Syncretism: The Politics of Economic Restructuring and System Reform in Japan ed. by Kenji E. Kushida, Kay Shimizu, and Jean C. Oi (review)

Syncretism: The Politics of Economic Restructuring and System Reform in Japan provides a comprehensive and balanced overview of Japan’s political-economic transformation since 1989. Although an edited volume, it hangs together well because Kenji Kushida and Kay Shimizu wrote two-thirds of it themselves and used the expertise of the other three contributors very effectively. The book argues that politicians concerned with their own electoral fortunes were the key force behind Japan’s economic reforms of 1996–2006 and that these reforms made the Japanese economy significantly more market oriented and flexible, although the economy retains considerable elements of clientelism and long-term relations.

Kushida and Shimizu’s overview chapter provides an excellent and succinct review of Japanese politics and economic reform since 1989. They cleverly illustrate their analysis with a running sequence of graphs of the approval ratings of Japanese cabinets from 1989 through mid-2012. The chapter discusses the broad public concern with slow economic growth and how Prime Ministers Hashimoto Ryūtarō and Koizumi Jun’ichirō responded with aggressive reforms. These reforms transformed the Japanese economy in significant ways. But since domestic financial firms themselves were not the primary pursuers of reforms, they did not embrace them wholeheartedly and the result was “syncretic,” that is, new practices coexisted with old ones. Shimizu and Kushida outline the ways in which important Japanese financial institutions evolved on a “hybrid” pattern. Partly because they had many employees that had become superfluous because of deregulation but were not easy to let go, Japanese banks pursued partnerships with foreign institutions in order to provide new services and make use of their idled employees. Traditional institutions also survived, especially in the form of the regional banks that provided services for small and medium-sized enterprises (SMEs). The advantage of this combination of new financial practices with considerable survival of traditional forms was that the Japanese financial system was buffered from the effects of the 2007–8 global financial crisis.

Ulrike Schaede’s chapter on business groups (keiretsu) and main banks argues that while both are less important than they once were, they have also changed their functions. The impetus for change was that the main goal of management shifted in the 1990s from avoiding business failure at all costs to maximizing profits. The role of the main bank was downgraded and its main purpose is no longer to provide credit or to rescue companies in the event of failure but instead to provide “knowledge, information, and unbundling strategies.” Firms increasingly shop around for main banks rather than simply relying on the one they have long been associated with. Because of competition with foreign firms, banks now must offer “high-quality services, such as M&A advice, international financing, and initial public offerings” (p. 90). The role and importance of the keiretsu has also diminished. Levels of the two most important indicators of keiretsu cohesion, within-group purchasing and cross-shareholding, declined significantly by 2000 in all six keiretsu, although in the Mitsubishi group these levels continued quite high. Schaede argues that increasingly there needs to be a profit incentive, such as may come from brand recognition, for firms to continue active business group membership. She notes that many firms continue to emphasize long-term ties to traditional partners, but such firms are increasingly at a disadvantage.

Greg Noble steps back for a broad overview of the political process of reform from Koizumi on and of the overall economy. Perhaps because he is looking at the overall economy rather than just at large firms, he offers a more guarded assessment of liberalization than does Schaede. He acknowledges the significance of the reforms and their salutary effect on Japan’s economic performance. And he emphasizes the solid political foundation for reform that...