Japanization of the 1980s and 1990s. More recently, Japan has turned again to successfully globalizing US companies to seek a way out of its economic sluggishness. This process demonstrates how the relative strengths of an external source can be used as a catalyst to revive stultifying conditions at home, and regenerate the dynamics of the logic of capitalism. Underlying this dynamic is the continuing search for growth and capital accumulation in the face of increasing global competition.

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‘Japanization’ in the UK The Japanization of the UK may appear ironic from a subjective perspective, but objectively it can be viewed as a dialectical phenomenon of the diffusion process outlined above, which has worked to catalyse institutional innovation. ‘Japanization’ is actually a metaphor to describe corporate reforms in the UK (Turnbull 1986; Oliver and Wilkinson 1988, 1992) and was given impetus by Japanese FDI,1 which has included green-field investment, acquisition and strategic alliance. To what degree and scope it has spread has already been extensively investigated and discussed by British academics (Wickens 1987; Oliver and Wilkinson 1988, 1992; Turnbull 1988; Garrahan and Stewart 1992; Bratton 1992; Morris and Wilkinson 1995).2 In this section three different cases, which may be considered avenues of Japanization in the UK, are considered. They all involve manufacturing industry, and specifically green-field investment (Toyota), acquisition (Daks Simpson) and strategic alliance (Rover). Whichever mode is taken, the result has been a vigorous rationalization of production systems into something more suitable for the expression of the logic of capitalism in the corporate environment. All three companies are subsidiaries of large global companies and their management is consequently subject to global competition in optimizing quality and cost efficiency. This contributes to pressures for emulation and transformation in management style and method. Under particular study here is the role of Japanese management (hereinafter JM) as a catalyst for rationalization in production systems, in which management, employment, work organization and industrial relations are reorganized along the lines of a new concept which may provide ‘relative’ strength. Toyota (Toyota Motor Manufacturing UK Ltd) Toyota’s UK plant is a typical green-field investment. In such cases, without the kind of institutional resistance encountered in existing workplace environments, ‘Japanization’ is assumed to be most directly realized. The plant began operation in 1989, turning out its first cars in 1992. Of the 2,289 employees in 1997, fifty-two were Japanese. Production in 1996 was 117,000 units, with a future capacity of 200,000 units. A total workforce of 3,000 is anticipated. Seventy per cent of output is exported to continental Europe, 25 per cent to the home market and the remaining 5 per cent elsewhere. Localization of parts supply is 80 per cent, with 160 suppliers, of which ten are Japanese transplants. The remaining suppliers are distributed almost equally among British, continental European and US companies.3 The goal of the plant is thus to secure a system of high-quality, low-cost mass production. To achieve this, organizational flexibility is emphasized and pursued through sophisticated human resource management (HRM), such as team working and education and training. This can be facilitated by avoiding traditional management and adversarial industrial relations, so a first step was to negotiate a single-union agreement, in this case with the Amalgamated Engineering Union (AEU) (Ōki 1993).4 On the basis of the single-union agreement, non-managerial employees are classified without job demarcation into five occupational categories: (1) production staff team members; (2) production staff team leaders; (3) administrators; (4) group

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leader/engineer/specialist; (5) senior group leader/senior engineer/senior specialist. By agreement with the union, flexible mobility within and between these categories is possible. Also included in the agreement is the implementation of continuous quality improvement, based upon team working and the education and training of employees (Interview: June 1997). Team working is considered important but is not supported by any ‘autonomous’ (in reality ‘compulsory’) quality circles as in Japan. What exists is the opportunity within working hours to present suggestions for improvement. Production staff members have offline education for five days a year and prepromotion education; leaders have problemsolving education and personnel system education for four months. Promotion is made through assessment, recommendation and interviews, and promotion to the position of leader is through internal promotion by advertising and recommendation. The wage differential between production staff/administrators and team leaders is £13,000–£20,000 and £16,000–£23,000 respectively, maintaining a differential of £3,000 (Interview: June 1997). Working conditions in Toyota still need to be examined and compared in detail in order to assess the fuller implications of this situation. Table 9.1 shows the major characteristics of management practice in Toyota: single status, commitment, total quality control (TQC), team work, assessment of individual ability and capacity, education and training, single-union agreement, consultation council, standard working conditions. What is observed here is a typical example of UK ‘Japanization’, although differences exist from the parent company in Japan, such as a lack of just-in-time (JIT) and quality control (QC) activities as well as ‘lifetime employment’ and ‘enterprise union’. Nonetheless, it represents a step towards the main objectives of the contemporary British political economy – that is, to overcome traditional adversarial industrial relations and move away from the rigid use of labour. By contrast, the UK’s ‘Americanization’ in the 1950s, another example of managerial enthusiasm, was aimed at ‘productivity’ based upon ‘new machines’ and ‘specialization’ (Dunning 1998:100–12), hardly affecting approaches to labour management.

Table 9.1 Management in Toyota Motor Manufacturing UK Ltd Corporate culture

Single status (manual and white collar) and one class perception, commitment, involvement

Strategic behaviour

Mid- and long-term strategy, coordination, sophisticated management

Organization

Open and flexible, localization

Production system Line production, TQC, team work, standardization, kaizen, milk-run system, no kanban, heijunka (levelling), continuous flow, jidoka, member initiative, no QC activity Approach to human resources

Assessment of capacity (potential capacity and ability), individual assessment, sophistication (attention to individual employees), no job demarcation, systematic education and training

Wage/salary

No job/rate link, all salary system (not hourly wage)

Industrial relations Single-union agreement with AEU on the basis of partnership TMAB (Toyota Members Advisory Board): employee representatives including union

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members) Working conditions

Average

Sources Compiled from interview in June 1997; Labour Agreement Draft, July 1991

Daks Simpson (Daks Simpson Group plc) The second case of ‘Japanization’ is Daks Simpson, a traditional British clothing manufacturer, which was acquired by a relatively small Japanese textile trading company in 1991. ‘Japanization’ here was effected by supplanting the old structure with new management from the Japanese parent company, Sankyō Seikō.5 As a trading company, Sankyō Seikō did not have a model plant in Japan, but introduced management reform conceptually, both incorporating typical Japanese traits and dismissing more traditional British ones. The biggest change in its corporate culture after acquisition was that the company moved to serve corporate rather than founder-family interests, leading to a change from ‘amateur’ and ‘autocratic’ to ‘professional’ and ‘democratic’ management. Preacquisition, the group management was authoritarian, personal and restrictive on initiatives from employees and managers; the new owners removed the existing managers and replaced them with internally appointed personnel. Members of top management were also internally promoted, except for those positions for which suitable candidates could not be found. The new corporate culture was based upon a ‘democratic’ ethos in the sense that employees could now listen, speak, think and respond to management, in marked contrast to the previous ‘do-it-because-I-say-so’ style. Good communications within the organization have become a key element of management. Hence, a shift occurred from a traditional, personalized style of management to a modern, professional style based upon more democratic principles. Other

Table 9.2 Comparison of management styles in Daks: before and after acquisition Management style before acquisition

Current management style

Corporate culture

Personal management board to Professional management, collective decision comply with family shareholders making, but all to be agreed by shareholder in Japan. Single status (payment and use of facilities such as canteens and parking)

Strategic behaviour

No concrete strategy

Development and innovation

Organization

Fragmentation of organization. Closed and hierarchical

Integration of production, merchandising and marketing

Production system

Line production

QRS production system, team work

Approach to

Wage/job index system

Education and training, communication,

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commitment, the use of behavioural science approach

Wage/salary

Wages and salaries were average Wages and salaries were average for the area; for the area; top standard in the top standard in the same industry; no same industry significant change in wages and hours, except ‘money purchase’ appeared for pensions and profit-related pay introduced

Industrial relations

Management/union conflict (union dictatorship)

Cooperative industrial relations, single union

Working conditions

Working conditions were reasonable but workers had no involvement in the determination of conditions

Conditions are improving, e.g. dehumidification, temperature, training and job satisfaction

Source Questionnaire, June 1997 Note This is a summary of a questionnaire to two directors of Daks Simpson and two directors of the Daks company plant in Larkhall and one union leader at the Larkhall plant

changes will follow. Table 9.2 shows the contrast in management style before and after acquisition. What is characteristic here in terms of HRM6 are professional management, innovation, single status, education and training, commitment, communication, quick response system (QRS) and team work, single-union, harmonious industrial relations and standardized working conditions. Another major innovation was in work organization. Fordist production was abandoned in favour of a flexible team framework, called QRS. In 1997 not all employees had been moved to this new system, but transfer was ongoing. A survey of the QRS now in operation suggests productivity improvement (30-40 per cent), enhanced job satisfaction (low absenteeism) and qualitative improvement (fault rate reduced from 30 to 0–3 per cent) (Interview: June 1997). The renewal of management culture and transfer to QRS represents a convergence towards professional management and an up-to-date production system better suited to contemporary diversified market demands. The old systems had long been outdated both in corporate and market terms. QRS was initially opposed by both employees and local managers, but once introduced the system won all-round support for its efficiency, quality and employee satisfaction. ‘Japanization’ as seen in Daks Simpson has thus meant a convergence towards the HRM concept – modernization of management and a limited liberation of labour from the rigidity of Fordist production – and the displacement of paternalistic industrial relations by a more employee-centred scheme. Industrial relations, previously coloured by a personalized management style, have become more formalized, with employees under more direct management control. Rover (Rover Group Ltd) Rover is a typical case of ‘Japanization’ through strategic alliance with a Japanese company. ‘Japanization’ was more problematic here than in the previous two cases, owing to the continued existence of traditional management under the then British

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ownership. However, its new partner, Honda, brought a strong technological competitiveness previously lacking, which was a sufficient incentive to emulate the Japanese company’s production system. Honda worked with Rover from 1979 to 1996, when Rover was sold to BMW. During that time Honda exerted a significant influence on Rover’s production systems and management, mainly through the dispatch of British managers to the US Honda plant in Ohio. There they learned about Honda’s manufacturing methods and management philosophy, and in particular the ‘one team, one goal’ philosophy. Honda also taught the importance of attention to detail, crucial to quality and cost. More specifically, Rover adopted corporate values, multi-functional team working, more relaxed job demarcation, single status, interdepartmental cooperation, open management, training, flat organization, tight control spans, closer links with suppliers and JIT methods (Interview: June 1997; Oliver and Wilkinson 1992:100–5). In short, the partnership facilitated a departure from Fordist methods and a shift to a high-trust, multiskill, flexible team-working system. However, despite the new flexible, cooperative and motivated work organization, there was no noticeable concern with ‘quality of working life’ or ‘worker participation’ (Oliver and Wilkinson: 1992:102). Management strategy met with union resistance, as manifest in the rejection of the ‘zone circle initiative’in the late 1980s, which aimed to establish direct channels of communication to employees. The difficulty for Rover, compared with Toyota, was that the change was introduced within an established system of labour–management relationships. In 1991 Rover established an agreement with the unions, entitled Rover Tomorrow – The New Deal. Based upon this agreement, production workers became ‘associates’, at the same wage level; from 1,700 separate job titles, there were now only ten. Status differentials between production workers and white-collar employees have been eliminated and all are on single-status conditions in payment methods, sick-leave benefits, health care, workwear, canteens, etc. (though when the author conducted a survey in June 1997, production workers were still on hourly payment). Management in the workplace is based upon team-working. Workers are as a team responsible for quality control, daily mainten-ance, tidying up and arrangement, workplace layout, equipment, improvements in processes, cost reduction, management of tools and materials, work allocation, job rotation and in-team training. Industrial relations operate through three trade unions, the Transport and General Workers’ Union (T&G), the Amalgamated Union of Engineering Workers (AUE) and the Manufacturing, Science and Finance Union (MSF). Although there are thus three large unions, negotiations are conducted jointly once a year. Shop stewards still exist, but their role has changed dramatically from representing labour interests to promoting cooperation and harmony (Interview: June 1997). Nonetheless, managerial strategy to implement lay-off sand wage cuts was unsurprisingly rejected by workers (T&G 1998:11). A seven-grade system operates: associates (grade A) and group leaders (grade B) are non-managerial employees, and associates can be promoted up to middle management (grades C, D, E). Senior management and directors (grades F, G) are usually recruited from outside. Promotion is from A to B grades based upon selection tests, physical condition and an annual assessment focusing on ability and potential leadership skills.

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A quality control (QC) system is conducted throughout the plant. Engineers devise the QC auditing system, and problems relevant to quality issues are distributed as an assignment to all employees. Quality issues are grouped and translated into quantitative points, so that employees digest the points as they solve the quality problems. Employees, who receive education and training for quality promotion and improvement, are organized hierarchically, so that ideas for improvement flow in theory upwards and downwards. Such schemes have a £20 million budget. Education and training also coaches employees in constructing job ability tables, by which an employee’s skills are identified for job rotation. Table 9.3 is a summary of the characteristics of Rover management; the characteristic features of HRM are single status, communication, commitment,open system, QC, flexibility, team production, education and training, individual assessment, single table negotiation, cooperative industrial relations and standard working conditions.

Table 9.3 Management after the ‘New Deal’ After New Deal (influence of Honda) Corporate culture

Future orientation, one team/one goal, single status

Strategic behaviour

Global strategy of BMW. Development and innovation

Organization

Flat organization; two-way communications (from top to bottom/from bottom to top). Open system

Production system

Line production system, team, flexible, QC (quality auditing system)

Approach to human resources

Employees as human capital; HRM; education and training; internal promotion; individual assessment

Wage/salary

Team work; now about ten jobs. One team of fifteen people, one band one category (title associate)

Industrial relations

Shop stewards for creating harmony and cooperation; EU works council; joint single table negotiations; T&G, AEEU, MSF

Working conditions

Average

Source Interview in June 1997

Thus, the direction of change at Rover can also be seen as a move towards ‘Japanization’ and HRM, a convergence to a post-Fordist paradigm based upon high trust, multiskilling, flexibility and team working, and the adoption of single-status, in-enterprise education and training and cooperative industrial relations. Its detachment from the rigidity of wage/job-linked employment and adversarial industrial relations was also a response to technological, market and global conditions. Single-status, team work, TQC and enhanced employee commitment and involvement in the corporate goal were also brought into the equation. Despite such a large-scale transformation, it was reported in February 1999 that BMW wanted to close Rover’s Longbridge plant, as it fell short of cost and quality expectations, and was considered unprofitable (Sunday Times 7 February 1999). The idea of BMW to close the plant was put into practiceas reported on 17 March 2000. It sold Land Rover to Ford Motor Company in March, and negotiations to sell the

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Rover car business were carried out at first with Alchemy Partners, a private investment group (http://www.ft.com/, accessed 17 March 2000).7 But on 9 May 2000 it was announced that it would be sold to Phoenix, a consortium of West Midlands businesspeople headed by the former chief executive of Rover. The deal was for Phoenix to pay £10 to BMW and BMW to provide ‘repayable credits’ of £500 million. The government would pay £129 million for the retraining of 1,000 dismissed Rover workers. Phoenix would continue to manufacture at Longbridge the Rover 25 and 45 models, MGF sports cars and the old Mini cars. The new Mini would be kept with BMW. This story of getting rid of the ‘English patient’ by BMW manifests a political economy played out between the UK government and a global German company (The Economist 12–19 May 2000:35–6). It is a typical case where local employees’ compromise with capitalist rationalization conducted under ‘Japanization’ and HRM was in vain and the situation is treated as simply an issue of the global political economy. ‘Japanization’ is thus a good example of how the relative strength of a manufacturing system can become a catalyst for rationalization. In the UK, it represented a move towards a model of ‘relative’ strength, a convergence towards the Japanese model. For Japan it was a method and process of proactive globalization, while for the UK it was a matter of rationalization in managerial systems and values, and thus reactive globalization (Hasegawa and Hook 1998). In terms of political economy it was a complementary push–pull relationship between Japan and the UK. For the latter it resulted in technology transfer, employment creation, export expansion and more importantly the replacement of outmoded values. While the UK was remodelling its management structures under Japanese influence during the 1980s and 1990s, a different and downward economic trend was emerging in Japan. This led, by the late 1990s, to a degree of major corporate restructuring in Japanese enterprises, fired by the globalization strategies pioneered by US businesses. Whether this should be interpreted as convergence with a US model or is better seen as a catalyst process to revive Japanese business is the focus of the next section. US-led ‘globalization’ in Japan The termination of the bubble economy, continued low growth from 1990 and the East Asian financial crisis of 1997 provided Japan with the incentive for serious corporate reforms in the area of ‘corporate governance’ and organizational structure, long overdue since the mid-1970s. Particular measures were the rationalization of top management and the restructuring of company organization into profit-oriented divisions. Nikkei and other newspapers report daily on various corporate reforms and explain such reforms as responses to deregulation policies and globalization. Careful examination of the content of ‘globalization’ in Japan, however, shows the effect of US pressure8 in opening up the Japanese home market; to cope with such determined pro-active globalization, Japan needed to update its business practices. ‘Americanization’ in the 1950s and 1960s was a catalyst for rationalization of production systems on the basis of Fordism; the current situation shows US influence catalysing Japanese corporate rationalization, largely through the means of IT. US

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pressure also demonstrates a ‘push–pull’ dynamic between the US and Japan in political economy. The JM model created through the first wave of ‘Americanization/globalization’ was limited to production systems, and now requires rationalization in corporate structure and top management. Reform at head office emerged as an issue of ‘corporate governance’ and in-company structure as a need for profit-oriented divisional organization, i.e. restructuring the company into a network of – whatever term is preferred – business divisions, company system or profit centres. Predominantly, this is rationalization that follows the US model, which strongly asserts the prerogatives of shareholders. A July 1999 comprehensive survey of corporate reforms among 910 major Japanese companies (excluding financial institutions) was published in the Nikkei 26 July 1999. Figure 9.1 is a graph compiled by the author based upon this survey, which shows the degree of reform by industrial sector; it is noteworthy that the most extensive reforms are concentrated in the manufacturing industries experiencing global competition. The criteria for ‘corporate reforms’ are degree of merger and acquisition (M&A) activity, reform of organization, reform of employment practices, use of IT, and reform in attitudes and corporate values. Sony, Fujitsu, Honda, Canon, Komatsu, Toshiba, Matsushita Denko, Matsushita Denki Sangyo, Ricoh and Asahigarasu were assessed as the most advanced in corporate reform. The result of corporate reforms was manifest not only in change in structure and organization but more concretely in workforce downsizing, increases in sales and enhanced company value on the stock market. As shown in Figure 9.1, the most reformed industries are those already competitive in terms of trade and FDI, and thus already participants in proactive globalization. A nonmanufacturing exception is the electricity and gas

Figure 9.1 Extent of corporate reforms, by industrial sector Source: Compiled from the Nikkei Coporate Reform Survey (Nikkei 26 July 1999)

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industries, but the electricity industry is now facing government pressure for deregulation and thus potential global competition. Conversely, fisheries/agriculture, transport related, construction, wholesale and retail, services and others, non-bank financials and real estate are among the least reformed areas of industry. Thus, it is not all industrial sectors that are pursuing corporate reform. In terms of percentages, those companies which are advanced in reform probably constitute just a handful of listed companies (about 100–150 companies). Why then are reforms in a small pool of companies so important as to be reported and discussed in newspapers and journals? Two reasons can be advanced. One is that these companies are the models for others to follow when the necessity for change arises. The other is an issue of political economy and concerns to what extent Japan should balance out pro-active and reactive globalization (Hasegawa and Hook 1998).9 While the former is considerably greater in Japan, the development of large-scale rationalization implies reactive globalization resulting from increased global competition within Japan – hence the shift from traditional JM to a US model. Among companies seeking such renewal, the US model is taken as a global standard, so that ‘globalization’ is a metaphor describing corporate emulation of US conditions. This inevitably implies that corporate reforms are designed to create a company that will generate profits for shareholders and investors, a departure from the traditional JM model. However, most firms in the lower rank of reform or even those which are in the reform process would prefer to remain as traditional as the situation allows. Such organizations may well prefer management with an emphasis on employment, connections and relations with the government, customers and suppliers, and wait for the globalization storm to pass. These would likely be industries in close contact with the Ministries of Finance, Transport, Construction and Agriculture. A conceptual consideration of which model is most appropriate is a convenient and useful approach, but a more realistic spur to reform is the actual change in the composition of ownership and the resultant implications. A significant aspect of the modern capitalist system is that the ones who own the company influence corporate concepts and thus structure. The logic of capitalist enterprise manifests itself in the changing trends of corporate ownership and it seems common to many economies, in particular in the Anglo-American economies. Figure 9.2 shows the long-term trend of Japanese corporate ownership and suggests why global companies in Japan see a need to adopt institutional reforms which will comply with the requirements of global capital and investors. The years 1950–90 saw a steady increase in ownership by financial institutions and corporations, along with a continued decline in individual ownership and a gradual rise in foreign ownership. A remarkable feature of the following decade was the extended growth in foreign ownership, while the others conditions remained almost constant, save for a sharp decline in individual ownership in 1997–8. Among financial institutions, the relative importance of life insurance, pension funds, property insurance and investment funds has increased and they

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Figure 9.2 Composition of share ownership Sources Tōyō Keizai (1998), Nikkei (3 June 1999) together account for 19.5 per cent (see Table 9.4). In particular, the growth of pension funds is marked, with an increase of 1.4 per cent in 1993 rising to 3.8 per cent in 1998. The increase in the percentage of non-banking institutions, together with the increase of foreign ownership, has thus created ownership conditions requiring that corporate concepts need to depart from traditional ‘aligned interest’ (Scott 1997:189) towards a quest for short-term profitability. Sony Corporation as a typical case of corporate reforms Sony Corporation, considered the most progressive in the Nikkei Corporate Reform Survey, has a very high foreign ownership of 45.3 per cent. This exceeds the total ownership of Japanese financial institutions (Mitsui Shintaku, Sakura, Sumitomo Shintaku, Yasuda Shintaku, Tokyo-Mitsubishi, Mitsubishi Shintaku), which run at only 14.9 per cent for all these (Sony 1999a; Tōyō Keizai 1999:647). This unique characteristic may well be the main stimulus for Sony’s

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Table 9.4 Changes in ownership of listed companies (%) 1998

1993

Corporations

24.6

23.9

Banks

21.8

21.7

Japanese individuals

19.0

23.7

Foreigners

13.4

6.7

Life insurance

10.6

12.7

Pension funds

3.8

1.4

Property insurance

3.5

3.8

Investment funds

1.6

3.0

Others

1.6

3.1

Sources Tōyō Keizai (1998); Nikkei (3 June 1999)

pioneering position in quasi-US corporate reform (http://www.sony.co.jp/, accessed 18 November 2000). Further plans for corporate reform were announced in March 1999, aiming to enhance ‘corporate value’ through strong group strategy by speedy decision making at board level (Sony 1999b). The first move towards this was made in June 1997 when the number of directors was cut from thirty-eight to ten and the so-called shikkō yakuin (executive officer) system was established. Since then, more than 150 listed companies have followed suit with similar reforms of top management (Nikkei 25 June 1999). The shikkō yakuin system is a Japanese version of the US executive officer system, in which there are three areas that characterize current corporate reform; Sony typically manifests them. The first area concerns rationalization of the board, namely corporate governance. The existing board members used to have both decision-making and execution functions. The shikkō yakuin system aims to separate this function by dividing members into two categories, board members and shikkō yakuin. Senior board members remain as such, while junior ones have been downgraded to shikkō yakuin. Board members concentrate on decision making and shikkō yakuin concentrate on the execution of board decisions. The legal status of shikkō yakuin is rather ambiguous as they are neither board members nor employees, but they are delegated the responsibility to manage their business divisions in the way set down by the board. Sony’s shikkō yakuin includes a management committee which is chaired by the president. The number of board members in Sony Corporation is ten, three of whom are external members, including a former professor of Hitotsubashi University, a specialist in Japanese business and economic studies. The ratio of external directors is still far below the US average of 62 per cent and their function is different from that of US external directors in that Sony invited these external directors to strengthen the function of the board as a decision-making body, not to check their business operations for the benefit of shareholders.

