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 Setting Sun? Japan Anxiously Looks Ahead

August 11, 2002

YEAR in and year out since Japan's financial bubble burst
in 1990, American presidents have needled and cajoled the
country's leaders to fix their economy and restore Japan to
its rightful place in the world.

Gradually, though, as this country has continued its drift,
a more skeptical view has begun to gain ground: Japan is
returning to its rightful place in the world, that of a
middling country of vastly diminished and still declining
importance in world affairs.

From the ashes of World War II, Japan enjoyed one of the
fastest economic rises ever seen. Its successes made it
widely envied by developing nations everywhere, as an
example of how much a democratic, capitalistic country
could achieve in a short period of time. Now, if its
decline continues, it could have profound implications for
American diplomatic and military policy in Asia.

Twelve years after its stock market collapsed, along with
its dreams of superpower status, Japan is still frozen in
denial about a dysfunctional political system built on
institutionalized cronyism. By contrast, the United States
is already seeing strong stirrings of reform just weeks
into a crisis over business ethics.

Not everyone is ready to turn out the lights on Japan. The
Hudson Institute, for example, has just published a book
titled "The Re-Emergence of Japan as a Super State." In a
recent opinion column in The Wall Street Journal, the
institute's president, Herbert London, cited Japan's "100
percent literacy rate, stable leadership, products valued
in world markets, mastery of Western management techniques
and a belief in purposeful communal action," and concluded
"it is not hard to be confident in Japan's future."

But recent signals from Washington suggest much greater
skepticism, as diplomats say the Bush administration has
increasing doubts that Japan will ever again become a
global mover and shaker.

It is not just that Japan is not what it used to be. Some
analysts say even its decline matters far less than it
might once have, because it failed, when times were still
good, to convert some of the immense wealth it had
accumulated into more lasting power and influence.

"Looked at objectively, Japan is a rather insignificant
power in terms of its contributions to the rest of the
world," said Ronald A. Morse, a professor of Japanese
studies at the University of California at Los Angeles who
is also an executive with a telecommunications firm here.
"If the country keeps receding, or even disappeared, there
is hardly anything that would have a major negative impact
abroad. The reason this sounds shocking is because
everybody still remembers the Godzilla image of a Japan not
so long ago that was going to swallow up America."

For other observers, however, Japan's long slide has huge
implications for the future of Asia and beyond. Japan is a
model for few in Asia these days, and with the country's
diplomacy in disarray, those who take their cues from Tokyo
are a fast dwindling number, leaving a vacuum that may be
filled by less closely allied friends of the United States,
or by outright rivals.

Indeed, from Central Asia to the Korean peninsula, many
analysts believe the coming decades are shaping up to be a
competition for diplomatic and economic sway between Russia
and China. And if Moscow and Washington draw closer, that
would only accelerate Japan's declining influence in Asia,
and make Japan less able to serve as a counterweight to

IF the Japanese really lost hope, they might start thinking
more about acquiescing in Chinese power," said Robyn Lim,
an expert in international relations at Nanzan University
in Nagoya, "so Japan's return to some semblance of economic
health is a vital interest of the U.S. for both security
and economic reasons.

"How to influence Japanese policy is the big problem, since
the leadership is now completely paralyzed."

Japan's stalemate is especially striking when compared to
the energetic diplomacy of Russia, another diminished Asian
power, and one with virtually no economic hand to play.
Still, by virtue of its nuclear prowess and proximity to
central Asia, the Caucasus and eastern Europe, Russia has
gone in the blink of an eye from nuclear enemy of the
United States to strategic partner, even contemplating
cooperation on missile shield development. Over that same
stretch, Japan, which was disarmed by the United States in
1945 and remains pacifist, has never overcome its
ambivalence about American missile shields, despite its
longstanding alliance with Washington.

The rise of China presents Japan with its greatest
challenge since the Second World War, but has left Tokyo
seeming both intimidated and confused, shifting nervously
between appeasement with generous development assistance,
and provocations. These include visits by Prime Minister
Junichiro Koizumi to a controversial shrine, Japan's
imperial army veterans and trade spats.

Japan's discomfort reflects what experts say are the
painful choices that loom as its population shrinks and
ages dramatically.

Some Japanese may be tempted to rearm and go it alone
behind a leader like Tokyo's popular governor Shintaro
Ishihara. Mr. Ishihara is a sort of East Asian Jean-Marie
Le Pen, who demonizes ethnic minorities and taunts China as
well as the West, as in his famous 1989 book, "The Japan
That Can Say No." But with low economic growth its
best-case outcome, realism will oblige Japan to cling ever
more tightly to the United States for its security.

Japan's recent failure of dynamism is of a piece with a
pattern seen at least since 1868, when the Meiji
Restoration threw off feudalism and two centuries of
isolationism to meet the challenge from the West. The
country has veered between catastrophes, marshaling its
energies fantastically well toward recovery, as after World
War II, and then blindly holding on until the next crash.

What's changed is that the world moves far faster now, and
squandered moments, even Japan's lost decade, may be
irretrievable. The country's moment of truth may have been
in the Persian Gulf war in 1991, when, as Yoichi Funabashi,
the international affairs commentator of the Asahi Shimbun
newspaper, wrote, "Japan found itself merely an automatic
teller machine, one that needed a kick before dispensing
the cash."

AS inadequate as mere checkbook diplomacy is, the Japan
that is being written off today is increasingly unable even
to play that game the way it once did because of its huge
debt and pension woes. But even when Japan had wealth to
spare, it was unable to overcome the deep historic wounds
left over from its imperial conquests of the 1930's, or to
systematically strengthen its political and economic ties
with Asian neighbors.

"If you look beyond the United States, the countries that
have been able to play a significant role in the world of
ideas are all rather second-rate European countries: the
British, the French, even the Swedish," said Sheldon M.
Garon, a historian of Japan at Princeton University. "Japan
has contributed very little to the discussion. They don't
really have the vision to become world citizens, and have
done a really horrible job of promoting alternatives to
American dominance."

Perhaps the most essential element in Japan's relative
decline is its insularity. Although familiar, this feature
of the country reflects a great irony. With its mastery of
the production and marketing of consumer electronics, Japan
was an early mover in globalization. And yet here again it
has failed to adjust, placing alongside isolated North
Korea in international rankings of English-speaking
ability. Meanwhile, even Japan's coming population crunch
has failed to open the country to immigrants.

As the country's bureaucrats cook up one costly high tech
plan after another in hopes of putting Japan back into the
driver's seat, few here seem to have realized that money
alone doesn't build Silicon Valleys. No, that is a task for
open societies that draw on the world's best brains.

"I see only two things Japan can do, and they are
inseparable: opening up the country and its institutions,"
said Jean-Pierre Lehmann, a longtime Japan specialist at
I.M.D., a graduate management school in Lausanne,
Switzerland. "But I don't see this happening, because Japan
just doesn't want foreigners. Meanwhile, you can't rebel in
Japan, so the most talented young people are leaving the
country or are simply resigned."