The latest bad news from Tokyo coincides with a sharp decline in U.S. economic growth, lower than forecasted rates of expansion in Europe, and the deepening of the crisis facing a number of relatively large semicolonial countries in Latin America and Asia.

The slowdown in Japan, while an integral part of this international unsteadiness, is deeper and has been going on longer than elsewhere in the imperialist world. Japan, once touted as an economic miracle by employers, bourgeois economists, and governments from New Zealand to the United States, has been increasingly revealed as the weakest link in the imperialist chain.

This fact, and the failure of the Japanese ruling class to so far carry through any serious changes to the banking system or other "structural reforms" in the economy, pose special concerns to the U.S. capitalists and their representatives in Washington. "You cannot have the second largest economy in the world essentially stagnating without impacting the rest of us," said Alan Greenspan, chairman of the U.S. Federal Reserve, to the Senate financial committee in April.

Prior to the recent election of Prime Minister Junichiro Koizumi of the Liberal Democratic Party (LDP), which has dominated electoral politics since World War II, the government has responded to the economic crisis with a massive spending program focused on construction of roads, railways, and bridges. "This benefited key construction companies with close links to the LDP or its power brokers but the spending had a limited wider economic impact," the Financial Times reported. The spending has left Japan with a debt of more than 130 percent of its gross domestic product, the highest of any industrialized nation.

Koizumi has said he will instead carry out "painful" measures, including clearing bad loans from the books of banks, slashing capital gains taxes, and cutting back or privatizing a number of state-owned enterprises. His proposals, while short on detail, have been encouraged by the big-business media and by politicians in the United States--including President George Bush, who declared after meeting Koizumi in Washington on July 1 that he had "no reservations" about the prime minister's "reform agenda."

"My fundamental philosophy is that you have to put up with pain today for tomorrow's sake," Koizumi said in an interview on the eve of his trip to the United States, referring to more economic decline, rising unemployment, and falling standards of living for working people. He casts his appeals in a nationalistic framework: "My top priority is to rebuild the economy and create a proud and confident Japan," he told the parliament in early May.

So far, however, the new prime minister's actions and program have not matched his rhetoric.  
 
Origins of Japan's crisis
In addition to the world crisis of capitalism and the current economic downturn, the Japanese superwealthy ruling class, unlike in North America and in many countries of Europe, never carried out a thoroughgoing revolution to overturn the feudal aristocracy. Feudal families dominated politics, the military, and the economy before and during World War II. The rulers in Japan never embarked on a land reform like the Homestead Acts enacted during and after the Civil War in the United States, nor did they push through a bourgeois banking reform as did their U.S. counterparts in wake of the bank failures at the opening of the Great Depression of the 1930s.

After Japan's defeat in World War II, the occupying U.S. military implemented measures, including suffrage for women and a land reform, which were presented as steps to modernization. The U.S. rulers, however, were concerned only with restoring a stable capitalist state in Japan and with blunting future threats of the Japanese military.

Working people suffer the most from the backwardness that marks social relations in Japan. Women, for example, still endure extreme discrimination in employment. Millions, even college graduates, are tracked into "miscellaneous workers" jobs such as "office ladies" to "brighten up the office." They are expected to quit when they marry or have children. Reports on employment of women in Japan all point to a distinct "M" curve, where employment peaks for women around age 25, falls dramatically, then picks up again when children have left the home around age 45. There is little child-care available and part-time and "temporary" employment is a feature of working life for women, few of whom are employed in industrial jobs.

Despite passage of an anti-discrimination law in 1985, most reports say little has changed. Last year Tomoko Haneda won a rare lawsuit against Sharp Electronics for extreme wage disparities between herself and male employees. "It has been over 10 years since we got an equal employment opportunity law in Japan," she said, "but the situation for women remains pathetic. The only way it can improve is if we engage in the battle."