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The major point of ‘corporate governance’ debates in Japan was board function in two particular areas, decision making and monitoring. The former emphasizes fast reactions and this is being implemented by removing the function of execution to the shikkō yakuin, thereby creating a smaller number of board members. The second point involves two things: the avoidance of corruption among directors, and the assurance of corporate efficiency. The former was aided by the 1993 revision of Japan’s commercial law which lowered the cost of suing directors to 8,200 yen for any one case; the number of law suits since then has increased dramatically, from around 80 to 240 between 1993 and 1998 (Nikkei 30 June 1999). One role of ‘corporate governance’ is to avoid director behaviour which runs against the interest of shareholders, but in reality the majority of such cases are found among unlisted small and medium-sized companies and involve sōkaiya (a kind of racketeer specializing in shareholder meeting disruption), speculation, careless financial loss, bad debt and scandal. The main concern is therefore the second point, namely how to secure ‘corporate efficiency’. This is crucial at a time of global competition and particularly for a company like Sony. The way Japan, as well as Sony, set about creating ‘corporate efficiency’ differs from the US model (Table 9.5). The Japanese design is to create a small ‘organic board’ with external directors, while the US pattern prefers an effective ‘monitoring system in the board’. Thus, the role of external directors is very different. Such variation in the role of external directors derives from differences in the career of the internal directors. While in the US model they are often recruited from the external labour market through headhunting agencies, in Japan they are almost all internally promoted from former employees of the same company. This can create a situation whereby internal directors tend to avoid external directors and thus make them feel functionless. If necessary, however, these should be the ones who are able to help – hence the current mode of ‘corporate governance’ in Japan. Although Sony has established ‘remuneration’ and ‘selection’ committees on the board, the way they are likely to function will not be the same as in the US model (Nikkei Business 20 July 1998:44–8). This characteristic of Japanese corporate reform is manifest in the establishment of a management council at board level as well as a management committee at shikkō yakuin level, without, in many of the companies that have introduced shikkō yakuin, the establishment of remuneration, monitoring and selection committees. The second area of corporate reform is a restructuring of the whole corporate organization to create a clear identity of business divisions and identify their financial performance (see Figure 9.3). In the case of Sony, the company divides its business activities into three core businesses: electro, entertainment, insurance and finance. Electro business includes five major companies: in-home network, personal IT network, Sony computer entertainment, core technology and network and broadcast and professional systems. The Sony group headquarters functions as a body of ‘active investors’ and strives for the maximization of ‘corporate value’. Headquarters has three

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Table 9.5 Comparison of corporate governance between Japan and the US Japanese model

US model a

Owners of Institutional investors 12.9%, financial the company institutions 35.6%, non-financial corporations 9.4%, parent company and group companies 30.7%, founders and family members 5.4%, individual investors 2.5%, others 3.5%

Institutional investorsa 71.7%, financial institutions 1.9%, non-financial corporations 1.9%, parent company and group companies 1.9%, founders and family members 15.1%, individual investors 5.7%, others 1.9%

Perspective of owners

Long-termism

Short-termism

Board of Directors

Directors are mostly internal directors 70%, related or independent 30% (ex. Sony)

Directors are mostly non-internal members; external directors 62%, related company directors 17% and internal directors only 21%

Function of the Board

Decision making, execution and monitoring

Monitoring, remuneration, selection committees

President (CEO)

Internally promoted as head and representative of the company

Recruited from outside as professional CEO

Role of President (CEO)

To ensure the long-term performance of the company

To achieve the highest corporate performance in order to meet the expectation of dominant share owners in a short time-span

Executive Officers

Recruited from internal labour market

Recruited from external labour market

Employees

Employees as well as reservoir for producing board members

Employees not considered source for potential board members

Sources Nikkei (13 June 1999); Fukao (1999:81) Note a Pension funds and trust funds

concrete functions: professional services to the business units, monitoring of corporate laboratories, and developing network business. The service function is provided through various professional service units, some of which are treated as independent companies. Another function is to manage corporate laboratories for R&D activities, which may either directly or indirectly serve existing and future product development by the business units. Only the basic research institute is under the control of the group headquarters; others are responsible for their own profitability against capital investment in research.

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Figure 9.3 Corporate structure of Sony Corporation, July 1999 Source Adapted from Sony (1999b) They are thus more closely oriented to new product development (Nikkei 6 May 1999). The third function is to develop ‘network business’, which aims to develop future businesses based on digital technology. Sony will acquire three subsidiary companies in the year 2000 thanks to new legislation coming into force that year, the Kabushiki Kōkan Seido (Share Exchange System). Similar organizational rationalization has been introduced into some other major companies, like Hitachi, and this type of organizational restructuring seems to be becoming standard. The third area of corporate reform is employee rationalization, achieved by reorganization of plants, restructuring of supplier chains and other methods of workforce reduction. For those who remain, several retraining programmes are designed to transfer employees from ‘analogue’ to ‘digital’ and from ‘hard’ to ‘soft’ jobs. By 2002 Sony aims to reduce the number of its establishments from seventy to fifty-five and large-scale retraining of employees will be carried out. Employee numbers will be reduced by 10 per cent from 170,000 to 154,000. Together with organizational reform, a new system of evaluation of individual employees will be introduced, linked to the level of performance in each business unit and company. The situation represents a shift to management based upon individual assessment and individual performance both at employee and organizational level. Thus, corporate reforms are being pursued through the establishment of Japanese-style ‘corporate governance’, organizational restructuring and reduction in employee numbers.

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This is a comprehensive rationalization operated under the metaphor of the ‘globalization’ of Japan, and it can be taken as the other side of the coin to ‘Japanization’ in the UK. Conclusion The dynamics of capitalist development are uneven, requiring constant corrective measures if a country wishes to maintain or improve its position within the capitalist system. The flux of fortunes between countries within that system inevitably leads to emulative activity. Whether it is ‘Japanization’ in the UK in the 1980s and 1990s or USled globalization in Japan in the late 1990s and early twenty-first century, the process is one of corrective rationalization in the appropriate sphere, namely production systems and corporate structure respectively; the terms used are metaphors for measures designed to improve the working of capitalist logic for domestic interests. Contemporary globalization mostly springs from the US to the rest of the world; next in order of globalizing activity are the UK, Japan, Germany and France. These countries, thanks to their existing capitalist development, can regenerate themselves through staggered mutual emulation. The UK’s ‘Japanization’ is the outcome of Japan’s earlier ‘Americanization’, which set the scene for the creation of relative strength in Japanese production systems, and allowed the UK to counteract a de-industrialization trend. Both metaphor and catalyst were at work in this process, which challenged and changed the traditional premises of British management and production, and brought about a new approach to employment, work organization, management and industrial relations. In Japan, too, corporate change is under way, influenced by an external (i.e. US) model. However, as yet this affects a small minority of companies, albeit important ones, and there seems to be more discussion of such changes than actualization. Although around 200 firms have moved towards the US model, even Sony, widely regarded as the most advanced in this context, maintains a board structure more Japanese than American. This suggests that even following an external example is best seen as an incentive to develop a home-grown rationalization that ultimately is more far reaching than the model it apparently emulates. We therefore must await further developments to assess how far the UK’s ‘Japanization’ and Japan’s US-led globalization actually affect regeneration in the UK or the restoration of Japan’s ‘relative strength’. BMW’s statement on 17 March 2000 concerning the break-up and sale of Rover suggests that ‘Japanization’ alone is not sufficient for a company’s regeneration and survival against global competition. The issues discussed in this chapter indicate the dual nature of Japanese globalization, and Japanese management’s role within it. How far Japanese globalization will take the overall process of capitalist rationalization is a question that goes beyond the emulation of external models and depends to a great extent, as the BMW–Rover case implies, on other operative factors in political economy.

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Acknowledgement This article is a revised and developed version of my article originally submitted to International Review of Business, 4 (1999) 13-34, with permission from Kwansei Gakuin University. Table 9.2 is reprinted from Table 1 in my article in International Business Review, 9 (2000) 587-98, with permission from Elsevier Science. Notes 1 FDI is defined in Japan by the Foreign Exchange Law, Article 22, item 3: (1) acquisition of more than 10 per cent in shares (either in number or amount) issued by foreign bodies; (2) loans to foreign corporate bodies longer than one year; (3) establishment of branches or payment for expansion in foreign countries. The total amount of Japanese investment in the UK during 1995–7 was US$4,403 million, while that of the UK in Japan was US$870 million (JETRO 1998 and 1999:530). The total of Japanese manufacturing companies in Europe was 828 at the end of 1997; thus the UK accounts for as much as 29.5 per cent of the total. For further detail, see Hasegawa and Hook (1998:38–60). 2 The most recent discussions on Japanization are found in McCormick (1999), Stewart (1996) and Morris and Wilkinson (1995). 3 At first, from a pool of 2,000 companies, 400 were chosen. Criteria for selection were the capacity to supply production runs of 100,000, compliance of parts with Toyota specifications, and guarantees of both quality and cost (Interview: 1997). 4 In 1991 Toyota preferred the AEU as its single-union partner from four other unions, the Transport and General Workers’ Union (T&G or TGWU), General Municipal and Boilermakers’ Union (GMB), Electrical, Electronic, Telecommunication and Plumbing Union (EETPU) and Manufacturing, Science and Finance Union (MSF). The AEU and EETPU merged and formed the AEEU in 1992. The agreement with this union is the foundation for further mechanisms of ‘harmonious’ industrial relations, namely a consultation committee called the Toyota Members’ Advisory Board (TMAB). 5 Sankyō Seikō began as a silk trading company in 1920 and it entered the ‘fashion’ business in the 1970s by acquiring brands such as La Coste, Leonard, Hang Ten and Daks. In 1995 it had a capital of 3 billion yen with 584 employees (Sankyō Seikō 1995). 6 The basic values of HRM derive from theories developed in the US in the 1950s and 1960s by McGregor (1960), Likert (1967), Argyris (1957) and Herzberg (1966), in which they suggest that organizations function better when employees are treated as responsible, creative and motivated, allowing concepts such as participation, autonomy and self-actualization to emerge. It can be argued that traditional British employee relations also shifted towards HRM from the mid-1980s (Berridge 1992; Ferner and Hyman 1998:21–4), if elements of HRM include direct communication with the workforce, harmonization of conditions between white-collar and manual workers, linking of pay to performance, and emphasis on employee training and development. Although Ferner and Hyman conclude that companies implementing HRM are mostly large and unionized (Ferner and Hyman 1998:22), the overlaps with ‘Japanization’ must have created a synergetic effect for ‘innovation’ of British industrial culture and increase of managerial ‘prerogatives’. 7 It was reported that if the Longbridge plant was closed 50,000 jobs would be lost in the Midlands region (Guardian 15 March 2000). 8 According to a 1998 JETRO questionnaire to foreign companies in Japan on investment conditions, issues such as recruitment of human resources, prejudice against foreign

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companies, keiretsu practices, legislative restrictions and the obscurity of Gyōsei Shidō (administrative guidance) have much improved. Japan reportedly also promised to open its markets further to the US in the US–Japan Economic Consultation in April 1999 (Nikkei 23 April 1999). 9 In contrast to British reactive globalization, Japanese reactive globalization began to appear in the 1990s, as shown by a rapid increase of inward investment to Japan, in an increase of mergers and acquisitions of Japanese companies by Western companies,and advance of foreign financial institutions into Japan. The government also created various inducements in the area of finance and tax in the 1990s (JETRO 1999:70–8). The impact fed back with various mergers among Japanese companies, as typically shown by an announcement on 19 August 1999 of the merger of the three major banks, Kangyo Bank, Daiichi Kangin Bank and Fuji Bank, through the creation of a holding company (Nikkei 20 August 1999). Sanwa, Asahi and Tokai announced their merger to be made in April 2001 with combined assets of 103.7 trillionyen (£592 billion). Since 1997, the number of major Japanese banks has shrunk from 21 to 13, and the creation of new mergers means Tokyo is now home to four of the world’s biggest banking groups (Guardian 15 March 2000).

References Argyris, C. (1957) Personality and Organization, London: Harper & Row. Berridge, J. (1992) ‘Human resource management in Britain’, Employee Relations 14, 5: 62–92. Bratton, J. (1992) Japanization at Work, London: Macmillan. Daks Simpson Ltd, Interview, June 1997. Dohse, K., Jürgens, U. and Malsch, T. (1985) ‘From Fordism to Toyotism? The social organization of the labor process in the Japanese automobile industry’, Politics and Society 14, 2: 115–46. Dunning, J. H. (1998) American Investment in British Manufacturing Industry, London: Routledge. Ferner, A. and Hyman, R. (1998) Changing Industrial Relations in Europe, Oxford: Blackwell. Fukao, M. (1999) Kō-pō Reito Gabanansu Nyumon (Introduction to corporate governance), Tokyo: Chikuma Shinsho. Garrahan, P. and Stewart, P. (1992) The Nissan Enigma, London: Mansell. Hasegawa, H. and Hook, G. D. (1998) Japanese Business Management: Restructuring for low growth and globalization, London: Routledge. Herzberg, F. (1966) Work and the Nature of Man, New York: Staples Press. JETRO, F. (1998 and 1999) Tsūshō Hakusho (White Paper on Trade), Tokyo: Tsūsanshō (Ministry of Industry and Trade). Kenney, M. and Florida, R. (1993) Beyond Mass Production, Oxford: Oxford University Press. Likert, R. (1967) The Human Organization, New York: McGraw-Hill. McCormick, K. (1999) ‘Putting Japanese management in its place’, Japan Forum 11, 2: 255–60. McGregor, D. (1960) The Human side of Enterprise, New York: McGraw-Hill. Morris, J. and Wilkinson, B. (1995) ‘The transfer of Japanese management to alien institutionalenvironments’, Journal of Management Studies 32, 6: 719–30. Nikkei Business 20 July 1998: 44–9. Nomura, M. (1993) Toyotizumu: Nihongata Seisan Shisutemu no Seijuku to Henyō (Toyotism: maturity and transformation of Japanese model production system), Kyoto: Mineruba Shobō. Ōki, K. (1993) ‘Toyota no igirisu shinshutsu to nihonteki rōshi kankei’ (The advance of Toyota into the UK and ‘Japanese-style industrial relations’), Keizai Ronshū, Nihon Fukushi University, 7: 55–160. Oliver, N. and Wilkinson, B. (1988, 1992) The Japanization of British Industry, Oxford: Blackwell (second edition, 1992). Rover Group Ltd, Interview, June 1997.

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Sankyō Seikō (1995) Challenge for Next, Osaka: Sankyō Seikō. Scott, J. (1997) Corporate Business and Capitalist Classes, Oxford: Oxford University Press. Sony (1999a) Zaimu Jyōhō (Financial Report) No. 6758, Tokyo: Sony Corporation. —(1999b) News and Information, No. 99–030, Tokyo: Sony Corporation. Stewart. P. (1996) ‘Beyond Japan, beyond consensus? From Japanese management to lean production’, Asia Pacific Business Review 2, 4: 3–20. T&G (1998) T&G Record, London: T&G. Tōyō Keizai (1998) Kigyō Keiretsu Sōran (Data Bank), Tokyo: Tōyō Keizai Shinpōsha. —(1999) Kaishashikihō (Company Report), summer edition, Tokyo: Tōyō Keizai Shinpōsha. Toyota Motor Manufacturing (UK) Ltd, Interview, June 1997. Turnbull, P. J. (1986) ‘The “Japanization” of production and industrial relations at Lucas Electrical’, Industrial Relations Journal 17, 3: 193–206. —(1988) ‘The limits to “Japanization” – just-in-time, labour relations and the UK automotive industry’, New Technology, Work and Employment 3, 1: 7–19. Wickens, P. (1987) The Road to Nissan: Flexibility, quality, teamwork, London: Macmillan. Womack, J. P., Jones, D. T. and Roos, D. (1990) The Machine that Changed the World, New York: Rawson.

Part III Globalization in nation and society

10 Japanese responses to globalization Nationalism and transnationalism Hatsuse Ryūhei Introduction This chapter examines the Japanese response to globalization with a specific focus on its influence on society since the late 1980s. It is characterized by the emergence of a contradictory tendency of, on the one hand, the resurgence of nationalism and, on the other, the advent of transnationalism. While the literature on nationalism is vast, here it is defined simply as a political principle and its social manifestation which insists on the congruence of the state and nation (Gellner 1983:1). In contrast transnationalism, the legitimacy of which as an academic term is much less established, can be defined as a social principle and its practices supporting human activities beyond nations and across national borders. Inherent in transnationalism is universalism – namely, the principle that all human beings are born equal irrespective of nationality, race, creed, family origin or perhaps even sex. It is associated with cosmopolitanism in that anyone can live and enjoy safety anywhere in the world, and everybody has the right to choose freely their place of abode, whether in the country of birth or elsewhere. Nationalism can be further subdivided into moderate nationalism and ultranationalism. What this means for our discussion is that the Japanese response to globalization can be transnationalism or either variant of nationalism. The concept of acculturation can facilitate differentiating amongst these three, as national feelings or nationalism in the non-West are closely related with the acculturation of each nation facing Western influences (Hirano 2000:145). Extending this argument further, a transnational or moderately national response to globalization can be understood as adaptive acculturation in the face of global or universal influences. In contrast, ultranationalism can be understood as an adverse reaction to this sort of transnationalism as well as outside influences in general. In so far as universalism, cosmopolitanism and transnationalism are concerned, the salient feature of contemporary Japan in the face of globalization is the increasing legitimacy of these principles. As will be argued later, this can be seen in the efforts made to enhance the human rights of foreigners in Japan, whether ‘old-comers’, such as resident Koreans and Chinese, or ‘newcomers’, such as migrant workers from Asia and other parts of the world. What this means is that, whereas Japan has been known as a society closed to foreigners, globalization has served to thrust to the fore questions of universalism, cosmopolitanism and transnationalism as possible principles for interacting

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with the non-Japanese members of Japanese society. In this sense, these principles can be seen as an alternative to nationalism. The recent resurgence of ultranationalism in Japan is in essence a reaction to post-war Japan rather than to the globalization in progress. It is now more than half a century since Japan surrendered on 15 August 1945 in the Asia Pacific War (1937–45). Young Japanese people have no experience or little memory of the post-war national misery, let alone the war itself. Against this backdrop, the legitimacy of nationalism, moderate or ultra, has increasingly re-emerged in the 1990s. Moderate nationalism has come to be accepted widely in Japanese society, while ultranationalism, emphatically praising militarism in pre-war Japan and obstinately denying economic pacifism in post-war Japan, has not been so influential. Thus moderate nationalism is a reaction to globalization and hence more exogenous, whereas ultranationalism is not necessarily so but more endogenous. The latter’s political function, however, goes beyond the domestic sphere to be extended to external affairs as well. The main purpose of this chapter is to examine the revival of nationalism in the 1990s and at the start of the twenty-first century as well as to discuss the salience of transnationalism in the context of the human rights of foreigners, whether residing permanently or temporarily in Japan. The conclusion will seek to offer a perspective on the future of Japan in the face of globalization. Globalization and nationalism The growth of foreign interaction The link between globalization and the growing salience of nationalism in Japan is partly a response to the flows of people engendered by globalization processes. Although the Japanese economy has been in the doldrums throughout the 1990s and is only starting to pick up at the start of the twenty-first century, the flow of people, coming in and going out, has continued to increase, except for outflows in 1991, 1997 and 1998 and inflows in 1993, 1995 and 1998. One trend remained constant, however: the number of Japanese going abroad far outstrips the number of foreigners entering Japan. In 1998, for instance, almost 16 million Japanese went abroad, while only 4.5 million foreigners entered Japan ( Judicial System and Research Department 1999). Such an asymmetry is in sharp contrast to the trend until 1971: in that year, for the first time ever, a greater number of Japanese departed Japan than foreigners entered – nearly 1 million compared with 600,000 foreigners. As for the purpose of going abroad, in 1998 82 per cent of Japanese departures were for tourism. The major destinations were Asia (41 per cent) and the US, including Hawaii and Guam (36 per cent). In line with the internationalization of the Japanese economy, business-related departures have been steadily increasing, from 360,000 in 1974 to 530,000 in 1998. This imbalance between tourism and business underlies the limited experience most Japanese have of long-term residence in foreign countries. Certainly, interaction with foreign peoples and cultures may not necessarily mean an increase in transnationalism and universalism, but the lack of a large group of people who have experience of living abroad, who can respond to at least the most

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virulent forms of ultranationalism, leaves political space for at least moderate nationalism to flourish in contemporary Japan. As far as the presence of foreigners is concerned, their arrival time, motives for immigration, nationality, lineage, legal status and status of residence differ widely. As discussed in greater detail in Chapter 11, they can nonetheless be divided into two groups: old-comers and newcomers. The former are those who came to Japan from former colonies or their descendants. The latter are those who came to Japan since the middle of the 1980s, most of whom work in manufacturing, the manual or service sectors, or study at language schools, technical training colleges or universities. With over 1.5 million foreign residents officially registered at the end of 1998, the number has more than doubled over the last three decades. In terms of nationality, until the middle of the 1980s Koreans formed the overwhelming majority (over 80 per cent), but now account for less than a half (42 per cent). Globalization has served to increase the number of foreigners, as first entertainers from the Philippines and Thailand (mid-1980s), manual workers from Pakistan and Bangladesh (late 1980s), and manual and service workers from China, South Korea, Thailand, Iran, the Philippines, Malaysia and Sri Lanka (early 1990s) have headed for Japan. Many of these have worked illegally. Since the early 1990s, moreover, Brazilians and Peruvians of Japanese ancestry have headed for Japan in the wake of changes in the Immigration Control Law (June 1991). In this way, the impact of globalization has been not only to increase the number of foreign residents in Japan, both legal and illegal, but to make their composition much more complex. Nationalism Thus, Japanese people are physically involved in globalization processes, but this does not necessarily indicate a transformation in attitudes towards foreigners. Illustrative of the Japanese response to globalization is the report of the Prime Minister’s Commission on Japan’s Goals in the Twenty-first Century. Entitled The Frontier Within: Individual empowerment and better governance in the new millennium, it was presented to then Prime Minister Obuchi Keizō in January 2000. The commission that drafted the report was composed of sixteen leading professors, doctors, journalists, NGO activists, a business leader, a composer and an astronaut. It was supported by thirty-three specialists on five sub-commissions. While none of these is an official organ of the government, the reproduction of the report by the government, and the subtle difference between the Japanese and English versions (see below), suggests the report can be taken to enjoy at least some support at the very heart of power. The report makes three key points: first, the increasing compression of the world and the accompanying increase in transnational activities. Second, the need to standardize at the global level the social systems of each country, and for Japan to adapt itself to this situation by developing good governance and promoting individual initiatives. Third, it recommends that Japan should take the lead in shaping a new global order and that the people should be more positively involved in such endeavours. While it would be unfair to suggest that the report paints a totally optimistic picture of the future of globalization, noting how bringing people into direct contact with ‘foreign elements’ can act as ‘a source of friction and conflict’ (Prime Minister’s Commission on Japan’s Goals in the Twenty-first Century 2000:3), it is in essence very optimistic about Japan’s future,

