TOKYO - The Orioles' Hall of Fame manager Earl Weaver used to say that a team is never as good as it looks when it is winning, and never as bad as it looks when losing. Japan's new prime minister, Keizo Obuchi, might take comfort in that.
Japan's losing streak is about as old as the decade, but it seems to be accelerating. Business-page headlines this month have been uniformly dreary - bankruptcies up; stock market down; corporate capital investment down; banks cutting off credit to shaky companies; corporate bond ratings downgraded.
Naturally, everybody knows what Japan should do. American, Chinese, Malaysian and other governments are pestering Japan to do the right thing. Japan's editorial writers agree that the Obuchi government is not doing the right thing. Sample headlines - "New leader, old ideas"; "Obuchi's first failure"; "A quick thumbs-down for Obuchi"; "Obuchi off to fizzling start."
Imagine! Keizo Obuchi has been prime minister for three entire weeks without solving the crisis. The nincompoop!
But Japan's recovery is the world's business, not only Japan's. Japan is by far Asia's largest economy, and if it could boom, the increased business activity would stimulate the flagging economies of its trading partners in South Korea, Thailand, Indonesia, the Philippines and Malaysia.
Conversely, a weak Japan weakens the rest of Asia. A falling yen - its value against the dollar is only 60 percent of what it was three years ago - squeezes the export competitiveness of the other Asian currencies. If the yen drops much further, analysts say, a round of currency devaluations might spread throughout the region, beginning perhaps in China. Just how seriously Wall Street takes Asia's economic weakness was seen the other day when the stock market took a 300-point, one-day drop.
In Western eyes, Japan oscillates marvelously between titan and pygmy. In the 1950s, "Made in occupied Japan" signaled the cheap trinkets - pretty shells wrapped in paper streamers and the like - produced by a defeated former enemy.
I lived in Japan for a year and a half beginning in 1964. Japanese saw that as the year they reclaimed their place on the world stage. It was a matter of great national pride, given the dryness of the subject, when Japan was accepted into the Organization of Economic Cooperation and Development - the club of advanced industrial countries. And that year the world came to Tokyo for the Olympic Games. Japanese felt that their country had recovered from the pariah status of World War II loser.
Still, Japan was eager to please. In hopes of being found worthy by the Western world, members of the public and private sectors tried to bury everything that was thought to be too Japanese.
Sometimes the results were almost farcical. There are too many barking dogs here, a letter writer complained to a Tokyo newspaper - what will the foreigners who come to the Olympics think of us? Can't somebody collect all the dogs and humanely cut their larynxes to silence them?
And: What shall we do about the old men - retirees - who sit in the air-conditioned airport lounge every summer day in their underwear? Is this the picture Japan wants to present to the world? Can't these old men be rounded up, at least during the Olympics, and settled somewhere where the foreigners won't see them?
By 1980, when I returned to Japan, the country had recovered not only its economic prowess but also its self-confidence. While the United States was experiencing "stagflation" - no growth, but rising prices - Japan captured world markets in automobiles, cameras, television sets, steel and other industries. Within a few years, books would be published: "Japan as No. 1" and "The Japan That Can Say 'No.' "
An official of the Ministry of Trade and Industry silkily told a group of visiting American journalists: "Japan has learned much from the West. Now, perhaps Japan has much to teach the West."
This month I returned to Japan for two weeks, and the wheel has turned again. The United States revels in its Goldilocks economy - not too hot and not too cold, but just right - and Japan is a stumblebum. Its economy this year will produce less than it did last year, while unemployment has climbed to a modern record. Its stock market is off 60 percent from its highs of a decade ago, meaning that the paper millionaires created by the stock and property boom of the 1980s are 60 percent poorer than they thought. And banks list as assets on their books an estimated $1 trillion - yes, trillion - in loans that will never be repaid.
The politicians are paralyzed. Perhaps by early October, a new ++ rescue package might be enacted, said a government spokesman last week. Or perhaps not, given that a lively opposition is blocking power in Japan's upper house. Even so, the government's rescue plan, a combination of tax cuts and pork-barrel spending to jolt the economy, follows six similar packages that have pumped more than a half-trillion dollars into the economy since 1992 without much effect.
The core of Japan's continuing crisis is the weakness of its banks. They passed out loans freely in the go-go 1980s, with land and stocks as collateral. At the height of the speculative party, the paper valuation of Tokyo real estate exceeded that of all the land in the United States. A single building site might be mortgaged three or four times, raising more capital as its nominal value rose.
When these "bubble" assets collapsed, the loans could not be repaid. For one thing, who gets to foreclose on a building site mortgaged to three or four banks, especially when no one wants to build there? But Japan has been unable to muster the political will to write the debts off, swallow the losses and reorganize on a sound footing. The policy has been to wait for a new up cycle and hope the loans would start paying again.
That still seems to be the policy. In an early address to the Diet, Obuchi reassuringly announced that there were no insolvent Japanese banks; a survey had disclosed that every one of them has assets exceeding its liabilities.
Technically, that might be true. But the loan portfolios are hollow assets, with many accounts that pay no interest or principal. Obuchi's reassurance was taken as a signal that his government does not intend to take the tough measures that are needed - letting the weakest banks go bust. But then the bankers mostly are supporters of the ruling Liberal Democratic Party.
Obuchi's finance minister, Kiichi Miyazawa, is hardly a more reassuring figure. One of his colleagues hyperbolically called him a "class-A war criminal" for his past service, which includes being finance minister when the bubble boom got out of hand in the late 1980s, and then prime minister when the government failed to react to the crisis in the early 1990s.
Optimists, The Economist magazine quipped, reckon that the government will fall in October; pessimists expect it to linger into the New Year. There is an opposition party, the Democratic Party of Japan, whose energetic leader, Naoto Kan, appears serious about reform - or perhaps only about stalling the Obuchi government's rescue plan, forcing a downfall and taking power.
I talked with three businessmen about Japan's prospects. One is an American who has traded and sold in Japan.
"Don't believe the propaganda that Japan is finished," he said. "The Japanese economic miracle of the postwar years really did happen. These are intelligent and resourceful people whose entire history shows their ability to overcome a challenge."
"Of course, Japan will be back," said the second, a Tokyo exporting consultant. "But it will take 50 years. We won't live to see it."
The problem, as this Japanese sees it, is that the world has changed and Japan has not. "Our education system was the best in the world for training a skilled and obedient work force," he said. "But this is no longer the manufacturing age, it is the knowledge age. That requires creativity and entrepreneurial sense that Japanese schools do not teach. But American schools do."
The third, an investment banker in Tokyo, is neither as optimistic as the American nor as pessimistic as the trade consultant.
Education reform is indeed needed, he said, and a response to the rapid aging of Japanese society. A birthrate below 1.5 babies per woman, combined with the world's longest average life spans, means a future in which a relatively few workers support many elderly retirees. American Social Security faces the same problem, but the multiples are much greater in Japan, and there is no tradition of swelling the work force with immigration.
But the banker says Japan has strengths, too. Older people tend to be richer than younger ones, he points out, and Japan has the world's highest savings rate. He notes, "There is plenty of capital here." He envisions a future for Japan as Asia's financial center.
But not with a banking system in eternal crisis. So Japan's indispensable requirement, the banker says, is leadership. "As we shift from a manufacturing economy to a knowledge-based one, some people will lose their jobs, and some businesses must go bankrupt. A revolution," he says, "requires strong leaders."
Hal Piper is an editor at The Sun and a former foreign correspondent
Pub date: 8/23/98