When Japanese talk about their country, they cling to cliché. A resource-poor land ... rising from the rubble of World War II ... Japan as number one. Even in the past decade of flounder and drift, the wisdom was always conventional. Increase government spending ... tighten the belts ... no pain no gain.
Of all the things Japan has lost since its economic bubble popped 12 years ago — the van Goghs, Rockefeller Center, national confidence — add one more: the comforting, all-accepted platitude. You don't hear the whens, hows or ifs of economic recovery anymore: the unspoken question these days is whether some seismic collapse is on the near horizon. Lifetime employment, a pillar of the Japanese miracle, has been supplanted by the specter of lifetime underemployment for today's twentysomethings and brutally early retirement for the salarymen who rose out of that rubble. A lot of Japanese are shaking their heads and muttering, "Times are bad, but ..." and the sentence goes unfinished. No one can find a consoling conclusion.
The Japanese have finally got it: 12 years isn't a mere recession, and the rising sun doesn't inevitably follow the dark of night. "Everybody's afraid because we know we are getting poorer, day by day," says Yoshiharu Nakashima, who ought to know: he's a pawn-shop owner in Tokyo's Ueno district. When U.S. President George W. Bush visits next week, he'll undoubtedly spend some backroom time telling the Japanese to get their acts together. His host will be Prime Minister Junichiro Koizumi, who achieved rock-star popularity by promising to do just that, but whose public support vanished this month when he caved in to Japan's troglodytic Old Guard — the bureaucrats and Liberal Democratic Party (LDP) hardliners — robbing the population of the hope of change. At the end of next month, Japan's reform-repellent banks will close their yearly books and reveal whether their assets, many of them shares on the super-depressed stock exchange, are substantial enough for solvency. (There's serious talk of the government having to nationalize a big part of the banking sector.) Beginning April 1, the government will no longer guarantee bank deposits above $75,000. That signals that the country's downhill coast of the past decade could pick up truly dangerous speed: at the very least, Japanese thought — both collectively and individually — they could live a long time on the savings accrued in better times. Maybe not. And then earlier this month, two numbers that were never again supposed to cross — the Nikkei and Dow industrial average — converged when the Japanese index dropped below the Dow — portending finally, truly, absolutely, that Japan was now back where it started — trailing the West.
Japanese now realize that their great prosperity machine, a wonder in its day, has run down. Even the best machines — especially the best machines — need regular re-engineering: parts that hummed along in one era get jettisoned in the next. Japan is loath to do that kind of tinkering. Throughout the '90s, with most voters comfortably well-off and complacent, leaders were able to subvert the kind of creative destruction that could have reinvigorated Japan's economic infrastructure. As a result, no entrepreneurial phoenix is rising from Japan's industrial ashes. Real-estate values are at 1982 levels. Manufacturing has been siphoned off to China and other cheaper countries and unemployment is at a post-war high of 5.6%. A survey by Koizumi's office finds that 65% of the population are feeling insecure and fearful of the future — higher than at any point since 1958. "Our wealth," says former Vice Minister of Finance Eisuke Sakakibara, now director of an economic think tank and professor at Keio University, "is slipping away."
So Japanese are now shopping at second-hand stores; residents in upper-class districts comb through their neighbors' trash for used furniture. Potential entrepreneurs, the Akio Moritas of the future, are doomed to remain dreamers: the banking system is so swamped with the remembrance of debts past it doesn't have the money — or will — to help new businesses get off the drawing board. For the first time since the end of WW II, Japan is facing the concept of personal and corporate obsolescence. "We hope this is the bottom, but who really knows?" asks Masayuki Watanabe, a 48-year-old meat wholesaler who gave up his faltering business three months ago (and with it a $70,000 annual income) and now peddles $5 lunch boxes in Tokyo's depressed financial district. "We have no choice but to start over." Even, it seems, if that means leaving the country. Laid-off Japanese engineers are now lining up for jobs in China. Salarymen work, live cheaply and send paychecks home to support their families — much like the world's other economic nomads, the Philippine maids of Hong Kong or Turkish factory workers in Germany. "They'll look at a job in China even though the pay is half what they were making in Japan," says Tomoko Hata, a manager at a Tokyo employment agency. "It sounds very sad. But they're desperate."