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declaring its own position as ‘resilient optimism’ (ibid.: 20). This is due to the Commission’s belief that individuals change society and the world. In this sense, no overt signs of nationalism appear in the report. Nevertheless, the following paragraph at the outset of the report gives pause for thought. It starts as follows: We Japanese have not engaged in discussion and debate on national aspirations for a long time. Over time, a sense emerged that talking about the goals or image of the nation was somehow embarrassing or oldfashioned … In this report we will discuss Japan’s aspirations, expressing our hopes for the nation and our determination to do what needs to be done (Ibid.: 1) The central concept, as evidenced in this passage, is ‘national aspirations’ (kokorozashi), or ‘Japan’s aspirations’. The English meaning of kokorozashi varies from will to intention, ambition, aspiration, resolution and aim. In this sense, ‘national aspirations’ can be read as ‘the will of Japan as a state’; that is, a nationalistic understanding of the term is possible. Hence this phrase can be seen to express the legitimacy of a discourse in which ‘we Japanese’ talk about ‘the will of Japan as a state’. Clearly, the first two words ‘we Japanese’ do not reflect the increasingly cosmopolitan make-up of contemporary Japan, as touched on above. In this way, the legitimacy of nationalism, albeit moderate nationalism, inheres in the report. In addition, a subtle difference can be detected between the Japanese and English versions in connection with nationalism. Chapter 6 proposes an approach to enlightened national interest: Given the massive changes in the international environment since the end of the cold war, Japan must not shirk the task of redefining its national interest. [We are] opposed to the rigid pursuit of national interest that forces both one’s own country and others constantly to make zero-sum, either/or choices… We wish to emphasize that an enlightened national interest is a national interest open to the people. For one thing, seen broadly and in terms of actual content, an enlightened national interest means policies to fulfill national needs. For another thing, it means that when the national interest is defined there is feedback from the public, information and perceptions are shared with the public, and the public participates in various ways in policy decisions. (Ibid.: chapter 6:5–6) At first sight, this is a well-balanced and restrained discussion of ‘enlightened’ national interest. Nevertheless, the original Japanese suggests a much more nationalistic interpretation, as all three terms, ‘the people’, ‘the public’ and ‘nation(al) needs’, converge into one term, kokumin, which, literally translated, corresponds to the Japanese people, nation or nationals. In this sense, a national interest ‘open to the people’ actually means ‘open to the Japanese nation or to Japanese nationals’, ‘feedback from the public’

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means ‘feedback from Japanese nationals’, and ‘the public participates’ means ‘Japanese nationals participate’. Clearly, the implication is that foreign residents of Japan are excluded from these political processes. What is more, the report is wishy-washy when it does talk about foreigners in Japan, failing to go to the heart of controversial issues, such as whether or not Japan should accept manual or service workers from other, especially Asian, countries (ibid.: 13). Neither does it refer to the intractable problem of the estimated 300,000 ‘illegal’ workers. Thus, while it emphasizes the need to create a society in which ‘different ethnic groups can coexist’, it notes that Japan is ‘not yet accustomed to incorporating foreigners into its society’ (ibid.: 5). To read such a sentence would lead an uninformed reader to think Japan had no experience of ‘coexisting’ with foreigners, yet this patently ignores the legacy of Japanese imperialism and the large number of Koreans living in Japan. Indeed, no reference to Korean residents in Japan is even made in this lengthy report. It is here that the underlying nationalistic premise of the report can be found. Of course, this is not the unbalanced ultranationalism of pre-war days: hence, the report does not sing the praises of the Japanese invasion of other Asian countries and the benefits of the Greater East Asia Co-prosperity Sphere. It instead admits that ‘Japan forced its self-serving goals and order on surrounding countries, pursued aggrandizement of the Japanese empire at huge cost to other countries, and brought war and calamity to the Asia Pacific region’ (ibid.: 3). In this sense, it is in marked contrast to ultranationalists who proclaim the cause of Japanese imperialism and sing the benefits of Japan’s colonial policy. Ultranationalism Although ultranationalism is resurgent in contemporary Japan, it has not yet gathered momentum. Still, signs of a revival can be found in two illustrative cases. One is a remark made about foreigners by the controversial Governor of Tokyo, Ishihara Shintarō, and the other is the discourse of a group of opinion leaders in support of militarism in pre-war Japan. Ishihara started his adult life as a novelist. He then entered politics as a Diet member and in April 1999 was elected as the Governor of Tokyo. He can be regarded as the most prominent leader of the far right in Japan, although he has no political association or organization under his own control. His remarks are often provocative but controversial, outspoken but prejudiced, and popular but xenophobic. To cite a few examples: in the winter of 1990–1 he trotted out the story that the Nanking Massacre of December 1937 was nothing but a Chinese exaggeration. In his argument the Chinese victims, military and civilian, did not number 300,000, as reported by China, but only 10,000–19,000. It was nothing but an ‘aberration of troops on the winning side, concomitant to warfare’ (Ishihara 1991:100). In September 1999, after having visited a hospital for the severely physically and mentally disabled in the suburbs of Tokyo, he pondered whether or not some of them have their own personality (Asahi Shinbun 23 September 1999). But it was his remarks, in April 2000, at a ceremony before a garrison of the Ground Self-defence Force, which caused most concern: In Tokyo, numerous third-nationals or foreigners, who have illegally entered this country, have committed again and again atrocious crimes.

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No longer are crimes in Tokyo what they were in the past. Hence, it is possible that we will see foreigners rioting on a very large scale in the wake of a major disaster. Police power, however, has its limits. So I want you not only to offer emergency care after disasters, but also to maintain public security in such emergencies. (Asahi Shinbun 12 April 2000) Ishihara’s reference to ‘a major disaster’ stirred memories amongst Koreans and other concerned citizens of the outbreak of attacks against Koreans following the Great Kantō earthquake of 1923, in which upwards of 6,000 Koreans were murdered with the support of the authorities (Nakao 1997:152). Unfounded rumours of Korean rioting had triggered off these murderous attacks by the military and civilians. Logically, Ishihara is at the epicentre of the rumours, as spread seventy years ago, in the following three senses. First, he used the derogatory term ‘third-nationals’. In post-war Japan, that term has only been used to refer to those people from the former colonies, Korea and Taiwan, living in Japan, who were deprived of Japanese nationality. They were officially treated as belonging to the third category of nationality, i.e. neither Japanese nor alien. In essence, ‘third-nationals’ is a discriminatory term used especially in reference to Koreans. Second, by labelling some foreigners as ‘illegal’, he serves to foster an image of all foreigners as actual or potential criminals. This stirred a sense of insecurity among people and prompted negative feelings towards foreigners. Needless to say, this can become the basis for popular xenophobia. In fact, almost all of the ‘illegal’ foreigners are only ‘illegal’ in the sense of not having the proper visa. Only a small minority have committed ‘atrocious’ crimes, which are committed by Japanese as well as foreigners. In this sense, he does not paint an accurate picture of the role of foreigners in crime in Japan. Thus his story is only in part true. It is obvious that he overemphasizes the ‘foreign’ element of criminality. Third, although Japanese prejudice and discrimination towards Koreans persist, Japanese people and foreigners, especially Koreans, are actually living together in harmony. In January 1995, at the time of the Great Hanshin Awaji earthquake, for instance, mutual assistance among all residents and all nationalities was the order of the day. Indeed, the Korean and Chinese communities played an active role in providing food and daily necessities to the majority Japanese community as well as to their own (Japanese Association for Human Rights of Koreans 1999:155–6). Thus, Ishihara simply represents a xenophobic response to globalization. Let us turn now to another example. In the early 1990s, a group of academics, writers and journalists, led by Professors Fujioka Nobukatsu and Nishio Kanji, and comic writer Kobayashi Yoshinori, started a campaign to revise the history textbooks for middle schools and high schools. Their historical viewpoint is said to be based on ‘liberalism free from any ideology’ but, as with Ishihara, it is more illustrative of the rising tide of ultranationalism. For them, Japanese school textbooks reflect the unfair judgement of the Tokyo Military Tribunal (1946–8), which was biased against the losers in favour of the winners of the war, and the strategy of the Comintern, which succeeded in brainwashing Japanese intellectuals. School textbooks reflect nothing more than a ‘masochistic view of history’ which plays up the misdeeds of the Japanese military from the Meiji period onwards. In their understanding, modern Japan did not set out to rule over other Asian countries; it instead sought to free them from Western domination. In the same way as

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Ishihara, the group insists that the Nanking Massacre was nothing more than the ordinary killings inevitable in any war. The members share a state-centric, chauvinistic and masculine view of history, looking down on neighbouring Asian countries in the present as well as in the past, and giving pride of place to the development of the Japanese nation down through the ages. From ancient times, the Japanese nation has maintained a direct lineage, untainted by other blood, in which inheres a pure Japanese identity. Clearly, these are ultranationalistic sentiments, reflecting a pro-active attempt to end the dominant interpretation of Japanese history rather than a reactive attempt to respond to burgeoning globalization. To understand the nature of the group further, let us examine Nishio’s response to globalization. In the late 1980s, he was one of the opinion leaders who opposed the introduction of foreign workers, and since the 1990s he has become a leader of this ultranationalistic group. Thus, in 1989, he pointed out that the global trend, as evidenced in Western nations, was a move from the open-door policy to the closed-door policy, as in the case of Germany and France and then the US (Nishio 1989:76–108). Japanese espousal of ‘internationalization’, he argued, only testifies to Japanese ignorance of the global situation (ibid.: 76). Clearly, such sentiments reflect an adverse reaction to transnational acculturation. For he is very much concerned with the demise of the nation following the introduction of foreign manual or service workers: Many Japanese argue that the problem of foreign immigrant workers should be treated on a humanitarian basis, hence as an act of a well-off country providing worse-off countries with economic benefits. But it seems to me that all of such arguments are too emotional, devoid of reality … The problem of foreign workers is neither a simple one of labour shortage nor economics, but one related to the basis of national survival. That is, it is an issue of national security, related to the basis of the issue of whether Japan shall die or continue to live. It is an issue of national defence against infringement of the national border by nonmilitary means. (Nishio 1989:221) Turning to Korean residents in Japan, he emphasizes how small their troubles are in Japanese society, and justifies their disregard in social policy. As they are almost equal to Japanese nationals, no need for special treatment exists: Japan is not necessarily a pure nation, since it holds historical minorities, and came to embrace within it a Korean population (0.6 per cent of the total population), resulting from its Western style colonial policy before the War and its policy of enforcing the immigration of labour from Korea during the War. They have never been assimilated into our country ever since. So that we should make atonement for our past sin, we shall forever have to continue to carry out a policy of ‘integration’, recognizing their culture and customs, respecting their difference from us, and ensuring them human rights identical with ours. However, the problem of Korean residents in Japan does not seem so important or serious. For firstly they

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are racially little distinct from us, and do not form such a big portion of the total population. Secondly, their living standard is high and so is their educational level. Thirdly, they do not render us such complicated and difficult issues as permanent residence or minority status as in the rest of the world at present … Thus their problem is so small in comparative and relative terms. (Nishio 1989:115–16) On the surface, this statement appears to be generous to Korean residents. However, if we read it carefully, it clearly implies support for a policy of integration or assimilation, which implies the eventual loss of their identity, and their total disappearance into Japanese society. Second, it does not venture to propose any policy for improving their social conditions, let alone political ones. It implicitly denies such a necessity by observing that their living and educational conditions have few problems. We need a litmus test to discover Nishio’s real intent. The test came in 1997 when he objected to the idea that foreign residents are entitled to be employed as civil servants in local authorities (Nishio 1997:198). Thus, in essence he does not recognize the equal application of human rights to foreign residents, despite his seemingly generous statement. Clearly, he does not pay attention to the suffering and insecurity of the oppressed. In summing up the above discussion, ultranationalism can be viewed as a negative reaction to globalism and transnationalism, whereas moderate nation-alism is clearly a positive reaction to globalization. It is difficult to determine which direction these two will take in the foreseeable future: they could reinforce each other and converge into one. Another possibility is that moderate nationalism could become closer to transnationalism. Globalization and transnationalism As mentioned above, the composition of foreigners in Japan is complex in terms of nationality, ethnicity, time of arrival, motives for entry, legal status, length of residence, family conditions and so on. It is also in a state of constant flux, with the changed situation symbolized by the reduction in the share of Koreans, now only about 40 per cent of the total. In other words, 60 per cent or more of foreigners are from other than Korean countries. These foreigners live throughout the land, intermingling with Japanese nationals at home as well as in society. Japanese, willingly or unwillingly, have to accept and adapt themselves to their presence. The number of Koreans has decreased over time in absolute as well as relative terms, but the size of the Korean community remains unchanged. This is in part because those Koreans naturalized in Japan still keep their former ethnic and cultural identity, and because a child born to a Korean father and a Japanese mother now can choose Japanese nationality, even if the child lives together with a family under the strong influence of Korean culture. In short, Koreans, nominally on the decrease, still maintain a stable Korean community in a substantial sense. Nevertheless, changes in the composition of the Korean community are of particular note. Roughly speaking, three generations can be identified: pre-war, post-war and the

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latest. Now the latest generation of Koreans, born since the 1960s, comprises the majority. The pre-war generation remembers the suffering and humiliation at the time Korea was under Japanese rule. In general, the first generation identifies itself with Korea in terms of ethnicity, nationality and culture. Meanwhile, the post-war generation, having suffered from being in an underprivileged position, is inclined to identify itself with Korea in terms of ethnicity and nationality, but culturally comes closer to the Japanese mainstream. In contrast, the new generation shares an identity distinct from the preceding two generations. For third-generation Koreans are inclined to identify themselves neither with Koreans in Korea nor Japanese in Japan, but as ‘Koreans in Japan’. While maintaining Korean identity in terms of ethnicity, this generation no longer sets much store by Korean nationality, recognizing the yawning cultural gap between itself and Koreans in Korea. To cite two examples, Kyō Nobuko, the author of the best seller A Very Normal Korean in Japan (1987), identifies herself with third-generation Koreans in Japan, by observing: ‘I have travelled to search for an identity, taking off all the straitjackets, powerful enough to catch and swallow us … I am neither a Korean nor a Japaneseœ (Kyō 1998:2,10). Next, Lee Seijaku, in an autobiography entitled My Heart: A third generation Korean in Japan, describes her identity formation as a child born to a first-generation father and a second-generation mother. She writes: ‘I myself identify more favourably with Japan than Mom does. I feel like Korea is a foreign country, and Japan is a mother country’ (Lee 1997:12). She dares to confess: ‘My feeling is Japanese. I have considered myself as a Japanese having formal Korean nationality’ (1997:132). Already in 1992, marriages uniting two Koreans comprised only 17.7 per cent of all Korean marriages, whereas couples with a Korean husband and a Japanese wife were 27.5 per cent, and those of a Japanese husband and a Korean wife 54.4 per cent (Ministry of Health and Welfare 1992). Sooner or later, the idea of ‘a Japanese having Korean ethnicity’ will grow stronger, so a legal framework, such as a new concept of citizenship, will be called for in order to accommodate a new type of foreign, especially Korean, resident. Of the 1,482,707 foreigners registered in 1997, 74.8 per cent (1,109,155) are expected to live in Japan permanently, as they have permanent residence or long-term settlement status, or are the spouse of a Japanese or a permanent resident (Immigration Bureau 1999). Their absolute number has increased, going up from 975,369 (1992), but in relative terms a slight decrease has occurred, going down from 76.1 per cent (1992). Onehalf of these are Korean, a fifth are Brazilian and Peruvian, and a hundredth are Vietnamese. The remainder are mainly Filipinos and Chinese. Old-comers are settled more or less evenly throughout Japan, although a quarter of Koreans are concentrated in Osaka City and the overseas Chinese live mainly in Yokohama and Kobe. Newcomers from Asia, living in Tokyo, tend to congregate in two downtown areas, Shinjuku and Ikebukuro. These two areas have been highly urbanized, so depopulated by Japanese seeking a better environment. Meanwhile, many of the Brazilians live in Aichi, Shizuoka or Gunma Prefecture, and the Peruvians in Kanagawa Prefecture. The Vietnamese immigrants have chosen to live in Kanagawa, Hyogo and Osaka Prefectures, reflecting their reluctance to move away from the settlement camps they first lived in on arrival in Japan. In Yamagata Prefecture, Korean, Filipino and Chinese women live with their Japanese husbands in remote rural areas (1,006 brides as opposed to 3,122 foreign residents in total in this prefecture at the end of 1995) (Kuwayama 1995:13). Children of

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these couples go to primary school. At one branch of a primary school, five out of ten first-year pupils have a Filipino mother (year unidentified) (ibid.: 41). In addition to the registered foreigners, about 300,000 men and women, mostly from Asian countries, work without a labour permit on construction sites, in small factories and in restaurants. These ‘illegals’ came from Thailand, the Philippines, Pakistan and Bangladesh in the late 1980s, and from China, Korea, Thailand, Iran, the Philippines, Malaysia and Sri Lanka in the early 1990s. Simultaneously, internationalization is proceeding even within the home. For instance, marriage between Japanese has been steadily decreasing over the last three decades, going down from 954,852 (1965) to 754,959 (1998), whereas Japanese marriage to a nonJapanese has increased more than seven times, going up from 4,156 to 29,636 during the same period (Ministry of Health and Welfare 1965, 1998). In 1965 marriages of a Japanese man to a non-Japanese woman were a third of those of a Japanese woman to a non-Japanese man, whereas in 1998 the former were three times the latter. The trend has been completely reversed as a result of more Japanese men marrying more Asian women. A combination of a Japanese husband and a Korean, Chinese or Filipino wife has become fairly common. An increase in babies born to a non-Japanese parent has resulted. According to Lee Setsuko, of all the new-born babies in Japan in 1997, 2.8 per cent (33,748) were born to a non-Japanese parent or parents. The ratio was 8 per cent in Osaka City, and 7 per cent in metropolitan Tokyo. In Osaka one in thirteen babies has a nonJapanese parent or parents; it is one in fourteen in Tokyo. The nationality of the mother was Korean (6,991), Filipino (6,024), Chinese (5,168) or Brazilian (3,143) (Asahi Shinbun 8 October 1998). The consequence for Japan is profound, as Japanese politics now has no choice but to deal with the presence of foreigners. A few decades ago all foreigners were deprived of any entitlement to public housing, national pension, child support, national financing for the purchase of a family home, student scholarships, national university professorships, lawyer status, participation in the All-National Sports Festival, Inter-High School Sport Matches and so on. Fingerprinting was also a requirement. In addition, those Koreans or Chinese (Taiwanese) wounded or killed while serving as Japanese soldiers or militaryrelated civilian employees in the Second World War were deprived of all of the benefits provided to former Japanese officers, soldiers and their families. Pensions for veterans, social benefits for the wounded and pensions for the families of those killed were all closed to those Koreans and Chinese. The only exceptions were social relief benefits to the worst-off, labour protection laws and medical assistance to the H-bombed of Hiroshima and Nagasaki. In this context 1979 and 1981 marked a turning point in history, as Japan ratified the International Covenant on Economic, Social, and Cultural Rights, and the International Covenant on Civil and Political Rights in 1979, and the Convention Relating to the Status of Refugees in 1981. Accordingly the government rectified the laws relating to public housing, national pensions and child support, and also abolished laws allowing the deportation of those suffering from Hansen’s disease, mental disease or those accepting social relief benefits. In 1982, professorships at national universities were opened to foreigners, on the condition that the appointee needed to apply for the same position again every three years. Later, many universities lifted this restriction, too.

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The year 2000 was another landmark year. Fingerprinting of all aliens, which has been the most controversial issue relating to foreigners’ human rights, was finally abolished on 1 April. This system started in 1952 with the fingerprinting of the five fingers of the left hand, using black ink, every five years. However, individual disobedience and the mass movement for the abolition of finger-printing forced the government to change policy: from five fingers to a forefinger; from black to transparent ink; from every five years to the first time of registration. In June 1992 special permanent residents, mostly Koreans, were exempted from all requirements to be fingerprinted. The goal was its complete abolition, which was finally achieved in 2000. Another remarkable change is the Diet decision of May 2000 to offer compensation for the wounded or dead of Korea or China (Taiwanese) who served in the former Japanese armed services. In the financial year 2001, 4 million yen will be paid to the wounded as a gift of money and assistance for old age, and 2,600,000 yen will be offered to the families of those killed. Certainly, such an amount of money is not in itself enough, but it is without doubt a major step forward as the government has stubbornly refused to pay ‘reparations’ (i.e. compensation) to individuals. The other restrictions listed above have all been lifted. Many local governments have actively promoted policies beneficial to foreign residents. First, local civil service jobs are in principle open to foreign residents in such big cities as Kawasaki, Kobe, Osaka, Sendai and Nagoya, and progressive prefectures like Kanagawa and Kochi. The number is still small, with 776 foreigners working as civil servants, mainly in the Kansai region, in 1996. This was an increase of 47 per cent compared with 1992 (Asahi Shinbun 8 March 1998). The central government has taken the position that Japanese nationality is an absolute necessity, especially for those who are in charge of implementing public policies or participating in public decision making. But even this restriction has been relaxed by a change in national policy allowing each local government freely to decide who is categorized as such. In addition, local governments such as Kawasaki (city) and Osaka (prefecture and city) have established a sort of council in which a select group of foreign residents express opinions mainly on social affairs. Many local assemblies have adopted a resolution that foreign residents are entitled to local suffrage. Finally, some local governments (villages and towns) have implemented social policies in order to assist Asian brides to settle down smoothly in the region by assuring them of a good social life, language services and medical care. Notwithstanding these positive developments, discrimination and prejudice against foreigners, especially Koreans and other Asians, remains strong. Many Japanese, being fewer than ever before, still oppose marriage with these ‘other Asians’, renting them a house or room, or hiring them in big business or public services. In this respect, there are numerous social problems that need to be resolved: labour conditions, social benefits, medical care, legal status, divorce procedures, exploitation of women, education, desertion of children, naturalization, refugee status, deportation, interpretation at the police station or in court as well as local suffrage, marriage, habitation and job hunting. In a sense, Japan seems to be a normal state in that it is neither more nor less advanced in its transnational orientation than the West. Needless to say, foreign, mainly Korean, activists have played a very important role in prompting changes in government policy, and many Japanese have worked together with them. The main activities have been protests against fingerprinting and demands for

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ethnic education for children at school. At the same time, Western values have played an important role in opening up Japanese society to global society. Western universalism can be said to work through two channels: a human rights movement based on people’s initiatives and sustained by NGO activities, on the one hand, and changes in government policy brought about by attempts to adjust to globalization, on the other. Although these two are often in conflict with one another, in the longer term they can be expected to reinforce each other, thereby paving the way to transnationalism. Another factor is recent changes in Japanese society. This can be seen, for instance, in the March 2000 revision of Japanese immigration policy, where a call was made for well-trained foreigners specializing in caring for the elderly, and trainees (actually temporary workers) for agriculture, processing of marine products and hotels. The policy proposes a kind of asylum in the case of forceful deportations which can be conceived as inhumane due to a deportee’s personal relationship with a Japanese, although it categorically rejects the introduction of asylum as an officially authorized system. So far, our discussion has centred on the national or macro level. At a micro or communal level, however, conflict often occurs between local people or the far right and foreigners. Far-right groups sometimes assault students at North Korean schools in response to North Korean government policies, such as the launching of a test missile. Similarly, newspapers tend to exaggerate the number of crimes committed by foreigners. To cite just one example, when the White Paper on the Police was published (National Police Agency 1999), newspaper headlines read: ‘The number of foreign criminals has increased by a factor of twenty-five over the past two decades’ (Asahi Shinbun 24 September 1999). Actually, the White Paper, which was entitled Tackling Crossborder Crime, pointed out both the increase in transnational crimes and crimes committed by a sizeable number of ‘illegal’ foreign residents, placing emphasis on the first aspect. Data from this show that crimes committed by permanent residents have been decreasing, whereas crimes committed by newcomers have increased. Both journalists and the police tend to create the image that all foreigners are likely to commit crimes. In this sense, the seeds of racism have been sown on the political fields of Japan. In summing up the above discussion, transnationalism can be said to be emerging in two ways. One is the emergence of a social environment receptive to foreigners. The other is the advance in social policy for accepting foreigners. Conclusion In the age of globalization, the promotion of transnationalism is a necessity, the advocacy of nationalism is a probable choice, and the road to ultranationalism is a low but persistent probability. At the factual level, globalism and universalism are proceeding at a steady pace in every sphere of Japanese life, but at the mental level pro-action and reaction compete with each other in tune with a negative or positive attitude towards prewar, militarist Japan. A key factor in this context is the relationship among these three national feelings, and, more specifically, the direction that moderate nationalism will take in the foreseeable future. If it is inclined strongly towards transnationalism, the future of Japan will be to globalize more smoothly, based on the people’s initiatives and NGO activities.

