- Japan’s “Lost Decade”: Causes, Legacies and Issues of Transformative Change ed. by W. Miles Fletcher III and Peter W. von Staden
The seven essays in this book were originally published in a special issue of Asia Pacific Business Review. With introductory and epilogue chapters added here, they examine Japanese business during the so-called “lost decade(s)” for Japan, which usually refers to the period after the collapse of asset prices in the early 1990s.
The main theme of the book is that the 1990s for Japan were not really “lost.” Rather, it was a time for transformation. The idea is most clearly expressed in chapter 3 by Ulrike Schaede. By the late 1990s, Japan started to change in all aspects of “formal organization, people and culture” (p. 33) to respond to new challenges, which mainly came from globalization. Japan’s model for economic growth (what Schaede calls the “development state approach”), which was successful until the 1980s, became less effective when low-cost competitors from the rest of Asia followed Japan’s path and started their own catch-up growth. At the same time, financial globalization began to transform Japan’s corporate finance and governance, and made it difficult for Japanese corporations to maintain the traditional structure. In the late 1990s and the early 2000s, the Japanese government changed economic regulations and the Companies Act, and Japanese corporations reorganized and restructured. The change that started in this period (the “strategic inflection point,” according to Schaede) is likely to continue as the repositioning is (as of 2010) still limited to a subset of Japanese corporations.
Schaede’s chapter provides suggestive evidence to support this hypothesis that Japan started the process of wholesale change in the late 1990s. Although we need to wait for more data and rigorous testing to reach a [End Page 452] definitive conclusion, the data in the chapter are sufficient to convince me the hypothesis is promising.
Pointing out that Japan was not completely lost after the collapse of the credit boom in the late 1980s is also important now that many advanced economies in Europe may be going into a long economic stagnation similar to Japan. Positive developments in Japan identified in some chapters of this book may be useful for European countries trying to cope with stagnation. Understanding successful adjustments in Japan is also useful for other Asian economies, such as China, that have grown rapidly more recently and are likely to face similar challenges as their catch-up growth ends. There will be positive lessons (in addition to negative lessons on what not to do) they can learn from Japan.
Schaede’s chapter is sandwiched by two chapters (written by each of the two editors of the book) that examine the policymaking in Japan that eventually led to the changes discussed in her essay. Each chapter focuses on one particular aspect of policymaking that is ignored in many other studies of Japan during the 1990s and the 2000s. Chapter 2 of the book by W. Miles Fletcher III studies the role of Keidanren, the organization of the largest businesses in Japan, while chapter 4 by Peter W. von Staden emphasizes the role of ideology held by policymakers.
Fletcher’s chapter reveals that the business leaders in Keidanren consistently argued for the economic deregulation that was accelerated during the “strategic inflection.” Keidanren pushed the government to implement economic reforms and the government finally started to respond. “During 2010, the policies of Keidanren remained essentially the same as they were 25 years earlier” (p. 28), but this is probably because the reform is still incomplete and does not mean Keidanren has been stubborn and continues to advocate policies that would not work.
Although Keidanren seems to have contributed to bringing about the important changes described in Schaede’s chapter, Fletcher criticizes the organization by noting that Keidanren did not call “in the late 1980s for measures to prevent a speculative bubble or in the early 1990s...