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Nevertheless, there are three unpredictable factors to consider. The first is the rise of a new generation of Koreans and Japanese. The latter have little prejudice against Asian people and values, but know little about the modern history of the relationship between Asia and Japan. It can move in either the direction of reaction or pro-action as a result of innocence and ignorance. If fascinated by the simple story of a brave national history, this generation will help to engender a social atmosphere more unfavourable to a transnational Japan. But, if well acquainted with the true history of modern Japan, the new recruits to Japanese society are sure to make it more open to transnationalism, based on good neighbourly relations. We should also note that Korea has caught up with or overtaken Japan in NGO activities in recent years. Here we see a strong basis for forming transnationalism in Asia. Second, Japan has become a normal state in terms of social discrimination against foreigners. In this connection, manifest discrimination hides behind the scenes. This is similar to institutional racism in the West, i.e. ‘all processes which, intentionally or not, result in the continued exclusion of a subordinate group’ (Miles 1989:50). Legal equality does not necessarily mean substantial equality. In this sense, Japanese society may move towards latent discrimination, which, however, if blended with the seeds of racism, might burst into attacks on foreigners in case of an unforeseen emergency. Third, labour migration has already entered a new stage in both the domestic and international spheres. Unlike the 1980s, Japan is not exceptional in accepting ‘illegal’ workers in that thousands of foreigners, legal and illegal, work in Malaysia, Thailand, Singapore, Taiwan, South Korea and elsewhere. The Japanese case comprises about 10 per cent of all those foreign workers (Tanimura 1999:36–8). Of course, there is concern that, once the gate is opened, workers from Asia will flood into Japan’s labour market. This is not necessarily true. Nevertheless, the existence of this possibility will continue for the future. It is because any advanced economy needs illegal, hence cheap, foreign workers for construction work and running the service industries. Japan’s shortage of labour power to take care of the ageing population adds to the difficulty presently faced. As Giddens observes: ‘The development of globalized social relations probably serves to diminish some aspects of national feeling linked to nation-states (or some states) but may be causally involved with the intensifying of more localized nationalist sentiments’ (Giddens 1990:65). As discussed above, globalization regenerates nationalism, while generating transnationalism, in Japan. What should be noted, however, is that ultranationalism has come to the fore because now is the time to review Japan’s current social systems, albeit severely affected by globalization processes, and in this context to reconsider the history of modern Japan accordingly. Transnationalism, inward and outward, is a decisive factor for promoting global peace and welfare, practically checking ultranationalism. It is from this perspective that the future of Japan should be considered. References Gellner, E. (1983) Nations and Nationalism, Oxford: Blackwell. —(1990) The Consequences of Modernity, Oxford: Polity. Hirano, K. (2000) Kokusai Bunkaron (International cultural relations theory), Tokyo: Tokyo University Press.

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Immigration Bureau, Ministry of Justice (ed.) (1999) Shutsu Nyūkoku Kanri (Immigration control), Tokyo: Immigration Bureau. Ishihara, S. (1991) ‘Nihon o otoshi ireta jōhō kūkan no nazo’ (The mystery of the information space entrapping Japan), Bungei Shunjū February: 94–110. Japanese Association for Human Rights of Koreans (ed.) (1999) Zainichi Chōsenjin to Nihon Shakai (Human rights of Koreans and Japanese society), Tokyo: Akashi Shoten. Judicial System and Research Department, Ministry of Justice (ed.) (annually) Shutsunyūkoku Kanri Tōkei Nenpō (Annual report of statistics on legal migrants), Tokyo: Judicial System and Research Department. Kuwayama, N. (1995) Kokusai Kekkon to Sutoresu (International marriage and stress), Tokyo: Akashi Shoten. Kyō, N. (1987) Goku Fūtsu no Zainichi Kankokujin (A very ordinary resident Korean in Japan), Tokyo: Asahi Shinbunsha. —(1998) Nikkan Ongaku Nōto (Musical notes on Japan and Korea), Tokyo: Iwanami-Shoten. Lee, S. (1997) Zainichi Kankoku Sansei no Mune no Uchi (My heart: a third generation Korean in Japan), Tokyo: Sōshisha. Miles, R. (1989) Racism, London: Routledge. Ministry of Health and Welfare (ed.) (annual) Jinkō Dōtai Tōkei (Population statistics), Tokyo: Ministry of Health and Welfare. Nakao, H. (1997) Zainichi Kankoku Chōsenjin Mondai no Kiso Chishiki (Basic knowledge of Korean issues in Japan), Tokyo: Akashi Shoten. National Police Agency (ed.) (annually) Keisatsu Hakusho(Police White Paper), Tokyo: National Police Agency. Nishio, K. (1989) Rōdō Sakoku no Susume (Recommendation to stop labour immigration), Tokyo: Kōbunsha. —(1997) Rekishi o Sabaku Ōrokasa (The folly of judging history), Tokyo: PHP. Prime Minister’s Commission on Japan’s Goals in the Twenty-first Century (2000) The Frontier Within: Individual empowerment and better governance in the new millennium. Online. Available http://www.kantei.go.jp/jp21century/index.htm (accessed 18 November 2000). Tanimura, Y. (1999) ‘Ajia no keizai kiki ga motarashita jinkō gyakuryū’ (The backflow of people caused by the Asian economic crisis), Kokusai Jinryū January: 36–9.

11 Migration, globalization and the nation state, Japan Yoko Sellek Introduction In an increasingly globalized world, international migration has to be seen as a complement to other flows and exchanges taking place between countries. During the last two decades or so, the issue of migration has emerged as one of the most serious crises in industrialized nations. The main reason for this is that, in an era of growing economic globalization, when each state is moving towards border-free economic spaces in the world order, the flow of migrants is largely determined by a global labour market, being more or less impervious to governmental policies. It is ultimately impossible to intensify border controls to keep migrants out, so any attempts by government to restrict the entry of migrants result in the growth of an illegal foreign migrant population. The existence of illegal migrants itself demonstrates an erosion of the state’s sovereignty. One significant phenomenon in relation to foreign migrants, both legal and illegal, is that they often continue to stay, regardless of the workforce needs, and make a measurable demographic difference to the population of the host country. This is illustrated by the emergence of various problems in relation to their needs for housing, employment and welfare. As a result, a variety of the country’s existing infrastructural systems are affected and are forcibly changed into those that are capable of accepting those foreign migrant workers into society as ordinary ‘residents’. This situation further creates conflict within a country between its exclusive authority to control the entry of non-nationals and its obligation to protect ‘residents’ within its territory. Japan is traditionally considered to be one of those countries which does not facilitate citizenship acquisition and, therefore, does not encourage immigration. Japanese citizenship relies on jus sanguinis principles, which confer citizenship on the basis of descent regardless of the place of birth. Lineage is regarded as the primary determinant of ‘Japaneseness’ and is viewed as the major element to form the collective identity of the Japanese people. Indeed, the country is generally recognized for its high homogeneity in ethnicity, language, religion, class and culture. This high homogeneity together with the Japanese collective identity, which puts a relatively strong emphasis on the maintenance of cultural uniformity, the importance of the group, and an ethic of harmony, is often seen as a contributing factor to the country’s post-war economic success, and the Japanese people as well as the government are ‘fearful of any immigration policy that would dilute their homogeneity and its accompanying collective spirit and group harmony’ (Weiner 1998:8–9). Although the number of foreign residents with alien registration permits in Japan has continued to increase, the country has the lowest proportion of foreigners of

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any major industrialized country, with just 1.51 million in 1998, representing only 1.20 per cent of the then total Japanese population of more than 126 million (Ministry of Justice, Immigration Bureau 1999b: 19). In terms of its history of absorption of migrants, as well, Japan has historical traditions of racial exclusion. Traditionally, Koreans form the largest group of foreigners in Japan, with some 638,828 South and North Koreans registered as of 1998, a figure which included 554,875 permanent residents (Japan Immigration Association 1999b: 14). Their original migration to Japan predates Japan’s colonial period following the Meiji Restoration. During the period of Japanese imperial expansion, the Koreans represented ‘guest workers’ who were imported to meet short-term labour needs and granted de facto Japanese nationality under Japan’s colonial policy. However, following Japan’s defeat in the Second World War, post-war changes in the legal status of Koreans transformed them from Japanese nationals into permanent residents. Over the decades the gradual process of their acculturation has taken place. The mother tongue of third- and fourth-generation Koreans is Japanese and, in general, they have been following a process which has given rise to the phenomenon of ‘sociological-Japanese’ Koreans. However, although they have resided in Japan for nearly a century, they have confronted social and economic discrimination, and remain as an invisible minority. Their incorporation into Japanese society has been hindered by notions of Japanese racial exclusion which do not permit people not born Japanese to become Japanese. Employment opportunities for foreigners in Japan are strictly controlled. The Immigration Control and Refugee Recognition Act (normally referred to as the Immigration Control Act) states that the government only accepts foreigners with some special technological expertise or skills, and those whose activities require special knowledge of foreign cultures that cannot be provided by Japanese nationals. Under the existing system, all foreigners must qualify for one of the residence categories stipulated in the Immigration Control Act, and work incompatible with residential status is, in the absence of special permission, prohibited. There is no category that accommodates ‘unskilled workers’ and, therefore, foreign workers in the field of so-called unskilled labour are ‘officially’ forbidden from entering the country. However, partly as a result of economic globalization since the mid-1980s, Japan has for the first time been transformed into one of the major destinations for foreign workers from throughout Asia. This chapter addresses globalization in the migration arena using the case of contemporary Japan. Japan has participated in constructing a global economic system and has grown vastly richer partly as a result of the liberalization of capital flows and trade in goods and services. In parallel with these flows of capital and goods, however, an influx of foreign workers has emerged. This chapter focuses upon the interplay among Japan’s labour force requirements which invite foreign workers as the country’s economy grows and its population ages, cultural tolerance or intolerance towards immigration in Japanese society, and the government’s attempt at regulating immigration to accord with, or operate against, the forces of globalization. The chapter further examines the implications of international migration for the autonomy and sovereignty of Japan under economic globalization. The first section of this chapter discusses the supply and demand for foreign workers since the 1980s and the associated responses from the government. It explains the types of foreign workforce the country needs and describes the government’s immigration

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policy. Some new trends in, and characteristics associated with, foreign migration during the current recession are then examined. Next, problems relating to the social welfare and medical care of foreigners are examined in order to explain the process by which the government has developed the country’s infrastructure under pressures for globalization. Finally, a number of concluding points are made on the implications of globalization for migrant workers in Japan. Supply of and demand for foreign labour since the 1980s and the government’s responses Unlike countries in Western Europe, Japan achieved high levels of economic growth during the 1960s and 1970s while placing little or no reliance on foreign labour. Since the 1960s, Japanese companies have managed to raise labour productivity by improving manufacturing techniques coupled with an increase in direct investment in East Asia; foreign investment and the employment of labour abroad became, in effect, a substitute for the importation of labour. Under economic globalization, Japan has played an important role in the global political economy, particularly via its presence in East Asia through the export of consumer goods, FDI, Official Development Assistance (ODA) and the export of culture in the forms of fashion, music and, most significantly, new models of economic development and success. Japanese companies have generated huge trade surpluses and have supported the country in generating high per capita GNP. However, this success, combined with the country’s central economic presence in East Asia, has contributed to the formation of links with Japan that subsequently have served as bridges for migration and, since the mid-1980s, Japan has been transformed into one of the major destinations for foreign workers from throughout Asia. There are various other factors which have triggered this transformation, including: demographic forces (i.e. the low fertility rates and rapid population ageing); the longest economic boom in Japan’s post-war history between the late 1980s and 1990; the shortage of indigenous labour in certain types of industry which was partly caused by the changing lifestyle of young Japanese and their reluctance to take ‘3D’ (i.e. dirty, dangerous and dull) and ‘dead-end’ types of jobs, together with the appreciation of the yen. It is difficult to know the exact number of illegal foreign migrant workers in contemporary Japan. Official estimates of the stock of ‘overstayers’, most of whom are believed to be working in the unskilled job sectors, were 106,497 in July 1990, increasing to 268,421 by July 1999 (Ministry of Justice, Immigration Bureau 1999e: 26). The number of skilled and professional foreigners admitted to the industrial workforce in Japan has been tightly restricted and the number of foreigners entering Japan to work legally is extremely small compared with the corresponding numbers entering Western countries. Of some 3 million foreigners entering Japan each year, the majority are tourists and other short-stay visitors and, although some status-of-residence categories such as ‘permanent resident’ and ‘spouse or child of a Japanese national’ do not have any particular restrictions on activities, the number of skilled and professional foreigners working in the industrial sectors (excluding those who fall into the category of ‘entertainers’) has remained at approximately 20,000 to 30,000 each year (Japan

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Immigration Association 1999a: 16–17). These statistics indicate that, although there is no category that accommodates ‘unskilled workers’ in the Immigration Control Act, the reality has become such that a strong polarization exists, on the one hand, between a firm government policy dictating that only small numbers of skilled foreign labourers are to be admitted, and the presence of half a million unskilled foreign workers from Asia and South America, including nearly 270,000 illegal workers according to figures published in July 1999, on the other. This polarization is partly caused by the fact that in Japan there are basically two types of demand for foreign workers (Kajita 1994:65). In order to participate in the global economy as well as to keep up with advanced Western countries, the importation of Western human capital has been encouraged. A large number of major companies in Japan have been trying to strengthen their central managerial functions and have been extending their activities abroad. For this reason, an increasing number of so-called ‘skilled transients’, such as managers, financial experts, technicians and intra-company transferees, have been recruited by these companies. If this is one type of demand for a foreign workforce generated by the core companies of Japanese industry, the other type of demand for foreign workers stems from the peripheral or external sectors which have been experiencing industrial decline. Small/medium-sized and family-owned companies, such as subcontractors and outside suppliers, have to recruit foreign workers in order to secure cheap labour in situations where the shortage of labour and the ageing of workers are serious concerns. The demand for foreign workers also exists in local government and education. Japanese society tries to adapt itself to the advanced West, learning Western cultures and the English language under the name of the internationalization (kokusaika) of Japanese society. In contrast, some local governments in depopulating rural areas have introduced Asian brides to their local Japanese bachelors who have been unsuccessful in finding Japanese brides. If one of the major roles of women is the reproduction of human resources, which includes childbirth and the production of labour, this introduction of Asian brides is a good example which indicates the reproduction of human resources transferred internationally in order to revitalize depopulated rural areas (Itō 1996:257). In the face of these two types of demand for a foreign workforce by private market forces, the fundamental dilemma for Japanese immigration policy since the late 1980s has been that it has to reconcile employer demands for labour and its own notion of collective identity, i.e. homogeneity with its accompanying collective spirit and group harmony. The revised Immigration Control Act of June 1990 was a product of this dilemma. Basically, the revision was meant to respond to Japan’s growing need for a foreign workforce while reinforcing measures to control illegal foreign workers. The implementation of the revised Immigration Control Act initially came to be known for introducing stiff sanctions against employers who knowingly hired illegal foreign workers who entered Japan on or after 1 June 1990, as well as against labour brokers who recruited them for Japanese companies.1 Responding to the needs of large companies for skilled transients from overseas, the revised Act has enlarged the scope of permitted working activities for foreigners in certain skilled and professional categories and rationalized the twenty-seven residence permit categories.

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However, a more important change was made in order to accept a larger foreign workforce. In meeting the shortages of labour in certain unskilled job sectors, the Revised Immigration Control Act created a new category of residence called ‘long-term resident’, which was made available to third-generation South American–Japanese descendants (Nikkeijin), as well as to the spouses of second- and third-generation Nikkeijin. This new category of long-term resident, together with the spouse or child of a Japanese national category into which second-generation Nikkeijin can fall, has acquired a special economic importance as one of the main legal channels for the introduction of unskilled labour. Even though the government claims not to have anticipated a sudden influx of Nikkeijin into Japan as a consequence of the revision of the Immigration Control Act in June 1991, the introduction of the Nikkeijin opened a legal route by which unskilled labour could be introduced instead of placing reliance on illegal foreign workers. This happened while still preserving the myth of Japan’s ethnic homogeneity since such people would not dilute Japan’s homogeneity or its accompanying collective spirit and group harmony in being ‘Japanese’ where the primary determinant is lineage. As evidenced by the revised Immigration Control Act, the government is proactive towards the expansion of the acceptance of skilled transients in order to improve the country’s position in a globalizing economy, while it is reactive against the influx of illegal foreign workers which has, in a sense, emerged in accordance with the development of new global economic processes. The government attempts to reduce the illegal workforce, but, in order to respond to the need for cheap and docile workers to serve in its labour-intensive and unmechanized industries, as well as in response to the long-term structural shortages of labour in the Japanese labour market, it has introduced legal unskilled foreign labour using various informal ‘side door’ mechanisms. For example, foreign pre-college students and foreign trainees are, in effect, able to work under certain conditions relating to their status of residence while not being recognized, per se, as foreign workers. The system of foreign ‘trainees’, the official purpose of which is ‘to contribute to the industrial, social, and economic development of various developing countries through an attempt to transfer technology, technical skills, expertise and/or knowledge which have been accumulated in Japan’ (Ministry of Justice, Immigration Bureau 1996a: 8), has been used as a very convenient mechanism for ensuring a constant labour supply through OJT (On-the-Job Training). Originally, the request to accept foreign trainees was made in the mid-1960s during the period of rapid economic growth when the Japanese economy was beginning to expand internationally and a large number of Japanese companies were making advances overseas. These companies wanted to send their locally employed foreign employees and those involved with their businesses to Japan in order to gain skills and technical understanding based on the expectation that those trainees, after completion of their training in Japan, would utilize their learnt skills in overseas subsidiaries or joint venture plants. Responding to this long-term pressure, in 1981 the Ministry of Justice introduced the status of residence 4-1-6 (Article 4, Paragraph 1, Item 6) which was originally established to accept foreign students (Ministry of Justice, Immigration Bureau 1999d: 3). In April 1993 the Ministry of Justice implemented the Technical Intern Training Programme, which permits trainees to engage in employment, including manual labour, for a certain period after the completion of their actual training. Compared with the original trainee scheme, the new Technical Intern Training

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Programme gives trainees many more rights as ‘workers’ and, in 1997, the ministry further extended the programme by extending the retention period for trainees from the original two years to three years.2 Furthermore, according to the basic principle of immigration policy in 2000, the ministry is prepared to extend the programme even further by increasing the range and types of skill covered by the programme. It will include caring for elderly people as a part of the measures against the country’s demographic trends, which include reduced fertility rates and rapid population ageing (Asahi Shinbun 14 January 2000). Both the original trainee system and the Technical Intern Training Programme not only provide a mechanism for the legal supply of ‘unskilled labour’ to companies suffering from shortages of labour, but also contribute to an external perception of Japan as a leader in Asia through the system’s stated objectives of human capital development and technology transfer. Also, the expectation is that the system of foreign trainees will not generate many of the social problems that have plagued Western countries that have received foreign workers in the past, since they would normally come to Japan for only a limited period of time without bringing their families. The status of residence called ‘pre-college student’ has proved convenient for alleviating the shortages of labour in the Japanese labour market. Most foreigners on precollege-student visas enter either Japanese-language schools or business schools and usually intend to study the Japanese language in order to enter Japanese universities or to acquire some skills in the industrial or commercial fields. The influx of pre-college students coincided with a proposal made by Prime Minister Nakasone in 1983 to accept 100,000 foreign students by the beginning of the twenty-first century as part of a campaign towards the internationalization of Japan and, as a consequence, their influx became substantial after 1983. In order to earn living expenses while paying tuition fees in a country which is famous for its notoriously high cost of living, pre-college students are permitted to work a maximum of four hours a day if they report the fact to the Immigration Bureau.3 In reality, however, it is very difficult for pre-college students to observe these regulations. Part-time work at a level in conformity with the regulations earns them insufficient wages to live even modestly and they are often faced with little choice but to work longer hours without reporting this extra work to the authorities. The majority of pre-college students work in the service industry as, for example, waiters, waitresses and newspaper-delivery boys. This status of residence is also convenient for foreigners with the intention of working in Japan. In order to stem the number of illegal foreign workers using such visas, the ministry has indicated tighter controls to be imposed over the issuance of pre-college visas since 1993, a by-product of which has been a sharp reduction in the number of resident foreigners, particularly Chinese, whose status of residence is often that of foreign student or pre-college student. Consequently, the number of pre-college students qualified to take the standard entrance examinations required by all public and some private universities has been decreasing.4 However, partly because of Japan’s declining birth rate and falling university-age population, there has been increasingly intense competition to attract foreign students to Japanese universities troubled by declining enrolments and shrinking revenues in order to secure sufficient foreign students and offset losses caused by the shortage of Japanese students. Responding to these demands on Japanese universities, the government had eventually to loosen its control over the

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acceptance of foreign pre-college students and on 1 April 1997 abolished the visa rule requiring foreign students and foreign pre-college students to secure a Japanese guarantor before entering Japan. Consequently the number of pre-college students has been increasing since 1997. In the case of foreign college students, i.e. those receiving education at a university or other institute of higher education, the Ministry of Education has been trying to prevent them from working illegally while opening the door more widely to students who are genuinely interested in studying in Japan. The students are allowed to work up to twentyeight hours a week during the term and up to eight hours a day during their summer and winter vacations. In order to prevent illegal employment, the universities to which they belong have to report their students’ intention of working to the Immigration Bureau and to supply documents which prove that they have been attending classes regularly. Since the Asian economic crisis of 1997 there has been a strong demand for more effective financial support for foreign students in order for them to continue living in Japan and, in November 1999, the government set up special measures to increase the number of foreign students who intend to study in Japan on a private basis by providing each student with a one-off financial contribution of 150,000 yen towards their accommodation expenses in Japan. The acceptance of a large number of foreign pre-college students as well as foreign college students is important for the government not only in protecting the Japaneselanguage schools and the universities from suffering financial difficulties, but also in developing a global perception of Japan as an intellectual leader as well as the economic leader in East Asia. Through providing more attractive educational opportunities for foreign youth, the government may be able to create a more ‘pro-Japanese’ Asian youth who can, hopefully, contribute to the country’s economic development as well as its international reputation. At the same time, however, the boundary between pre-college students/foreign students and foreign workers has been becoming less and less clear. The numbers of precollege students and foreign students who remained in Japan as overstayers were 12,267 and 5,837, respectively, comprising 4.6 per cent and 2.2 per cent of the total number of overstayers as at 1 July 1999 (Ministry of Justice, Immigration Bureau 1999e: 26–7). New trends as associated with foreign migration during the 1990s recession Some new trends in relation to foreign workers have appeared since Japan entered the recession at the beginning of the 1990s. These trends have given the government more concrete evidence to believe that the influx of foreign workers will entail long-lasting consequences for the country’s economic, social, cultural and political development. The main concern of the government, in particular during the recession, has been to prevent Japan from following the experience of Western Europe after the oil crisis of 1973. What the government is anxious about is that, just as in the West European experience, the first phase of labour migration might merge into a second phase of family reunification, and these migrations might then result in demands for increased expenditure on housing, schooling, and medical and social facilities. On the surface, this

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concern in relation to immigration control may appear to be economic. It is, however, more than that. As in other countries, the core of immigration control in Japan is political and is closely associated with the nature of the sovereign state. Underlying the nature of the sovereign state is a doctrine of social, ethnic and linguistic homogeneity. As these various elements of homogeneity break down, the policy-making elite needs to take counter-measures in order to maintain the fundamental characteristics of the state. The fear is of losing control of the population which, in turn, will undermine the elite’s power. In the case of Japan, which sees itself as closed and ethnically homogeneous, fear of the emergence of various groups of foreigners who could dilute this homogeneity is obviously significant. A new trend in relation to illegal workers is that the number of overstayers has declined gradually since 1993. Table 11.1 indicates estimates of the stock of overstayers, most of whom are believed to be working in the unskilled job sectors in Japan.

Table 11.1 Trends in the estimated number of overstayers, broken down by nationality (1990–9) Region

1 July 1990

Total

106,497 159,828 216,399 278,892 292,791 298,646 296,751 293,800 288,092

Male

66,851 106,518 145,700 190,996 193,059 192,114 186,146 180,060 172,516

Female

39,646

53,310

70,699

87,896

99,732 106,532 110,605 113,740 115,576

Thailand

11,523

19,093

32,751

44,354

53,219

55,383

53,845

49,992

46,964

S. Korea

13,876

25,848

30,976

35,687

37,491

39,455

41,024

43,369

44,916

China

10,039

17,535

21,649

25,737

29,091

33,312

36,297

39,738

39,552

Philippines

23,805

27,228

29,620

31,974

34,296

35,392

36,089

37,544

38,325

7,550

14,413

25,379

38,529

34,529

30,840

25,653

20,313

17,240

Iran

764

10,915

21,719

40,001

32,994

28,437

23,867

20,757

18,009

Peru

242

487

1,017

2,783

6,241

9,038

11,659

12,918

14,312

Bangladesh

7,195

7,498

7,807

8,103

8,161

8,069

7,931

7,565

7,295

Taiwan

4,775

5,241

5,897

6,729

7,283

7,457

7,677

7,871

7,906

Pakistan

7,989

7,864

7,923

8,001

8,056

7,733

7,414

6,921

6,517

Myanmar

1,234

2,061

3,425

4,704

5,425

6,019

6,341

6,391

6,335

Malaysia

Indonesia Other

–

1 May 1 Nov. 1 May 1 Nov. 1 May 1991 1991 1992 1992 1993

– 17,305

– 21,645

– 28,236

– 32,290

– 36,005

1 Nov. 1 May 1 Nov. 1993 1994 1994

– 37,511

– 38,954

– 40,421

40,721

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1 May 1995

Region

1 Nov 1995

1 May 1996

1 Jan. 1997

1 July 1997

181

1 Jan. 1998

1 Jan. 1999

Total

286,704

284,744

284,500

282,986

281,157

276,810

Male

168,532

164,154

160,836

155,939

153,055

149,828 –

142,551

Female

118,172

120,590

123,664

127,047

128,102

126,982 –

125,870

Thailand

44,794

43,014

41,280

39,513

38,191

37,046

30,065

26,546

S. Korea

47,544

49,530

51,580

52,387

52,854

52,123

62,577

63,848

China

39,511

38,464

39,140

38,296

38,957

37,590

34,800

36,077

39,763

41,122

41,997

42,547

42,627

42,608

40,420

39,235

4,511

13,460

11,525

10,390

10,296

10,141

9,989

9,763

Iran

16,252

14,638

13,241

11,303

10,153

9,186

7,304

6,524

Peru

15,301

14,693

13,836

12,942

12,073

11,606

10,320

10,263

Bangladesh

7,084

6,836

6,500

6,197

5,864

5,581

4,936

4,625

Taiwan

7,974

8,210

8,502

9,409

9,403

9,430

9,437

9,429

Pakistan

6,100

5,865

5,478

5,157

4,766

4,688

4,307

3,931

Myanmar

6,189

6,022

5,885

5,900

5,957

5,829

5,487

5,304

Philippines Malaysia

a

Indonesia Other

–

– 41,681

– 42,890

– 45,536

– 48,945

– 50,016

271,048

1 July 1999

– 50,982

268,421

4,906 51,406

47,970

Source Ministry of Justice, Immigration Bureau (1997:24–7, 1998:41, 1999a: 60, 1999e: 26–7) Notes: a These estimates are based on the immigration and emigration forms submitted by foreigners on entering and leaving Japan. However, they are subject to numerous discrepancies and should be regarded only as rough estimates.

The decrease in number since 1993 may reflect both the sluggish economy making the Japanese labour market less attractive to foreign workers and efforts by the Immigration Bureau in carrying out ‘round-up’ operations. However, as the recession continues it has become apparent that the majority of foreign workers have stayed in Japan and that the duration of their stay has become longer than prior to the recession. It used to be the case that, until 1992, the majority of apprehended illegal foreign workers had stayed in Japan less than one year (70.6 per cent in 1991, 58.8 per cent in 1992). However, in 1993 the number of those who had been staying in Japan for less than one year decreased to 29.5 per cent and those who had stayed in Japan longer than five years increased 2.4 times compared with the previous year. In 1996, those who had been staying in Japan for less than one year further decreased to 22.3 per cent, while those who had been staying in Japan for more than five years nearly doubled compared with the previous year, indicating that long-term stays have become the norm. In 1998, those who had stayed in Japan longer than five years comprised 25.7 per cent of the total number of apprehended illegal foreign workers ( Japan Immigration Association 1999a: 58).

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With regard to the Nikkeijin, some significant features can be found in relation to their migration pattern in the 1990s. First, in spite of the recession, the migration of Nikkeijin to Japan has been continuing. In 1998 the number of Nikkeijin in Japan was over 245,000, the majority of whom were Brazilians numbering over 220,000 ( Japan Immigration Association 1999b: 15–16). Originally, it was mainly first-generation Nikkeijin with a good command of Japanese who came to Japan to work, but nowadays the second and third generations form the majority of the migrants and the number of third-generation Nikkeijin, who are totally unfamiliar with the Japanese language, culture and customs, came to form the largest Nikkeijin group during the latter half of the 1990s. Second, the number of Nikkeijin working in Japan and having come to Japan with their entire families, including young children, has increased dramatically. According to an investigation led by Kajita, the ratio of married to single Nikkeijin was around 6:4 in 1998 (Kajita 1999:3). In conjunction with this trend, the proportion of female Nikkeijin has increased and the ratio of female to male Nikkeijin was on average 4:6 in 1997. As the profile of Nikkeijin coming to Japan has shifted to the younger generations, the number of those who are able to understand Japanese has become extremely small and, from the viewpoint of lineage, the number of spouses who are not of Japanese descent is in the majority. In this sense, the bond with Japanese society based on lineage, which is the original reason behind allowing them to work in Japan, has become increasingly tenuous. Third, the large number of ‘repeaters’ form the majority of Nikkeijin in Japan. Approximately 33 per cent of Nikkeijin residents have visited Japan twice and 14 per cent have visited the country more than three times since the late 1980s. They used to purchase their return air fare tickets in Brazil, but they now tend to purchase them in Japan and, on average, reside and work in Japan within a cycle of five to six years (Nikkei 8 May 1999). Corresponding to this trend, in areas such as Toyota city in Aichi Prefecture and Hamamatsu city in Shizuoka Prefecture and Oizumi town in Gunma Prefecture, where there are heavy concentrations of Nikkeijin, social networks for Nikkeijin have become well established and have stimulated further migration. The development of ethnically based entrepreneurships, which include grocery stores as well as other types of businesses, such as agencies that deal with visa-related activities, travel agents and house removal companies, has been significant in these areas. Also, the proliferation of global communications, such as the expansion of cable and digital satellite television in Portuguese and Spanish, has reduced the ‘emotional distance’ for them. Under globalization, where transport and communication methods have made tremendous progress and multicultural diversified values have been spreading quickly through society, Nikkeijin may be able to maintain their identity as Brazilians and Peruvians while living in Japan. From this perspective, their assimilation into Japanese society may be difficult to achieve. In the case of registered foreigners in general, their number continues to increase, and since 1990 the actual situation of foreign residents in Japan has begun to change quite markedly in terms of residence status. Table 11.2 shows the trend in the number of registered foreigners, broken down by type of status of residence. First of all, this table indicates a continuing decrease in the number of Koreans and Chinese special permanent residents. Until the influx of foreign workers in the late 1980s, the bulk of foreign residents in Japan were special permanent

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residents (so-called ‘old-comers’). However, in 1998, these residents only accounted for 35.3 per cent of the total number of foreign residents (Japan Immigration Association 1999b: 14). A partial explanation of this trend is that the naturalization process has been in progress among the young generation of Korean residents while the older generation has been ageing. In contrast to the decrease in the number of special permanent residents, the number of ordinary permanent residents, such as spouses of Japanese nationals and former refugees who have changed their residence status from spouse of a Japanese national or long-term resident to that of permanent resident has been increasing. In general, the ratio of foreigners having residence qualifications that are relatively unrestricted, such as permanent residence, spouse or child of a Japanese national, and long-term resident, has risen significantly since around 1992. The major characteristic of these residence categories is that their holders are much more likely to remain in Japan and to seek to make a living in Japan on a long-term basis.

Table 11. 2 Trends in the number of registered foreigners, broken down by type of status of residence (1992–8)

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In respect of nationality, there has been a significant increase in the numbers of Brazilians, Peruvians and Filipinos, the majority of whom belong to a group called ‘newcomers’. The phrase ‘newcomers’ usually indicates foreign residents who began residing in Japan during approximately the last twenty years. This group includes, for example, returnees from China, Indo-Chinese refugees, foreign students, foreign precollege students, foreign trainees, Asian brides married to Japanese men, and foreign workers including Nikkeijin and illegal foreign workers (Kanagawa Zai-Nichi Gaikokujin Mondai Kenkyūkai 1992:3). In 1992, the number of so-called ‘newcomers’ surpassed the number of ‘old-comers’ for the first time. Fourth, since 1992, it has become apparent that a large number of college students and pre-college students, the majority of whom are Chinese from mainland China, aspire to become long-term residents and have been trying to find employment in Japan after the completion of their studies. Table 11.3 shows the trend in the number of applications made by pre-college students and foreign students between 1986 and 1998 to have their status of residence changed to a category permitting employment. In 1998, for example, the number of foreign residents who applied to have their status of residence changed from that of college student or precollege student to a category permitting employment in Japan was 2,663 and, of these, 2,391 (89.8 per cent) were permitted to do so. The majority of those successful in changing their status were from Asia, comprising mostly Chinese from mainland China (65.4 per cent), followed by South Koreans, Chinese from Taiwan, Malaysians and Thais. In spite of the prolonged recession and the accompanying decline in the employment rate, this increase in the number of applications was partly caused by the fact that many foreign students who entered Japanese universities between 1989 and 1990 (the period when the number of college students entering Japanese universities increased substantially) graduated in the early 1990s. Among them was a substantial number of Chinese students who entered Japan on pre-college student visas during the so-called ‘Japanese-language boom’ in the late 1980s. They decided to stay on in Japan to work for Japanese companies to utilize their educational backgrounds, while enjoying Japan’s high standard of living as well as high wage levels. Furthermore, under economic globalization, Japanese firms have become increasingly conscious of the competitive threat represented not only by China itself but also by Chinese entrepreneurs in various Southeast Asian countries. This has increased demand for those with Chinese-language skills and an understanding of Chinese business culture. In particular, Chinese graduates who have received MA and PhD degrees from Japanese graduate schools in engineeringrelated fields have been in strong demand by Japanese firms. Those who have found employment by this route have normally been residing in Japan under residence categories such as ‘engineer’, ‘skilled labourer’ or ‘specialist in humanities/international services’. Typical types of jobs taken by foreign students/precollege students who have changed their status of residence toa category permitting employment include computer and multimedia development-related jobs, overseas sales and trading business, and positions in educational institutions (Ministry of Justice, Immigration Bureau 1999c: 35). To summarize the trends described above, there has been a continuing impact of illegal migration even in the midst of the recession. In a sense, for the government, the situation since around 1992 is a consequence of the enforcement of the 1990 Revised

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Immigration Control Act and is the unintended and unanticipated result of the characteristically Japanese policy of severely restricting the

Table 11.3 Trends in the number of foreign residents who applied to have their status of residence changed from that of college student or pre-college student to a category permitting employment in Japan (1986–98) 1986

1987

1988

1989

1990

1991

1992

Applicants

479

487

592

949

1,199

1,322

2,674

Permitted

403

416

522

707

1,004

1,117

2,181

Rejected

76

71

70

242

195

205

493

1993

1994

1995

1996

1997

1998

Applicants

2,299

2,555

2,551

3,135

2,775

2,663

Permitted

2,026

2,395

2,390

2,927

2,624

2,391

273

160

161

208

151

272

Rejected

Sources Ministry of Justice, Immigration Bureau (1996b: 36, 1999c: 35)

acceptance of contract-type foreign workers (Miyajima 1996:2). There have emerged various groups of foreign long-term residents, possessing different types of residence status and, although the number of foreign residents is small in comparison with levels in other industrialized countries, for the first time Japan has acquired significant multiethnic communities. Globalization of the government as a welfare state for foreign residents Initially, the Japanese government put most of its effort in the field of immigration control into controlling the national border, being mainly concerned with short-term economic gain through the fulfilment of labour requirements. However, these foreigners often reside in Japan much longer than the government had initially expected, which conflicts with the country’s traditional immigration policy, i.e. that all foreigners should be admitted on a temporary basis only. As these foreigners are beginning to be accepted as ordinary, rather than exceptional, foreigners, their economically driven migration has eventually spilled over into the social, cultural and political domains of Japanese society and some of the components of sovereign power over immigration control in Japan have been influenced and reshaped by their existence. Problems arising from having a large number of foreign residents in Japanese society tend to rise to the surface where the existing social system has not yet accommodated the requirements of such non-Japanese. They include, for example, various social services such as education for foreign children and health insurance. The main dilemma for the government is that, although it possesses

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exclusive authority to define its nationals as well as to control the entry of non-nationals like any sovereign state, because non-nationals reside in Japan for long periods of time and eventually create precedents as ‘residents’, the government inevitably becomes more and more accountable to all its residents, regardless of their nationalities, as increasing focus comes to be placed on their human rights. Issues related to medical care and health insurance schemes for foreign residents illustrate this dilemma. Medical care and social insurance schemes for foreigners The increase in the number of foreigners working in Japan in recent years has raised awareness of the problems associated with medical care for foreigners and the linkage to the pension and social insurance schemes. In the field of medical care, there are basically two kinds of public health insurance programme, i.e. National Health Insurance (kokumin kenkō hoken) and Health Insurance (kenkō hoken), neither of which requires the applicant to possess Japanese nationality to be eligible for membership. However, according to survey results in 1992, only 46.7 per cent of foreigners who had undergone a medical examination in surveyed medical institutions were covered by public medical care insurance, and private insurance such as overseas travel insurance covered only 1.4 per cent of foreigners (Administration Inspection Office 1992:185, cited in Mori 1997:197–8). The National Health Insurance programme is managed by local governments and is funded by insurance premiums and National Treasury disbursements. Coverage has been limited to those who have fixed residence and those who have been in Japan for a period of longer than one year or who intend to stay in Japan for a period of longer than one year. Foreigners who are most likely to be covered under this insurance are those with the formal residence status of ‘college student’, ‘pre-college student’, ‘dependant’, individuals engaged in ‘cultural activities’, ‘spouse or child of Japanese nationals’ or ‘permanent resident’. The management of the Health Insurance scheme is provided principally by the government, but some large companies have their own independent schemes managed by different health insurance societies. Enrolment in the Health Insurance scheme is conditional on being employed full time, or semi-full time, and requires the applicant’s employer to join the scheme in order to obtain coverage for his or her employees.5 Foreigners who qualify for insurance under this scheme are typically Nikkeijin and a small number of skilled transients working for transnational corporations in the fields of finance, information, media, IT, fashion and a range of new industries. Compared with the National Health Insurance programme, Health Insurance can be considerably more beneficial for workers since the percentage of medical fees not covered by the Health Insurance is normally smaller than is the case with National Health Insurance. However, under the current law, although Health Insurance is mandatory for employers in companies with more than five employees, it is often the case that a large number of both employers and foreign employees have been rather reluctant to join the Health Insurance scheme for various reasons. One source of reluctance is that, if employees are illegal foreign workers, their employers tend to avoid employing such workers under formal contracts for fear of being punished for being party to illegal employment under the revised Immigration Control

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Act. Another source of reluctance is that this insurance entails cost to the employer. Even among legal foreign workers, such as Nikkeijin, it is often the case that they avoid the Health Insurance scheme and use the National Health Insurance instead. This is partly because around 60 per cent of Nikkeijin are employed under indirect employment contracts and many dispatching companies do not insure them through Health Insurance in order to minimize expenditure as well as to minimize the cost of employing each Nikkeijin worker in order to improve competitiveness, particularly during the recession. Another major reason for the reluctance to join the Health Insurance scheme is that all employees covered by this scheme are also required to contribute part of their monthly pay to the national pension fund (kōsei nenkin). Basically, two types of pension scheme are available in Japan – kokumin nenkin and kōsei nenkin – and there is no nationality clause in relation to either. The kokumin nenkin programme is for those who are covered by the National Health Insurance scheme. Until 1995 it was possible to apply for National Health Insurance and kokumin nenkin separately. In the case of kōsei nenkin, however, not only are all employees covered by the Health Insurance scheme required to contribute part of their monthly pay to this pension fund, but they also have to contribute a percentage of their monthly wages over more than twenty-five years in order to qualify for a pension. It is only at the age of sixty-five that the individual can start enjoying the benefits of the pension scheme; hence the majority of foreign workers are obliged to pay premium instalments with no prospect of a refund (Tezuka 1995:259). This system has appeared to be both a complete waste of money and anachronistic not only for Nikkeijin workers but also for foreign skilled transients such as managers, financial experts, technicians and intra-company transferees who often reside in Japan for a maximum of a few years, moving to other financial centres around the world. For the reasons described above, in areas such as Hamamatsu city in Shizuoka Prefecture and Toyohashi city in Aichi Prefecture, where large numbers of Nikkeijin reside, those employed by companies located in these areas have applied for National Health Insurance funded by their local governments instead of joining the Health Insurance scheme. As a result, some local governments, particularly those which do not receive significant tax revenue from local companies, have begun to face financial difficulties and, as a result, the local authorities in these areas have started to refuse to register employed foreigners in this scheme. As a result of a combination of international pressure and criticism from the public as well as from local governments, in February 1994 the Ministry of Health and Welfare produced a partial reform of the National Pension Law and the national government began to introduce refunds under the new pension scheme in April 1995. Under the new pension scheme, non-Japanese workers who contribute to the pension programme for at least six months become entitled to a lump-sum reimbursement when they leave the country. The refunds, to be paid within two years of employees returning to their home countries, are allocated on the basis of six-month employment intervals up to three years. Foreigners who work in Japan longer than three years are entitled to a maximum refund of three years’ worth of pension contributions. This limit on refunds is based on immigration data in 1991 showing that more than 90 per cent of foreign workers stay in Japan less than three years. Based on the maximum monthly employee premium of

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38,425 yen, the maximum refund for three or more years of employment would be about 1.38 million yen. At the same time, the government introduced a new regulation regarding the National Health Service that from April 1995 requires those who apply for National Health Insurance to be enrolled in the kokumin nenkin as well. As a result, the percentage of Brazilian residents in Hamamatsu city who were covered under the National Health Insurance scheme in March 1996 dropped substantially to 16.5 per cent from 59.3 per cent in the previous year (Miyajima and Higuchi 1996:32). However, a decrease in the number of Brazilian residents who are on the National Health Insurance scheme does not necessarily imply an increase in the number of those who transfer to the Health Insurance scheme. Quite often they do not have any insurance, so frequently the whole process becomes a vicious circle for the local authorities. In 1997 only two-thirds of the total number of companies employing foreign workers had joined the Health Insurance scheme in Hamamatsu (Asahi Shinbun 19 July 1997). An estimated 270,000 overstayers had no medical coverage until recently. Since 1990, the limited access to medical treatment available for overstayers has caused serious financial and ethical problems in relation to medical care in Japan. Typically, overstayers try to avoid going to hospital as far as possible for fear of having to spend large amounts of money to cover medical expenses. When they do have to visit a hospital, their medical condition tends to be very serious and require urgent treatment. A significant number of overstayers do not pay incurred medical expenses, either as a result of inability to pay or from unwillingness to do so. Consequently, although medical institutions are not allowed to refuse medical treatment without justification, some hospitals are turning away foreigners without medical insurance even if they are taken to hospital as emergency cases for fear of having to shoulder large unpaid medical bills. The burden of unpaid medical bills falls hardest on hospitals and doctors who have complied with the laws governing essential and emergency treatment. In fiscal year 1994 (from 1 April 1994 until 31 March 1995), defaulted fee payments involving foreign patients totalled 162.4 million yen at the national level. In response, the Ministry of Health and Welfare did not provide any formal measures until 1996. Instead, it has been local governments and some NGOs that have been prompted to action by calls from the practitioners and agencies actually providing the medical care. Some local governments, such as the Tokyo metropolitan government and Chiba, Saitama and Gunma Prefectures, have started a system of partially compensating medical institutions for unpaid medical care expenses owed by overstayers and some NGOs have organized voluntary mutual aid schemes. However, since 1996 the Ministry of Health and Welfare has operated a scheme of partially compensating medical institutions for the unpaid medical care expenses of overstayers. Also, the government has enacted a law requiring that employers must join the Health Insurance scheme regardless of their employees’ legal status, even though the very act of employing foreigners who have overstayed their visas is illegal. This case provides an example of the central government being forced to restructure national financial arrangements in relation to health insurance under the pressures of globalization and through consideration of universal values, i.e. the human rights of all residents, whether citizens or not. It also illustrates the government’s dilemma in trying to

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strike a balance between appropriate immigration controls and guaranteeing social welfare for non-Japanese residents in a globalized welfare society. Conclusion In response to the pressures of globalization, a number of central issues confront the Japanese government in relation to foreign migration: first, the regulation of legal immigration; second, the establishment of effective measures to stop the influx of illegal migrants; and, third, the integration of foreign residents who stay in Japan as long-term residents and recognition of the reality of ethnic diversity in a process of social and cultural change, and the associated consequences for the nation state. The government welcomes skilled transients, the majority of whom are Westerners, in order to keep up with the advanced Western countries, to participate in the global economy, and to learn Western culture and the English language under the banner of the internationalization of Japanese society. This point was confirmed by the report of the Prime Minister’s Commission on Japan’s Goals in the Twenty-first Century (2000) submitted to Prime Minister Obuchi in January 2000. With regard to the illegal foreign workers, in circumstances such as those pertaining at present, where additions to the workforce are not necessary, the biggest task for the government is to regulate illegal migration. The government has continued to introduce stricter controls over foreign illegal workers and the latest revised Immigration Control Act, effective from 18 February 2000, has made illegal entry and stay in Japan a criminal offence and has extended the period of refusal of landing against foreigners who have been previously deported from Japan from one year to five years. However, so far, there is little indication that these control measures are proving effective. The measures seem to work against the power of globalization, which is leading towards greater economic and cultural interchange. In spite of the current economic recession, there has been no sign to indicate that a large number of foreign workers have been driven into a situation of extensive unemployment, and the number of overstayers has been constant at over 270,000 throughout the 1990s. This trend may stem from the fact that they cannot make substantial amounts of money to take home because of the long recession, and/or, regardless of the economic climate, a certain number of foreign workers willing to work in the 3D types of jobs are always required. Furthermore, in the labour market, they are often employed by subcontractors requiring a low-wage and flexible workforce. Particularly in the present weak economy, employers tend to rely more on short-term contract workers and outsourcing since it is cheaper and easier subsequently to make these employees redundant upon completion of specific projects. There is also a recognition within certain business sectors that foreign workers, both legal and illegal, are supporting vital areas of the country’s economy and that their removal would have an adverse economic impact on the businesses in which they are employed. As a result of the importation of unskilled foreign labour through informal labour importation mechanisms, a diverse collection of foreign workers employed under differing legal constraints has been created. Some of these foreign workers, principally the Nikkeijin, have come to reside in Japan much longer than the government initially

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expected and the overall picture of foreign residents in the 1990s shows that society is becoming increasingly multi-ethnic and has many different characteristics from that of previous eras. Combined with the development of their ethnic networks, accelerated by global communications and ethnic media, foreign residents are coming to be viewed as an integral element of society while developing their transborder networks. These changes are sure to have an impact on the identity of these migrants and, at the same time, it makes the relevance of national boundaries less significant, creating a sense of a ‘globalized family’ where the household is not so much a residential unit as a network of exchanges. This global character of international migration will make the assimilation of foreign residents into Japanese society almost impossible to achieve. Although Japan may still wish to see itself as closed and ethnically homogeneous, Japanese society today paints a different picture, pointing towards the emergence of a society in which multiple cultures and affiliations going beyond the nation state are being syncretized in a complex way. For the Japanese, the existence of foreign workers as ‘residents’ may be seen as the internal globalization of society and the identity of the Japanese people. Traditionally, the Japanese people have been territorializing their identity on the basis of myths of ethnic purity and of cultural homogeneity. The current situation in which transnational identities have been increasingly proliferating will certainly represent a threat for the Japanese people and will eventually erode their national identity or may create countervailing tendencies such as racism. At the same time, problems that arise from the presence of foreign workers as residents in local communities, such as those relating to social welfare and medical care for foreigners, have had a significant impact on the existing social and political infrastructure and eventually have led to reform of some of Japan’s social and economic policies. This aspect can be interpreted as the internal globalization of the state infrastructures. Japan has been widely known as a country adopting an exclusive attitude towards immigration issues. Under the pressures of globalization, the Japanese government has reached the stage where it has to juggle various issues, such as the country’s labour force requirements, the global pressures that drive individuals to migrate, the determination to preserve a society with a high degree of homogeneity, and the need to establish a more universal infrastructure to cope with non-Japanese residents. The government feels besieged, but attempts to continue to regulate immigration policy to accord with, or operate against, the forces of globalization. This inescapable trend towards globalization will force the government to keep reviewing and adjusting its existing systems and practices, and to adopt a more global perspective. Notes 1 These employers and brokers are fined up to a maximum of 2 million yen and/or are imprisoned for up to a maximum of three years. 2 The Technical Intern Training Programme consists of an initial training period followed by practical skills training. During the period of practical work training, the trainees have an employment contract and are covered by all labour-related laws, including the Labour Standards Law. They also receive wages. 3 Prior to the revision of the Immigration Control Act, the restriction imposed on pre-college students was that they could work up to twenty hours per week. However, since the revision,

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the restriction regarding the number of hours pre-college students are permitted to work has been tightened. Also, they are not allowed to start working immediately upon entry into the country, and have to wait at least three months before starting work. They are not allowed to work in places related to the entertainment and sex industries such as cabaret clubs, night clubs, dance halls, bars, pachinko parlours, strip theatres, adult shops and game centres. See Editorial Section of Kokusai Jinryū (1995:21). 4 The number of foreign students qualified to take the standard entrance examinations had fallen to 2,944 in fiscal year 1995 from 3,280 in the previous year (Mainichi Daily News 17 April 1996). 5 Here, the term ‘employees’ indicates those who are employed by a company, other than a public institution, where more than five employees work (Tezuka 1995:250).

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—(1996b) ‘Heisei nananen chū ni okeru ryūgakusei nado no nihon kigyō e no shūshoku’ (Employment of foreign students and foreign pre-college students by Japanese companies in 1995), Kokusai Jinryū 9, 11: 36–43. —(1997) ‘Honpō ni okeru fuhō zanryūshasū’ (The number of overstayers in Japan –1, July 1997), Kokusai Jinryū 10, 12: 24–7. —(1998) ‘Honpō ni okeru fuhō zanryūshasū’ (The number of overstayers in Japan – 1 January 1998), Kokusai Jinryū 11, 4: 40–3. —(1999a) ‘Honpō ni okeru fuhō zanryūshasū’ (The number of overstayers in Japan – 1 January 1999), Kokusai Jinryū 12, 5: 60–1. —(1999b) ‘Heisei jūnen matsu genzai ni okeru gaikokujin tōrokusha tōkei’ (Statistics on foreigners with alien registration, December 1998), Kokusai Jinryū 12, 7: 19–21. —(1999c) ‘Heisei jūnenchū ni okeru ryūgakusei nadono nihonkigyō eno shūshoku’ (The employment of foreign college students and pre-college students in Japanese firms in 1998), Kokusai Jinryū 12, 8: 34–7. —(1999d) ‘Kenshū, ginōjisshū seido no genjō to kongo no arikatanitsuite’ (The current situation of the Foreign Trainee Programme and the Technical Intern Training Programme and their future prospects), Kokusai Jinryū 12, 9: 2–23. —(1999e) ‘Honpō ni okeru fuhō zanryūshasū’ (The number of overstayers in Japan – 1 July 1999), Kokusai Jinryū 12, 11: 26–8. Miyajima, T. (1996) ‘Joshō, gaikokujin kara shimin e – taizai no chōkika to chōkiteki shisaku no hitsuyōsei’ (Introduction: from foreign workers to citizens – longer periods of stay and the necessity to provide medium-term measures), in T. Kajita and T. Miyajima (eds) Gaikokujin Rōdōsha kara Shimin e – Chiiki Shakai no Shiten to Kadai kara (From foreign workers to citizens – based on the viewpoint and issues of local communities), Tokyo: Yūhikaku. Miyajima, T. and Higuchi, N. (1996) ‘Iryō, shakaihoshō – seizonken no kanten kara’ (Medical care and social security – the right to a minimum standard of living), in T. Kajita and T. Miyajima (eds) Gaikokujin Rōdōsha kara Shimin e – Chiiki Shakai no Shiten to Kadai kara (From foreign workers to citizens – based on the viewpoint and issues of local communities), Tokyo: Yūhikaku. Mori, H. (1997) Immigration Policy and Foreign Workers in Japan, London: Macmillan. Prime Minister’s Commission on Japan’s Goals in the Twenty-first Century (2000) The Frontier Within: Individual empowerment and better governance in the new millennium. Online. Available http://www.kantei.go.jp/jp21century/index.htm (accessed 18 November 2000). Tezuka, K. (1995) Gaikokujin to Hō (Foreigners and the law), Tokyo: Yūhikaku. Weiner, M. (1998) ‘Opposing visions: migration and citizenship policies in Japan and the United States’, in M. Weiner and T. Hanami (eds) Temporary Workers or Future Citizens? Japanese and US migration policies, London: Macmillan.

12 Political integration of foreign communities in Japan The right to vote issue Eric Seizelet Introduction During the 1990s, Japan progressively entered the era of internationalization, kokusaika. In this process, the growing penetration of Japanese society by the outside world caused a range of concerns to be raised about the social implications of internationalization or, more precisely, globalization (gurōbaruka). One of the most important trends in the contemporary era is the extensive flow of populations. Until the 1980s, flows of populations involving Japan were comparatively limited and asymmetrical: they were partly viewed as the unavoidable consequences of kokusaika, but both the inflow and outflow of people for tourist or business purposes were not demographically significant and did not affect the core of Japanese society itself. Social interactions with foreigners living in Japan were geographically limited to urban areas, and contact, if any, was based on a more individual or personal type of relationship than through collective or organized channels. Foreigners as individuals and as groups were not really moulded into Japanese society. Their presence was largely hidden owing to their lack of social and physical visibility in the Japanese people’s daily environment. Nowadays, however, this no longer holds true. In 1998, foreigners in Japan represented 1.20 per cent of the total population of the archipelago. This percentage is certainly low compared with the proportion of foreigners living in Western countries, but it indicates that cultural and geographical distance is no longer an obstacle to migratory flows in East Asia. New issues are emerging which challenge the still-dominant discourse on the homogeneity of Japanese society. One of these crucial issues is the status and condition of more diversified groups of foreigners. Immigration procedures, the situation of foreign workers, the control and management of foreign criminality, the access of aliens to the benefits of Japanese social protection and health systems, the education of foreigners, and so forth, are problems now confronting Japanese society. Many of them have already drawn the attention of scholars, chiefly emphasizing that Japanese culture, because of the prevalence of holistic norms, fosters a weak sense of legitimacy of outsiders’ rights and encounters difficulties in providing equal treatment to social and foreign minorities. If the general mood this generates is not exclusively pessimistic, most of them, perhaps echoing a general tendency in Japan itself, pointed out – if not denounced – the dysfunctional features of the globalization process such as illegal migrants and overstayers, the steady growth of foreign criminality, the unresponsiveness of the school system and the huge inadequacies in medical care and labour insurance.

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But a new approach is now necessary in order to grasp the evolutionary change of Japanese society from a broader perspective. What is being called for is a complete reappreciation of the relationship between foreigners and Japanese society. On the one hand, granting political rights to foreigners can be considered as the ultimate stage on the way towards naturalization. On the other, however, political participation and nationality are not necessarily connected. What is true is that, in either case, political participation plays an important role in the process of integrating foreigners into Japanese society because of its ‘inclusionary’ nature. While economic and social rights do not necessarily lead to the recognition of the right to vote (sanseiken), the latter without the former is hardly conceivable. The third and perhaps most problematic question concerning the sanseiken issue in Japan is that ‘global’, ‘national’ and ‘local’ considerations overlap with each other. From the global point of view, nation states retain the ultimate power of decision after bilateral or multilateral negotiations or through the procedures set in place in domestic society for political accommodation. In this respect, globalization describes a process whereby political participation is viewed as an integral and prominent part of a set of democratic values that transcends the national framework, but needs it to be asserted and implemented through the judiciary within each nation state. Localism labels the interactions of competitive and separate identities – national and ethnic groups – which interfere within a polycentric society in the definition of a more decentralized citizenship. This chapter aims to analyse how these three dimensions are intertwining to forge a new political consciousness at a time when paradoxically representative democracy is facing a major credibility crisis in Japan. The 1947 Constitution and aliens’ political rights The classical approach: restrictive rights under popular sovereignty As far as the Constitution is concerned, the leading interpretation is that Chapter III on ‘Rights and Duties of the People’ must be applied to aliens, too: first because this chapter gives voice to fundamental and inviolable rights bestowed upon every human being as an expression of individual dignity; and, second, because of the provisions of the Preamble of the Constitution on international cooperation and friendship. Subsequently, as a rule, foreigners enjoy constitutional protection. Japanese courts have also admitted that aliens, whether legal or not, receive legal protection ‘as normally invested with fundamental rights deriving from their quality as human beings’, and ‘are analogically placed under the equal protection of the law, except under special circumstances’.1 Nevertheless, this does not mean that foreigners enjoy all of the rights provided under the 1947 Constitution. According to the seishitsu setsu doctrine – the differentiation of rights based on their nature – a distinction has to be made between the rights that might be granted to aliens and those which are obviously reserved to nationals. To be sure, aliens may enjoy freedom of political expression which belongs to political and civil liberties as a substantial part of any democratic order.2 In the McLean case, the Supreme Court contended that the constitutional guarantee does not extend to ‘those activities that are deemed to have an effect on the execution or the political will and decisions of the state’, which derive from popular sovereignty. It

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thereby upheld a restrictive interpretation of the right of political expression.3 As a matter of fact, this formulation is rather vague, since the Supreme Court decision makes no distinction between peaceful and violent forms of political protest. Besides, it can be said that the scope of authorized political activities by aliens is quite limited. Some commentators argue that the Supreme Court decision applies mostly to organized political activities aimed at promoting constitutional revision or influencing the decisionmaking process with the support of one’s homeland country. But this narrow interpretation does not really square with the terms of the decision (Hagino 1985:9). The same conclusion must be drawn concerning the right of petition. If neither the Constitution nor the 1947 Petition Act contains any provision excluding foreigners, it seems that the contents of such petitions fall under similar limitations, notwithstanding the position of those stressing that, since the government is not legally bound by them, petitions related to matters even affecting the political will of the state might be tolerated (Tezuka 1995:182). Furthermore, the Constitution makes no substantial difference between the terms ‘people’, kokumin (Article 15–1), and ‘inhabitants’, jūmin (Article 93– 2). Kokumin designates the community of Japanese citizens invested with electoral rights. Jūmin merely inserts this community into defined geographical boundaries serving as the basis for the local autonomy system. As a result, foreigners are legitimately deprived of voting rights at both the national and local levels. The reason for this exclusion lies in a territorial definition of popular sovereignty. Popular sovereignty cannot be conceptualized outside the national framework structuring the relationships between the governed and the governing. The smooth functioning of a democratic system requires that the political actors share the same identity and cultural indivisibility, thus precluding all modification of the electoral laws extending electoral rights to aliens as a breach of the Constitution (Kojima 1989:156; Itō 1990:197; Ōishi 1994:17). A new environment favouring the recognition of the rights of aliens Foreign residents fight over the sanseiken issue In the context of the increased pace of globalization, the end of the 1980s marked a significant change in both the general attitude towards aliens rights and foreigners’ selfconsciousness. Foreign residents became more assertive in claiming their rights and less inclined to comply with regulations and rights unilaterally fixed by the Japanese bureaucracy. Since the mid-1980s, even if social discrimination is far from having been completely eradicated, from a strictly legal point of view, restrictions on social welfare benefits, national health insurance programmes and pensions have been progressively lifted following the Japanese government’s ratification of the International Covenant on Civil and Political Rights (ICCPR) and the Convention Relating to the Status of Refugees in 1979 and 1982 respectively. International precedents played also a major role in the reshaping of the traditional link between citizenship and nationality. Most of those supporting the introduction of suffrage for foreign residents in Japan point out that, in the EU, along with the enforcement of the Maastricht Treaty, through legislative or constitutional revision, the decision has gradually been taken to open voting rights to

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foreign residents, and more particularly to ‘all the citizens of the European Union’, at least at the local level. Of course, in both cases the political context is quite different. Nevertheless, in the context of globalization foreign residents in Japan have gained a symbolic measure of recognition due to these evolutions in other parts of the world. This can be seen, for instance, in the reform of the fingerprinting system and the rectification of administrative practices imposing ‘the nipponization’ of foreign patronymics for civil registration. This trend is all the more impressive since new demands have been presented which, at heart, are highly controversial. Foreign residents are no more satisfied by any form of social integration – even incomplete – without participation. Foreign residents want wider access to local civil service posts and are campaigning for the deletion from local regulations of the nationality clause excluding aliens from local public service employment (Okazaki 1997:2–5). Furthermore, the discussion over foreigners’ suffrage has been brought to the courts for judicial scrutiny. This evolution fostered both psychological and political mobilization over the sanseiken issue. In December 1992, a survey conducted by the municipality of Kawasaki on this topic among the foreign residents yielded the figures given in Table 12.1. In this way, the survey reveals that a large majority of respondents evince a positive feeling about local sanseiken which is loosely connected with their length of residence. This means that political awareness among old-comers, such as long-time Korean residents, is stronger than amongst newcomers from Asia and other parts of the world. Other findings from prior surveys reveal that for nearly

Table 12.1 Which rights do you deem necessary? (%) Absolutely necessary

Rather necessary

Not necessary

NA

Right to elect municipal assembly members 29.8 and mayors

30.1

23.8

16.2

Right to petition municipal assemblies for local regulation, jōrei

28.0

33.0

18.2

20.8

Right to become member of municipal councils without any condition of nationality

40.0

29.8

16.4

13.8

Source Miyajima and Kajita (1996:113)

three Koreans out of four there is a marked preference for political rights over naturalization, even if the younger generation is less hostile to it (So 1992:24–6). The Korean community has been traditionally split between the pro-Seoul Mindan and the pro-Pyongyang Chōsen Sōren. The two diverge on this particular issue. To sum up, the latter judges that awarding local electoral rights to foreigners is merely a ‘smokescreen’ aimed at diverting the public’s attention from the actual discrimination against Koreans in Japan. The Chōsen Sōren strongly opposes any measure violating the principle of non-interference in Japan’s internal affairs, leading to the dissolution of Korean identity and finally worsening the divisions among Korean natives living in Japan

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(Kimu 1994:267). The former organization was also previously reticent on this issue but, in October 1986, individual officials of the Mindan began presenting the first requests about sanseiken to local authorities. Since the 1990s, moreover, the Mindan’s official stance on the political rights of foreigners has become more flexible. Unlike Chōsen Sōren, pro-Seoul groups now view local electoral rights as paving the way for the eradication of administrative, social and housing discrimination. This position is shared by the South Korean government (Okazaki 1995:6). As a whole, it can be noticed that individuals rather than organizations are playing a more active role in the promotion of foreigners’ rights. This indicates that the capacity of these formal groups to continue to structure old-comers’ individual behaviour is weakening: according to a survey by Kawasaki Prefecture in 1983, 82 per cent of the Kankokusekisha (Supporters of Seoul) and 79 per cent of Chōsensekisha (Supporters of Pyongyang) declared themselves in favour of local suffrage (Ri 1993:38–40). In short, in so far as big cities are concerned, foreign residents can be seen to want access to broader forms of administrative and political participation as well. Forms of actions: from petition to litigation One other concern is to determine the optimal form of action in order both to diffuse the information about foreigners’ political rights among the public and to sensitize local bureaucracies to the issue. It is clear that this objective depends largely on the degree of commitment on the part of municipalities and prefectures in promoting policies supportive of foreign residents. The Kanagawa Prefecture is a good example of a local entity that has carried out a large range of policies relating to foreign communities. As a result, it is predisposed to pay greater attention to their claim for fuller involvement in the decision-making process. Here the demographic data on residential distribution provide an important clue. For example, foreigners account for more than 1.7 per cent of the population in Kawasaki, but only less than 0.5 per cent in Kagoshima Prefecture. It was the latter prefectural assembly which, in April 1996, became the first local institution to reject a petition on local sanseiken. Second, the possibility of a political party solely devoted to the defence of foreigners’ rights being founded is highly doubtful. Surprisingly, Japanese law neither prohibits the creation of political organizations by foreigners nor excludes them from election campaigns. But these activities might be subjected to legal restrictions. Yet, since the revision of the Immigration Control Act in June 1991, these limitations no longer apply de facto to ‘the special permanent residents’, tokubetsu eijūsha, a category which designates Koreans and Taiwanese living in Japan for generations. This measure in a way facilitated the creation in 1992 of a new political organization called Zainittō,4 but its activities were hampered by both the electoral law, which does not allow foreigners to stand for election, and the provisions of the law regulating political funds, which forbids donations from foreigners. Moreover, it is questionable whether a political party mainly founded along the lines of ethnic affinities could succeed in attracting a larger electorate to its cause. Alternative political tactics might be more efficient in the longer term. The Liaison Conference for Claiming Local Political Rights for Foreign Residents (Teijū Gaikokujin no Chihō Sanseiken o Motomeru Renrakukaigi), created in 1995, brings together three citizen groups and Japanese intellectuals. The goal of this conference is to influence public opinion and to

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campaign for local political rights not only for residents from the former Japanese colonies, but also for newcomers whose length of residence in Japan exceeds five years. More recently, the Kawasaki Council of Representatives of Foreign Citizens (Gaikokujin Shimin Daihyōsha Kaigi) adopted during its first session in July 1997 a resolution asking for the suppression of discriminatory practices against handicapped children and foreigners concerning housing. It is important for these groups to convince public opinion of their capacity to enlarge their actions and concerns beyond the defence of their communitarian interests. Perhaps the most symptomatic and spectacular forms of action can be found in the litigation campaigns launched since the late 1980s. In November 1989, September 1990 and February 1993, one British and two groups of Korean residents brought a series of civil and administrative suits against both the state and local election commissions in Osaka District Court. In May 1991, another administrative suit was instituted by four Korean residents in Fukui District Court. In those three cases, the plaintiffs contended that the Japanese electoral laws subjecting voting rights to the holding of Japanese nationality were unconstitutional because they deprived foreign residents of any form of political participation. The instrumentalization of the judiciary in order to obtain legal recognition of new rights is a well-tried method by Japanese citizens, who use the socalled ‘contemporary type trials’, gendaikei soshō, to influence public policies through judicial procedure. Consequently, through trials procedures, foreign residents do not seek to obtain selfish satisfaction, but by placing the issues at stake in the context of the Constitution, they rather attempt to legitimize their action as decisive for the functioning of Japanese democracy. From this perspective, the court appears as a place for the universalization and publicization of conflict with the purpose of weighing on public policies regardless of the concrete decision made by the judge. The reactions of Japanese public opinion: between understanding and demur From the beginning of the 1990s, Japanese society as a whole seems to be more receptive to the claims of foreigners to greater equality of rights with nationals, including political rights. In 1993, for instance, the local Assembly of Kishiwada city (Osaka Prefecture) adopted a motion calling for the ‘strengthening of foreigners’ human rights including political rights at the local level for foreign residents’, and as of November 1995, 800 local bodies had passed similar motions. Although Japanese public opinion is still divided on this issue, according to recent surveys 47 per cent of respondents said they were favourable to local sanseiken, whereas 41 per cent remained hostile, mainly because they think that foreign residents could vote in their home country.5 Significantly, attitudes vary according to sociological variables such as age and location: younger people under thirtyfive years old and respondents from the KantŌ and Kinki areas exhibit much more positive attitudes toward foreigners’ sanseiken, respectively 60 per cent, 48 per cent and 57 per cent, than older generations and rural districts. This attitude can be easily explained. First, since the 1990s, Japanese politics unusually combined at the national level a high degree of political disaffection and distrust with relative instability in the cabinets. Simultaneously, political and administrative reforms advocated by successive

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governments throughout the last decade popularized decentralization as a way of stimulating local autonomy, which had been undermined by the long-lasting dominance of the LDP and dependence on the central government. The conjunction of these two factors resulted in the unforeseen development of new forms of grass-roots political mobilization through referendums and other forms of ‘direct democracy’, as seen at Maki (August 1996), Okinawa (September 1996), Mitake (June 1997), Kobayashi (November 1997) and Nago (December 1997). While citizens feel alienated by national politics dominated by corrupt elites in Tokyo, local inhabitants have begun to believe that their votes enable them to influence the local decision-making process, even on matters of national importance. In this sense, municipalities and prefectures embody the people’s aspirations to broaden participation in politics at the local level, as these aspirations are no longer fulfilled at the national level. Thus, if the ‘will of the people’ has to be reflected in local politics, foreign residents might be associated, under certain conditions, with the formation of the people’s will. The second reason lies in changes of governance in local political authorities generated by the more diversified and heterogeneous social composition of local communities. The smooth implementation of public policies is a common preoccupation of local legislatures and executives in any country. It requires an accurate evaluation of the needs of the population and efficient channels of communication and representation, especially in areas where foreign populations are concentrated. This explains why since 1991 big cities and megalopolises such as Tokyo, Kyoto, Osaka, Kobe and Kawasaki have created municipal or prefectoral services specialized in the management of affairs relating to foreign populations, or even encouraged the opening of local advisory bodies for aliens (Hirota 1995:91). In this respect, in December 1996, the Kawasaki township installed the aforementioned Council of Representatives of Foreign Citizens, placed under the direct supervision of the mayor.6 Most of these forms of administrative association can be considered as temporary substitutes for a system of political participation. New developments in legal scholarship and case law The widening spectrum of scholarly interpretation: from interdiction to recognition Foreigners in Japan do not compose a monolithic bloc. Without speaking of refugees, the first category refers to the inflow of people who came to Japan under special economic or monetary circumstances – endaka (‘high yen’), for instance – which make the country more attractive, especially since the mid 1980s. Their stay in Japan is temporary and they are not expected to show any willingness to settle. The second category includes foreign residents. Whatever their motivations and the background to their presence in Japan, alien residents in this category have no other place to live. In this case, their settlement in the host country appears to be definitive. Clearly, the social positions of those two categories are not similar and justify different legal treatment. Thus, even if political rights might be denied to the former, what about the latter? To be sure, the political integration of foreign residents introduces a break between nationality and the mechanisms of power selection,

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but changes in Japan’s legislation have already introduced more fluidity. In June 1991, by amending the Immigration Control and Refugee Recognition Law, the Japanese government opened to the Nikkeijin (second-generation Japanese) the possibility to exercise political rights at both the national and local levels. Even if the exercise of political rights remains closely linked to a fictionalized jus sanguinis in order to take into account the peculiar situation of Peruvian and Brazilian descendants of Japanese emigrants, Japanese nationality, as such, is no longer an absolute and exclusive criterion for the attribution of voting rights (Okazaki 1994:106). This explains why some scholars have proposed adopting the concept of denizenship used by a Swedish researcher, Tomas Hammar, which designates an intermediate status between citizens and aliens. This third option might thus be a valuable alternative either to naturalization synonymous with complete assimilation or to the indefinite prolongation of a frustrating ‘otherness’ (Kondō 1996:117–42). Given this context, some legal scholars have put forward the so-called ‘restrictive acceptance doctrine’, kyoyō setsu, based on the constitutional notion of ‘inhabitants’ (Article 93). According to that theory, which occupies a dominant position amongst Japanese legal scholars, foreigners are not to be excluded from the scope of jūmin, because the definition provided by Article 10 of the Local Autonomy Act is founded on the concept of residence and not that of nationality. This explanation relies primarily on a distinctive understanding of constitutional democracy as embodying a dual legitimacy: ‘legitimacy from above’ and ‘legitimacy from below’. The former, which guarantees that all power in the state derives from the popular will, does not impede the emergence of the latter by which local entities are not mere organs of the state but also the depositories of the inhabitants’ will at the source of local power. Another assertion is that the protection of human rights in Japan is based on a double structure of power: state and local bodies. People, kokumin, receive protection under the first and jūmin under the second. In short, ‘people’ and ‘inhabitants’ cover two distinctive legal definitions. In this case, the recognition of foreign sanseiken does not raise any constitutional difficulty, so long as it comes within the discretionary jurisdiction of legislative power. The consequence is that local assemblies are not allowed to take any initiative on their own by solely passing an ordinance, jōrei. Given the importance of the matter, a Diet decision seems congruent with this body’s constitutional position as the ‘highest organ of state power’. But once this legislative input has been taken on the national level, a local jōrei providing the details of the conditions thereof would be possible. For most of these commentators, foreigners’ voting rights should apply first at the lower level of the local administrative system, namely urban and rural municipalities, which are directly in charge of the current needs of the population (Nagao 1988:177; Nakano 1992:211–12 ; Takada 1992:91–3). Nevertheless, most remain reluctant concerning the opportunity of providing eligibility rights. Since local assemblies as well as the chiefs of local executives, in their respective roles, are participating in the formulation of the legal will of the state, aliens have to be excluded from eligibility. For other commentators, the foregoing restrictions should be more strictly extended to include the positions of mayors and governors. The reason is straightforward: in so far as agency-delegated matters are concerned, local executives are still placed under the direction of the national government (Shiyake 1993:52–4; Nakamura 1984:29–33). As to

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the distinction between the prefectoral level of administration and other inferior local entities as suggested by some district court decisions, one could object that when prefectoral elections and other local elections are held on the same day, at least the political mobilization and participation of foreign citizens would significantly decrease if they were allowed to vote only in municipal elections. Besides the restrictive acceptance doctrine, a minority of commentators have begun to advocate a new and perhaps somewhat excessive explanation, the ‘constitutional requirement doctrine’, yōsei setsu. This is the position broadly alleged by the plaintiffs in most of the cases hereafter studied. This doctrine rests on the universal values enshrined in the 1947 Constitution. It highlights also the specific status of foreign residents in Japan. Substantially, popular sovereignty is not connected with nationality, but refers instead to democratic values, such as self-determination and reliance. Therefore, when the Constitution refers to ‘Japanese people’, Nihon kokumin, this expression means all of the people living in Japan. In this way, the doctrine refutes all of the political arguments launched against an alien’s right to even limited sanseiken. Thus, there is no evidence that foreign communities having settled in Japan might be engaged in subversive activities or are still maintaining a strict feeling of loyalty toward their home countries. Should these ‘new citizens’ cultivate exclusive ethnic solidarities to compensate for their minority position, they would have few chances to be elected. The lack of reciprocity has been advocated by the Ministry of Local Autonomy as an argument against sanseiken for foreigners. But nothing stands in the way of the Japanese government negotiating bilateral agreements about reciprocity. As far as the Koreans in Japan are concerned, however, their legal status has never been subject to such a condition. At least, bestowing political rights on the Korean minority should be praised as fair and an attempt to right the wrongs of history. Not only would this be a response to the way members of the Korean minority were deprived of their Japanese nationality after the war, just at the time Japan was opening itself up to democracy, but also Japan would face clearly its own historical responsibilities as a former colonial power. Logically, such views end up concluding that both the regulations on the electoral system and local autonomy are unconstitutional. By separating legal and social issues so that the particular situation of foreign residents in Japan is taken into account, supporters of the yōsei setsu emphasize that the government is now bound by a ‘political obligation’ to modify electoral regulations (Urabe 1994:45–51; Ebashi 1996:108–9; Hagino 1985:10–15). Anyway, because this approach jettisons any distinction between different kinds or levels of political rights and adheres to a vision of a sense of political representation based on people’s confidence and not on nationality, a call for political participation in the Diet elections is easily conceivable as well. An outline of the judicial review over aliens’ political rights: towards an open-door policy? So far, the Supreme Court has rendered three important decisions on this subject. The first one was handed down in February 1993. In this case, the Supreme Court dismissed the appeal (jōkoku) by a British permanent resident, Alan Higgs, who had not been allowed to vote in the 1989 House of Councillors election because of his nationality. Quoting the McLean decision, the Supreme Court stated for the first time that the

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provisions of the electoral law reserving the right of suffrage to Japanese nationals at the national level do not violate the Constitution. But the judgment did not reject outright the appellant’s statement advocating the special legal treatment of permanent residents. Nor did it enunciate, as a general rule, that giving voting rights to foreigners would be ipso facto contrary to the Constitution. This position was approved by a majority of legal scholars (Ōishi 1994:17; Yokota 1995:3).7 In another case in which a group of Korean permanent residents from the Zainittō could not stand for the 1992 elections to the House of Councillors because of the nationality clause, the Osaka District Court adopted a rather strict position. It held that no difference exists between the permanent residents (eijūkensha) and other aliens in regard to electoral rights, even on the grounds that the former are taxpayers. The appeal against this judgement was quashed by the Osaka High Court, which, however, admitted that ‘natives from the former colonies and their descendants have to receive treatment appropriate to their contribution and devotion to Japanese society, in consideration for the past and present unfair treatment endured that should be corrected as soon as possible’. But the court stipulated that this understanding applies only to ‘other human rights fields than political participation’.8 Concerning local political rights, the Supreme Court handed down in February 1995 a first and pivotal decision. In this case, a group of Korean residents had brought a suit against the decision of four election commissions in Osaka, which in September 1990 had rejected their call for electoral enrolment. In its unanimous decision, the Supreme Court overruled the plaintiffs’ appeal against the Osaka District Court. It did so by first reasserting the conventional stand on the political rights of foreigners, i.e. an understanding of citizenship tightly connected with nationality and deriving from popular sovereignty and a strict definition of the notion of jūmin restricted to Japanese nationals. Turning to the interpretation of Chapter VIII of the Constitution on local autonomy, however, the court continued: under a system of government enjoying constitutional guarantees and given the importance of local autonomy in a democratic society, the management of public affairs closely related to the daily life of the population by local entities in accordance with the inhabitants’ will is desirable. Consequently, among foreigners residing in our country, there are permanent ones, eijūkensha, about whom it may be attested that they are cultivating in their zone of residence close and particular relationships with local bodies. Thus, in order to make their will reflected in the management by local govern-ments of public affairs closely related to daily life, it is appropriate to conclude there is no constitutional ban on any legislative measure concerning the bestowing on them of electoral rights for both the election of local executive chiefs and members of local councils.9 This long quotation was necessary since the overall tone of the decision appears quite progressive. The reality is more complex, however. The decision confirms the interpretation adopted by some inferior courts since 1994 according to which aliens’ suffrage is an issue relevant to discretionary Diet policies.10 Similarly, these courts viewed foreign permanent residents as an ‘important component of the local fabric,

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widely contributing to its preservation and development’. The courts considered that the functions of local governments directly oriented to welfare policy have but a light political shading. In this respect, ‘from a democratic constitutional standpoint’, any statute revision providing for aliens’ political participation at the local level and founded on the present distribution of state power between the central government and local political authorities is consistent with the principle of popular sovereignty. In other words, the Japanese courts have here combined a classical analysis which leads to the prohibition of aliens’ suffrage with a more pragmatic approach seemingly inspired by the restrictive acceptance theory which pays attention to the legal implications of the settlement and long life of foreigners in Japanese society (Mukai 1994:19). Thus, the courts implicitly endorsed the distinction between ‘political elections’ and ‘administrative elections’. Moreover, since foreigners’ suffrage is a matter lying entirely within Diet policies, aliens have no legal ground to call for suffrage under the Constitution: the judiciary should not interfere with this Diet policy nor can it force the legislative power to take any initiative in this field. Significantly, according to the Supreme Court adjudication, the social and administrative recognition of the place of permanent residents within Japanese society does not necessarily lead to the acknowledgement of political participation. Two additional remarks must be made. Ratione loci, the Supreme Court decision does not indicate the administrative level – prefectoral or municipal – within which these rights could be exercised. Ratione personae, the Supreme Court explicitly refers to eijūkensha which, contrary to the term teijūsha, has a stricter legal definition. This particular status of residence is regulated by the Immigration Control and Refugee Recognition Law as amended in 1990. In 1998, the number of aliens officially registered as eijūsha was 626,760, of whom more than 85 per cent were listed as tokubetsu eijūsha because of their Korean or Chinese origin. The point is whether the Supreme Court intended to limit the scope of such a legislative arrangement to that category or to incorporate other people such as spouses of eijūsha and Japanese nationals. Concerning this question in the third Alan Higgs case, the Osaka District Court completely evaded the possibility of a legislative policy as if a distinction has to be made among foreign residents according to their geographical origin.11 If this omission is deliberate, then reference to the colonial past would introduce questionable distinctions within the eijūsha category. In a third decision handed down in April 1995, the Supreme Court endorsed the foregoing distinction by not touching on the so-called legislative policy. This suggests that, for non-Koreans, the eijūsha status is a necessary but not a sufficient condition (Kondō 1996:275–6; Ebashi 1993:199–200). The second remark concerns the extent and the type of political rights likely to be granted, because the content of the decision appears some-what elusive. In its second decision, the Supreme Court noted that local voting rights might be allowed through legislative policy but omitted to clarify its position about eligibility. On the other hand, considering the strong commitment of the court to the building up of a local policy-making process reflecting the inhabitants’ will, it seems inconceivable that this objective might be reached by avoiding the question of eligibility.

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The aftermath: foreign political participation in the midst of political reform At first a range of press commentators applauded this verdict as a new step towards the enfranchisement of foreigners. But should supporters of alien rights become too euphoric they are bound to face bitter disillusionment. After the decision, a group of 118 Koreans from Osaka decided to file a new law suit complaining that the state bears responsibility for failing to take positive action to enhance the realization of foreigners’ political rights, although the terms of the decision clearly stipulate that ‘the lack of legislative policy should not raise any constitutional difficulty’. As a matter of fact, while local bodies appear more easily exposed to pressures from citizen groups and human rights sympathizers, the fragmentary and parochial nature of national politics in Japan provides few opportunities for minority groups to gain support from Diet members, who remain obsessed with constituency interests. Nevertheless, in the course of time, significant changes in the attitudes of political parties towards the sanseiken issue have occurred. To some extent, 1994 marks a turning point, but after the Supreme Court’s ruling the ultimate decision now rests with the politicians. As we have seen above, law suits, resolutions passed by local bodies, and changes in the opinion polls served to bring the sanseiken issue to the fore. In February 1994, the Shimane branch of the New Frontier Party (Sakigake) announced that party affiliation would thereafter be opened to ‘legal foreign residents’. Later, similar decisions were taken by other political parties: the New Party, Peace (Shintō heiwa) in February 1998, the Social Democratic Party of Japan (SDPJ: ex-Japan Socialist Party) in April and the Democratic Party (Minshutō) in October 1998. These parties called for a minimal duration of residence, from one year up to three years, to be eligible for membership. In November 1994, indeed, the Shimane branch of the New Frontier Party called explicitly for a change in the legislation and put forward an initial draft proposal. Then, in October 1996, the Tokyo Prefecture Assembly passed a similar motion. It seems the political context surrounding cabinet coalitions at the national level provided a rather propitious atmosphere for pushing foreigners’ political rights. Two points were under discussion: the definition and the scope of permanent residents and the conditions for suffrage. For the SDPJ and New Frontier Party, ‘permanent residents’ refers to aliens who have been living in Japan for at least five years – three years only for the Japan Communist Party (JCP) and the Kōmei Party. The reasons offered for such a relatively long duration of stay were twofold: first, the need for the applicant to be informed about the Japanese electoral system and local politics; and second, to be in accord with the provisions of the Nationality Act, which requires more than five years of residence in Japan as a general condition for naturalization. This period is regarded as the minimum required in order to verify a foreigner’s degree of integration into Japanese society. The New Progressive Party (Shinshintō) (NPP) opted to limit permanent residents to the tokubetsu eijūkensha and their descendants. In so far as the conditions of suffrage are concerned, the political parties were divided between those refusing eligibility rights (NPP) and those supporting them, either at the local assembly level (Kōmei Party), or extended to the local executive (New Frontier Party, SDPJ, JCP). In October 1998, on the eve of President Kim Daejung’s state visit to Japan, the Democratic Party produced a draft Bill calling for limited

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political rights for permanent residents. Eligibility rights were provisionally postponed because of the need for closer scrutiny of the problem. At the same time, electoral enrolment was not automatic, but based rather on application by the alien. This arrangement was necessary because of the need to take into account the reservations of the pro-Pyongyang faction of Korean residents, which is against any kind of compulsory enrolment. The Bill includes the various rights of petition provided by the Local Autonomy Act as part of ‘direct democracy’ at the local level. In November 1998, the JCP published the outline of its own Bill giving political rights, including eligibility, to the eijūkensha. In his speech in the House of Councillors, moreover, the South Korean President himself expressed the wish that Korean residents in Japan should be granted voting rights in local elections. Then, in March 1999, before the departure of then Prime Minister Obuchi Keizō for Seoul, the Kōmei Party called on the government to take concrete steps to meet the President’s wish. Nevertheless, government officials, while ‘examining the problem in a constructive manner’, still maintain a very cautious attitude. It is true that the ruling party was the most reluctant to support electoral rights for aliens. This tough position was justified on the basis of classical legal reasons – nationality and state sovereignty – and political considerations. In the field of domestic politics, the Liberal–Democratic Party (LDP) feared that supporting any such reform risked provoking a backlash within the conservative electorate. Consequently, no political mileage could be gained by campaigning on the matter. As far as the international relations of Japan are concerned, the government deemed it prudent not to irritate Peking or Pyongyang. But, after the Supreme Court decision, the LDP organized a special workshop on the problem of enfranchising foreign residents and an interim report was issued in May 1995. According to this document, the sanseiken problem needed to be analysed from a dual perspective: the reciprocity principle in international relations and the constitutional implications at home. As the South Korean government does not recognize any form of political participation by foreigners, however, the report was unlikely to have any practical implications. The reluctance of the LDP is largely shared by the bureaucrats in the Ministry of Home Affairs. By contrast, the opposition parties – even the JCP, which is anxious to improve its relations with a democratizing South Korea – do not stick to the reciprocity issue, stressing the lessons to be drawn from the colonial past and the contribution of Korean residents to Japan’s post-war prosperity. As a whole, extending the franchise to foreigners implies a revision of both the Local Autonomy Act and the Public Offices Elections Act. At the same time, the administrative practice of at times demanding twenty years of residence before granting the eijūsha status to foreigners who are not the spouses or children of a Japanese national or a permanent resident needs to be abandoned. Given the highly emotive and political nature of this issue, the enactment of such legislation is highly unlikely without reaching a general consensus within the Diet, even if a survey of Diet members carried out by the League of Young Korean Businessmen in Japan (Zainichi kankoku seinen shŌkōjin rengōkai), between September and November 1995, indicates that 87.9 per cent of the respondents support the right of aliens to vote locally (response rate 46.1 per cent). At a session of the Joint League of Korean and Japanese Diet members held in September 1997, the Japanese side undertook ‘to work to support voting rights for Korean residents in Japan’.

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Numerous obstacles nevertheless remain. Most importantly, the prospect for a dramatic change of both the electoral law and local autonomy regulations is largely dependent on the power of the LDP within the Diet. Besides, a ‘softer’ change went ahead in 1998 in order to remove an impediment preventing about 420,000 overseas Japanese from exerting their voting rights. In May 1998, a new amendment to the Election Act was enacted which enabled expatriates to vote under certain conditions in Diet elections only but not in local ones as they are not resident in Japan. It might be thus inferred that, if the status of foreigners in Japan as jūmin is not contested, there is no reason to exclude them from local sanseiken. With domestic politics still embroiled in a severe financial crisis the enfranchisement of aliens is hardly likely to get on to the political agenda of the cabinet in the near future. Even if the sanseiken issue became a topic of discussion at the 1998 bilateral talks between Seoul and Tokyo, nothing has yet been done to bring about concrete changes. Conclusion The outcome of the protracted debate over the political rights of foreigners in Japan is hard to predict. Needless to say, the West cannot serve as a unique model for Japan owing to the lack of powerful incentives, such as the existence of organized political fora in East Asia where such issues could be discussed or because of the continuation of intraregional tensions. Japan, contrary to the situation in the West, cannot rely on a regional environment capable of pushing the cause of alien rights forward. What is more, the lessons likely to be drawn from the European experience remain somewhat indecisive: the voting rate of foreigners in countries allowing alien suffrage is rather low. In Japan itself, the voting attitudes of aliens as well as their capacity, in terms of both psychological involvement and political mobilization, are a matter of speculation. From a broader perspective, it can be asserted that if, in the course of the internationalization of human rights issues, the legal status of foreigners and migrants deserves more attention, neither the Universal Declaration of Human Rights nor the ICCPR, nor, indeed, the European Convention on Human Rights, imposes on the signatory states any obligation about the political rights of foreigners. The definition and scope of nationality and citizenship remain largely under the monopoly of domestic legislation. The result is that the stance taken by the Japanese government remains consistent with the common trend in international positive law. But if the so-called legislative policy ought to be reserved for Korean or Taiwanese old-comers, this should imply that the McLean case could be raised against everyone who does not belong to the category of tokubetsu eijūsha. From this perspective, calling for political enfranchisement might be used by the immigration officers as a pretext to force foreigners’ deportation from the country. The risk would be the institutionalization of a ‘double standard’, according to which claims to political rights by special permanent residents would be tolerated, but viewed as endangering the shaping of the ‘political will and decisions of the state’ if supported by other categories of foreigners. Anyway, any new legislation will create a potentially irreversible situation. Should the enfranchisement of aliens become effective, it would be politically impossible to reverse the reform, because any suppression of rights previously

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granted would prove more detrimental to Japanese democracy than the perpetuation of the present situation. Will appeals to a transition from ‘national community’ to ‘residential community’ be heard in the future? How, and to what extent, will the evolution of Japanese society towards greater pluralism erode the exclusiveness of political rituals? No one can clearly answer these two questions. But the sanseiken issue brings to light one of the main features shared by post-industrial politics. Not only will the shift from cleavage in large social groups to more diversified and fragmentary interests and groups produce a large variety of political inputs, but it will generate also a greater diversity of political actors. The question is whether this evolution will spur a smooth transition towards a more active ‘participatory democracy’ in Japan. Notes 1 Grand Bench decision, 18 November 1964, Keishū 18, 9:579. In this famous case, the Ministry of Justice refused the visa extension requested by the plaintiff, Ronald McLean, a US teacher of English who had actively participated in the anti-Vietnam War movement in Japan. 2 See Tokyo High Court judgement, 25 November 1970, Hanrei Jihō 612:11; Tokyo District Court, 23 November 1967, Gyōsai Reishū 18, 11:1465. 3 Supreme Court, Grand Bench decision, 4 October 1978, Minshū 32, 7:1223. 4 The goals of the party were ‘to fight against all forms of ethnic or racial discrimination’, ‘to contribute to the protection of fundamental rights and the development of democracy’. With one priority: ‘obtaining political rights and freedoms for foreign residents in Japan’ (Ri 1993:61). 5 Survey conducted by Asahi Shinbun in February 1994. Quoted in Naikaku Sōridaijin Kanbō Kōhōshitsuhen (1996) Yoron Chōsa Nenkan Heisei 7 Nendo (Yearbook of opinion polls), Tokyo: Ōkurashō Insatsukyoku, 505. 6 Composed of twenty-six members appointed by the township and invested with the power of recommendation. The appellation ‘foreign citizens’ suggests that foreigners are therefore expected to be more involved in the local decision-making process. 7 Higgs Alan Case 1, Petty Bench decision, 26 February 1993, Hanrei Jihō 1452:37. 8 Ri Yon Hwa Case, Osaka District Court, 9 December 1994, Hanrei Jihō 1539:110. 9 Kimu Jon Gyu Case, Petty Bench decision, 28 February 1995, Hanrei Jihō 1523:49. 10 See Fukui District Court decision (I Chin Tetsu Case), 5 October 1994, Hanrei Jihō 1535:77, and upon appeal, Nagoya High Court Kanazawa Division, 26 June 1996, Hanrei Jihō 1582:30. 11 Higgs Alan Case (2–3), Osaka District Court, 28 January, 1994, Hanrei Taimuzu 848:117, and upon appeal (2), Osaka High Court decision, 31 January 1995.

References Ebashi, T. (1993) ‘Gaikokujin no sanseiken’ (Foreigners’ political rights), in Y. Higuchi and K. Takahashi (eds) Gendai Rikkenshugi no Tenkai (I) (The development of contemporary constitutionalism, vol. 1), Tokyo: Yūhikaku. —(1996) ‘Gaikokujin shimin no chihō sanseiken’ (Local political rights and foreign citizens), Jiyū to Seigi 47, 3: 107–14.

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Hagino, Y. (1985) ‘Gaikokujin no jinken (Makuri-nu jiken)’, (Foreigners rights (the McLean case)), in Y. Higuchi (ed.) Kenpō no Kihon Hanrei (Leading constitutional cases), Kihon hanrei shiriizu, 1, Tokyo: Yūhikaku. Hirota, M. (1995) ‘Teijū gaikokujin no chihō sanseiken ni kansuru oboegaki’ (Notes on foreigners’ right to local political participation), Toshi Mondai 86, 3: 91–2. Itō, M. (1990) Kenpō (Constitutional law), Tokyo: Kōbundō. Kimu, S. S. (1994) ‘Zainichi chōsenjin (sanseiken) yōkyū no kenkyū’ (Analysis of the sanseiken demand by Koreans living in Japan), Sekai 600, 10: 262–8. Kojima, K. (1989) Kenpō Gaisetsu (Outline of constitutional law), Tokyo: Gyōsei. Kondō, A. (1996) Gaikokujin no Sanseiken: Denizenshippu no Hikaku Kenkyū (Aliens’ political rights: comparative studies on denizenship), Tokyo: Akashi Shoten. Miyajima, T. and Kajita, T. (1996) Gaikokujin Rōdōsha kara Shimin e (From foreign workers to citizens), Tokyo: Yūhikaku. Mukai, N. (1994) ‘Teijū gaigokujin no chihō sanseiken’ (The political rights of foreign permanent residents), Heisei 5 Nendo Jūyō Hanrei Kaisetsu (Commentaries on leading cases 1993), Jurisuto 1046, 6: 18–19. Nagao, K. (1988) ‘Gaikokujin no jinken’ (Foreigners’ human rights), Kenpō no Kihon Mondai (Fundamental problems of the constitution), Bessatsu Hōgaku Kyōshitsu 7: 172–9. Nakamura, M. (1984) Kenpō 30 kō (Thirty lessons on constitutional law), Tokyo: Seirin Shoin. Nakano, T. (ed.) (1992) Kenpō II (Constitutional law II), Tokyo: Yūhikaku. Ōishi, M. (1994) ‘Teijū gaikokujin to kokkai giin no senkyoken’ (The permanent alien residents and voting rights in Diet elections), Heisei 5 Nendo Jūyō Hanrei Kaisetsu (Commentaries on leading cases 1993), Jurisuto 1046, 6: 16–17. Okazaki, K. (1994) ‘Gaikokujin no chihō sanseiken. chihō jichitai ni okeru gaikokujin no seiji sanka’ (Aliens’ right to local political participation. Foreigners’ political participation in local government), Kōhō Kenkyū 9: 105-16. ——(1995) ‘Teijū gaikokujin ni chihō sanseiken o’ (For granting local political rights to foreign residents), Hōgaku Seminā 482, 2: 4-9. ——(1997) ‘Gaikokujin no chihō kōmuin shuninken’ (Aliens’ right to appointments to local civil service posts), Hōritsu Jihō 69, 3: 2–5. Ri, Y. F. (1993) Zainichi Kankoku Chōsenjin to Sanseiken (Political rights and Koreans in Japan) Tokyo: Akashi Shoten. Shiyake, M. (1993) ‘Gaikokujin no kenpō kenri’ (Aliens’ constitutional rights), Hōgaku Kyōshitsu 152: 49–54. So, Y. D. (ed.) (1992) Teijū Gaikokujin no Sanseiken (The political rights of foreign permanent residents), Tokyo: Nippon Hyōronsha. Takada, A. (1992) ‘Gaikokujin no senkyoken’ (Aliens’ voting rights), Hōritsu Jihō 64, 1: 83–93. Tezuka, K. (1995) Gaikokujin to Hō (Foreigners and the law), Tokyo: Yūhikaku. Urabe, N. (1994) ‘Gaikokujin sanseiken no sairon’ (Foreigners’ political rights: a new approach), in Kenpō Rjiron Kenkyūkaihen (Research on constitutional Theory Association) (ed.) Tinken Riron no shin Tenkai (New developments in human rights theories), Tokyo: Keibundō. Yokota, K. (1995) ‘Gaikokujin no sanseiken: chihō jichitai de no senkyoken o yōnin shita saikōsai hanketsu’ (Aliens’ politicat rights: the Supreme Court decision allowing voting rights at the local level), Hōritsu Tihō 67, 7: 2–5.

Glossary Amakudari Appointment of newly retired bureaucrats in senior positions to posts in a private company or a semi-public institution Beiatsu US pressure Bunmeikaika Civilization Chōsen Sōren The League of Korean Residents in Japan Chōsensekisha Supporters of Pyongyang (North Korea) Chūka The Middle Kingdom (Sinocentrism) Datsua Escape (depart) from Asia Eijūkensha (Eijūsha) Permanent residents Endaka High yen Gaiatsu External (international) pressure Gendaikei soshō Contemporary type trials Gurōbaruka Globalization Heijunka Levelling Heiwa to anzen hoshō Peace and security Hitotsu no koe One voice Jidoka Automation with self-regulation Jiyūtō Liberal Party Jōrei Ordinance Jūmin Inhabitant Kabushiki kokan seido Share exchange system Kaizen Continuous improvement Kanban A signboard used for the JIT system Kankokusekisha Supporters of Seoul (South Korea) Keidanren Federation of Economic Organization Keiretsu Corporate affiliations by cross-shareholdings, directors, supplies and purchases Kokumin People Kokumin kenkō hoken National health insurance Kokumin nenkin National pension Kokusaika Internationalization Kōsei nenkin Employee pension Meiji Period from 1868 to 1912 Milk-run system Parts collection system used by Toyota (UK) for the collection of parts from around Europe Mindan The Korean Residents’ Association in Japan Minshutō Democratic Party Naiatsu Internal pressure Nihon kokumin Japanese people Nikkei Nihon Keizai Shinbun Nikkeijin Second- or third-generation Japanese Sakigake New Frontier Party

Glossary

210

Sanseiken Right to political participation Shikkō yakuin Executive director Shinshintō New Progressive Party Shintō heiwa New Party, Peace Shōwa Period from 1926 to 1989 Sōkaiya A person who operates a protection racket in stockholders’ meetings Taishō Period from 1912 to 1926 Teijūsha Long-term resident Tokubetsu eijūsha Special permanent resident Yōsei setsu Constitutional requirement doctrine Zaibatsu Financial cliques Zainittō The political party which aims to represent all foreign residents in Japan Zai-tech Use of surplus funds for extra profits by use of financial instruments Zaitō funds Funds issued by public financial institutions

Index Abegglen, J.C. 3 Abo, T. 130 acculturation 173, 179, 189 administrative guidance 106, 108, 110, 113 aid programmes 37, 42, 49–51, 64–5, 68 Akashi Yasushi 64 Alchemy Partners 158 Allen, G.C. 2 amakudari 107 Americanization 8, 11, 124–30, 134, 151,153, 159, 167 Amsterdam Treaty 72 Aoki, M. 140 Asia-Europe Meeting (ASEM) 45, 49, 67,82 Asia Pacific Economic Cooperation (APEC) 8, 30, 44–5, 50–3, 94, 97, 129 Asian Monetary Fund, proposed 46–7 Asian values 101–2 assimilation of foreigners 208 Association of Southeast Asian Nations (ASEAN) 80–1, 90–7; ASEAN plus Three 8, 40, 45, 48–53; ASEAN Regional Forum (ARF) 32, 80, 82–3 bad loans 107 balance of payments 88, 98–9 Bank of Japan 111 Bayer (company) 132 Bayerische Motor Werke (BMW) 132, 156, 158–9, 167 best practice 138–41 Big Bang reforms 111–13, 116 bilateral trade agreements 73–4 Blair, Tony 67 board members 163–4 Bogar Declaration 97 Bourke, T. 79 British Empire 22 Brittan, Leon 67 brokerage commissions 113–15 Brown, J.R. Jr 106 ‘bubble economy’ 120–2, 126, 134, 159 business culture 133 Cambodia 95 capitalism: East Asian or ‘oriental’ 6, 10, 87–95, 98, 100–2;

Index

212

Japanese 87, 91–4,98, 100, 123; see also crony capitalism car manufacturing 139–48 cartels 105, 108–9, 113 Cawson, Alan 66 Chiang Kai-shek 26 China 20–6, 31, 40–6, 51, 82, 90–4, 97–8,101, 201 Chirac, Jacques 77, 82 citizenship 188, 212, 214, 221, 226 civic society 7 Clark, K.B. 142 Cold War 29–32, 40–2, 52, 62–3, 72, 77,126 colonialism 21–5, 31, 36, 92–3, 180, 189; formal and informal 22–3, 40 Common Commercial Policy, European 73 Common Foreign and Security Policy (CFSP), European 62–3, 72, 81 communist regimes 31–2 compartmentalization in financial sector 112–13 competitiveness 46, 110, 121–6, 129, 156 constitutional provisions 33–4, 212–13,217, 220–1 convergence: of economic systems 6, 10, 116; of production systems 159 ‘convoy system’ 107–8, 113 Co-ordinating Committee for Export Control to Communist Bloc (COCOM) 63 corporate culture 154–6 corporate governance 124–5, 159–60, 163–5 corporate ownership 161–3 corruption 164; see also crony capitalism cosmopolitanism 173–4 credit-based economies 105–6 Cresson, Edith 61 crony capitalism 46 Daimler-Benz (company) 132, 145–6 DAKS Simpson (company) 152, 154–6 decentralization: political 36–7; of production decisions 145 defence policy, Japanese 33 Delors, Jacques 75 democracy and democratization 1, 13, 31, 38, 212 ‘democracy of goods’ 35 democratic ethos in management 154 denizenship 219 deregulation 127; see also liberalization diplomacy 26, 53, 73, 78–9, 100 Dore, Ronald 3, 123 ‘dot.com fever’ 115 dual economy 109

Index

213

East Asian Economic Caucus (EAEC) 44–5, 48–52, 129 Eastern Europe 63–4, 72, 81, 129 EC–Japan Centre for IndustrialCooperation 75 The Economist 2 enterprisism 123–4 Estrada, Joseph 51–2 Europe: definition of 71–3; Japanese perceptions of 9; see also Eastern Europe; ‘fortress Europe’ European Bank for Reconstruction and Development 64 European Commission 59–62, 66, 73–8 European Council 77 European Monetary Union 129 European Parliament 59, 74 European Political Cooperation 62 European Union (EU) 9, 30, 57–67, 214; expansion of 129; Japanese contacts with 59–60, 63, 71, 77–81; status of 72 Europeanization 11, 128–34 exchange rates 46–8; see also yen export-dependence 93 EXPROM programme 75, 77 external directors of corporations 164 financial crisis, Asian (1997) 6, 34, 40, 42, 46–8, 51, 78, 81, 87–91, 94–8, 101,124, 129, 159, 184 financial institutions 112–16, 161–2 Financial Reconstruction Commission(FRC) 107, 111 Financial Supervisory Agency (FSA) 107,111 Financial System Council 116 fingerprinting 183–4, 214 flexible working 156, 158 ‘flying geese’ pattern of development 42–3, 45, 51, 93 Ford Motor Company 145, 158 foreign direct investment (FDI) 3, 9–10, 42–3, 51, 89–97, 101, 113; by European firms in Japan 132–4; as a means of learning 131 foreign policy, Japanese 19–26, 32–4, 62 foreign residents in Japan 181, 199–203,207–8, 211–12; rights of 214–26; see also immigrants ‘fortress Europe’ 61, 75 France 66–7, 79, 92, 105, 127, 179 Fujioka Nobukatsu 179 Fujitsu (company) 60–1, 114 Fukuzawa Yukichi 21 Funabashi Yōichi 34 gaiatsu 111–12, 124

Index

214

Gallagher, J. 22 de Gaulle, Charles 67 GE Capital (company) 114 General Agreement on Tariffs and Trade (GATT) 60–1, 76, 89 Germany 6, 11–12, 25, 28–9, 40, 63, 79, 92, 105, 127, 130, 179; car production in 142–8 Giddens, A. 2, 186 Gilpin, R. and J.M. 1–2 Glass-Steagall Act 112 globalization 1–2, 87–8, 104, 109, 116,134, 152; activity by country 167; attitudes to 3–4, 9, 35–7; as a dialectical process 14; dual nature of 4, 167; early versions of 4; internal to Japan 3, 7, 11,13, 36, 137, 174, 207–8; of labour 7; as a metaphor 161, 167; multi-layered 5–6; political dimension of 37; pro-active or reactive 4, 9–10, 12, 159, 161; see also internationalization Goldman Sachs (company) 114 government ministries, Japanese 58–60, 161; see also Ministry of Finance, Ministry of Foreign Affairs, Ministry of International Trade and Industry government reports 3, 12, 175–6 Gray, J. 1 Great Powers 23–6, 33, 92, 123; see also superpowers Greater East Asia Co-Prosperity Sphere 23, 26–7, 30, 41, 177 Greenspan, Alan 124 Guam Doctrine 43 Gulf War 29, 32–3, 62 Hague Declaration 77, 83 Hammar, Tomas 219 Hashimoto Ryūtarō 48–9, 64, 67, 111 Hata Tsutomu 74 health insurance 203–6 hegemony 23–4, 35, 43, 51, 125–7 Held, D. 1 hierarchical management 145 Higgs, Alan 221–2 Hirst, P. 2 Hitachi (company) 166 homogeneity of Japanese society andculture 188–9, 195, 208, 211 Honda (company) 156 Hosoya Chihiro 57 human resource management (HRM) 153–9 human rights 6–7, 12–14, 50, 81, 173,180, 183–5, 203, 206, 212, 217, 219, 223, 226

Index

215

ideology 7, 22, 26–7, 52 Iida Tsuneo 127–8 Ikeda Hayato 67 Imai, M. 143 immigrants, to Japan 6–7, 13, 173–86,188–90, 193–5; illegal 188, 191–2, 195–8, 201, 206–7, 212 Immigration Control Act 189, 191–2, 201, 204, 207, 216, 218, 222 imperialism: Japanese 41, 92–3, 151, 177,189; and sub-imperialism 22–5; Western 5, 22 import restrictions 142 industrial relations 156–8 industrialization, late 104–5 Inoue Kaoru 21 interest rates 113 International Bank for Reconstruction and Development 98 International Computers Limited (ICL) 60–1 International Monetary Fund (IMF) 46–7, 53, 89, 94, 98 internationalization 11, 120–4, 179, 182,191 , 207, 211; of the yen 47–8 internet, the 114 Iran 59 Ishihara Shintarō 177–9 Italy 30, 40 Itō-Yokado (company) 115 Iwakura Tomomi 20–1 Japan: other countries’ attitudes to 4–5, 9; stages in modern development of 2–3, 12, 19–20 Japan Exchange Teaching (JET) programme 82 Japanization 151–9, 167 Jiang Zemin 49 Johnson, C. 105–6 Joint Declaration on Relations between the EC and Japan 63 Kaifu Toshiki 33, 64 kaizen 138–46 passim Kakizawa Kōji 74 Kaneko, M. 36 Katz, Richard 106, 109–10 Kay, J. 2 keiretsu system 75–6, 108, 114–15, 130 Kim Dae-jung 50, 224 Kim Young Sam 49 Kobayashi Yoshinori 179 Kohl, Helmut 77, 82 Koike, K. 140 Kojima Kiyoshi 42 kokusaika 211; see also internationalization

Index

216

Kōno Yōhei 64–5 Korea (North and South) 23, 26, 31–4,40–2, 50, 92, 98, 224–5 Korean Peninsula Energy Development Organization (KEDO) 67, 80–2 Korean War 41 Koreans resident in Japan 175–86, 189, 214–17, 220–5 Kosovo 67 Kyō Nobuko 181 lean production passim 138–45, 151 learning opportunities 126, 129–34 Lee Seijaku 181–2 Lee Setsuko 183 liberal school of world politics 33–4 liberalization, economic 44–6, 89, 93, 97, 113–14, 189; see also deregulation lobbying 66 localism 36–8, 212 Maastricht Treaty 62, 129, 214 McLean case 213, 221, 226 Mahathir Mohamad 45, 47, 52–3, 129 management practices 140; transferability of 3, 6, 144, 148 management style 154–5 Manchuria 23, 25 marketization 109, 113, 116 marriage 182–4 Marx, Karl 1 Massachusetts Institute of Technology (MIT) 142, 145 Matsui Securities 115 Matsushita (company) 66 Maull, Hans 34 Mazda (company) 125 medical care 203–6, 212 Meiji period 21–3, 92, 151 mergers 107, 112 Merrill Lynch (company) 114 Michelin (company) 79 Middle East peace process 64 ‘middle powers’ 28–9 militarism 26, 174, 177 military power, Japanese 33–4 Ministry of Finance (MOF) 105–7, 111, 116 Ministry of Foreign Affairs (MOFA) 58–9, 64–5 Ministry of International Trade andIndustry (MITI) 77, 91 Mitani Taichirō 27 Miyazawa initiative 47, 51–2, 98 modernization 20–1, 40, 151 Monroe Doctrine, Asian 24 Morita Akio 125 multiculturalism 13, 37, 199, 208

Index

217

multinational corporations 4, 43; see also transnational corporations Myanmar 50, 81 naiatsu 111 Nakasone Yasuhiro 62–3, 76, 79, 194 Nakayama Tarō 74, 77 Nanking Massacre 178–9 Nasdaq Japan 115 nation states 4, 33, 36, 186, 212 national interest 176–7 nationalism 7, 12–14, 25, 173–7, 180–1, 185–6; civic 35 Nestlé (company) 79 Netanyahu, B. 64 Neumann, Horst 147 ‘newcomers’ 199–201 Nikkei Weekly 114, 159–60 Nikkeijin 192, 198–9, 204–7, 218 Nippon Credit Bank 115 Nishio Kanji 179–80 Nissan (company) 61, 66, 79, 112, 138 Nixon, Richard 43 Nonaka Ikujiro 123, 140 non-tariff barriers to trade 76 North Atlantic Treaty Organization (NATO) 64–7 Obuchi fund 47 Obuchi Keizō 48, 50–3, 68, 175, 207, 224 Okuda Hiroshi 66–7 Opel (company) 145–6 open-door policy 88–90, 179 Organization for Economic Cooperationand Development (OECD) 3 Organization for Security and Cooperation in Europe (OSCE) 65 outsourcing 146–7, 207 overstayers see immigrants: illegal Ozawa Ichirō 33 pacifism 32–4, 63, 174 Peacekeeping Operations (PKO) law 33–4, 64 pension provision 204–5 ‘perception gap’ 57, 59 Philips (company) 66 Phoenix consortium 158 Plaza Accord 47 political participation 13–14, 212, 217–22, 225 political parties 29–30, 110, 223–5 ‘political system of 1955’ 30–2 Porsche (company) 145–6 post-Fordism 10, 109, 158 production systems 3, 11, 137–48, 152, 156, 159–60, 167 productivity 142–3, 147, 190

Index

218

profitability 125, 143 progressive economists, proposals of 35–6 protectionism 61, 109–12 quality circles 146, 153 quality control 157 rationalization schemes 159–61, 166 Reaganism 104 realist view of international relations 33 reform measures 6, 11, 123–4, 127, 130,134, 160–1; see also Big Bang reforms regional order, concept of 30, 32, 36, 50 regional power, concept of 23–9, 33–4 regionalism 5, 8–10, 22, 30–2, 36, 40–4,48, 51–3, 81; ‘open’ and ‘closed’ 44–5 Renault (company) 138 reparation payments 41, 49, 51 research and development 146–7, 165 restructuring, industrial 144–8 Robinson, R. 22 Rover Group 152, 156–9, 167 Saeki Keishi 35–6 Sakakibara Eisuke 53 Sankyō Seikō (company) 154 sanseiken issue 214–20, 223–6 Santer, Jacques 67, 77 Savings and Loans crisis 107 school textbooks 179 Schumpeter, Joseph 109 Scott, A. 2 Securities and Exchange Law 112 seishitsu setsu doctrine 213 self-confidence, Japanese 93 shikkō yakuin system 163–4 Shōwa period 23–4 Siemens (company) 79 single currency: Asian 94–5; European 66–7, 82 Single European Act (SEA) 62, 75 social welfare 36, 206–8 ‘soft power’ 34 Soft bank 115 Sony Corporation 36, 114, 162–7 Spain 79 Structural Impediments Initiative 76 students working in Japan 193–5, 201 summit meetings between Japan and the EU 71 superpowers 26–9, 62, 124 supplier networks 146–7

Index

219

Supreme Court, Japanese 213, 221–4 Taiwan passim 23, 31, 40–5, 92, 97–8 Takeshita Noburu 76 Takeuchi, H. 140 team working 153, 156–8 technology transfer 42–3, 89, 159, 193 Tett, Gillian 109, 115 Thailand 95 Than Shwe 51 Thatcher, Margaret (and Thatcherism) 76,79, 104 Thompson, G. 2 Tokutomi Sohō 24 Tokyo Stock Exchange 115–16 tourism 174 Toyota (company) 36, 66–7, 127, 139, 141,146, 152–3 Toyotism 141, 151 trade conflicts 74, 76, 128–9, 137 trade promotion campaigns 75, 79 trade unions 147–8, 153, 156; Japanese Confederation of 4 training programmes 49, 75, 157, 166, 193 transnational corporations 56–61, 65–7, 208 transnationalism 6–7, 12–13, 173–5,179–81, 185–6 Uchimura Kanzō 22–3 ultranationalism passim 173–80, 185–6 United Kingdom 6, 58, 61, 66–7, 152–9, 167; UK–Japan Voluntary Sector Exchange Programme 82; see also British Empire United Nations: Economic and SocialCommission for Asia and the Pacific (UNESCAP) 89; High Commission for Refugees 65; peacekeeping forces 33 United States: influence on Japan 5, 8, 11, 121, 125; Japan’s relations with 9–10, 25–9, 34, 41–4, 49–53, 128 universalism 173–5, 184–5 Uno school 91–2 venture capital 114 Vietnam War 41, 43 Virgin Group 132 Volkswagen (company) 132, 145 voting rights 212–26 Watanabe, H. 20 Western European Union (WEU) 63–5 Westernization 5, 20–1 Womack, J.P. 141–3 work groups 147 working hours 130

Index

World Trade Organization 76 xenophobia 178–9 yen, the: internationalization of 47–8; value of 43–7, 52, 89, 142, 190, 218 Yoshihara, H. 134 Yugoslavia, former 64–5 zaibatsu 92–3, 107–8 Zainittō 216, 221 Zhu Rongji 50 Zwickel, Klaus 147 Zysman, John 104–6

220