Immigration is low in comparison to other imperialist countries, although it is growing, and working people from Korea and elsewhere in Asia have mounted struggles for their rights. To "stem the tide" of people who illegally enter the country by air, who numbered 6,828 last year, the Japanese government has recently increased the number of immigration officials at airports. Officials say there were 51,459 people who either overstayed or violated their visas last year, a 7 percent decline over the previous year.

These are both factors that have made it harder for the employers in Japan to cut wages and increase productivity through speed up, extension of the workday, and other measures relative to their imperialist rivals. The union officialdom has built its base on job-for-life guarantees for a layer of workers, refusing to build the unions as fighting instruments of all workers and trying to merge their interests with those of the Japanese bosses.

The export successes of a small range of Japanese firms and the generalized growth of the economy for several decades after World War II masked the weaknesses in Japan. But this was hidden even after that period of growth had come to an end as a stock market and real estate bubble during the 1980s continued to lift the fortunes of a number of banks and other enterprises.  
 
Banking crisis
The stock market crash of 1987, which began on Wall Street but immediately reverberated around the capitalist world, burst the bubble, leading to a decade and more of precipitate decline in Japan. Since then the banking system has remained in a deep crisis.

The banks in Japan hold many of their assets in the form of real estate deeds and stocks and shares, as well as loans to now unprofitable enterprises. In January 1999, commercial land prices in the country were more than 75 percent below their level nine years earlier. The slump in real estate prices continued last year, with property prices falling almost 5 percent nationwide.

With similarly disastrous results, the banks have been handcuffed to the stock market as it has tobogganed downwards through the 1990s. While the markets in the United States and Germany quadrupled their paper value in the decade to June 2000--during the boom that preceded the current slump--the Japanese stock market lost nearly half its value.

Today the Japanese banking system remains in a deep crisis. This is reflected in the level of "bad loans" held by the major banks. According to economic observers, if non-performing bank loans are added to loans "needing attention"--the two lowest categories in the government's official classification system--then bad loans amount to more than $1.25 trillion, equal to more than one-quarter of the country's annual economic output.

The luster of the Japanese economic "miracle" has also faded on the country's manufacturing and service sectors.

Aside from a relatively small number of firms in the consumer electronics, auto, steel, and machine tools industries, most Japanese capitalists are unable to compete with their rivals in the United States, and can only survive by dint of massive government subsidies or protectionist measures. One study published in late 2000 by the McKinsey Quarterly claims that average productivity per worker in Japan is 31 percent lower than in the United States. The per capita gross domestic product in Japan stood in 1999 at $23,100, the ninth highest in the world, compared with $31,500 in the United States.

While firms like Sony and Toyota boast higher productivity than their European and U.S. competitors, companies in Japan that produce for the domestic market are 37 percent less productive than their U.S. counterparts. The McKinsey study found that businesses in retailing, health care, housing construction, and food processing--accounting for 18 percent of the country's gross domestic product and 22 percent of employment--are only 56 percent as efficient as U.S. firms.

The "Toyotas and Sonys, accounting for only about 10 percent of all economic activity in Japan," the report says, "are the exception and not the rule. The remaining 90 percent of economic activity takes place in companies that do not export products, instead providing domestic manufacturing and services. Save for national origins, these companies share nothing with Toyota. They are subscale, poorly managed, antiquated, insulated from competition, and woefully unproductive."

The report says that 70 percent of new single-family homes in Japan are build by traditional master carpenters working mostly alone with traditional tools.  
 
Agricultural protections
As an island nation that can be subjected to naval blockades, the Japanese rulers prioritize policies that heavily protect agricultural production. According to an article in the Financial Times, imported rice is penalized by tariffs of almost 1,000 percent. Tokyo "is also in a bitter dispute with China about its curbs on imports of shiitake mushrooms, leeks, and tatami rushes used for mat-making," continued the report.

The government's restrictions on agricultural imports raise the shelf price of rice, wheat, and beef to between three and six times the world average.

For example, faced with pressure from some Japanese capitalists for a trade pact with the Mexican government that would have removed quotas and tariffs from that country's agricultural products, the Japan External Trade Organization predicted that such a deal would result in an "overall collapse of existing systems and far-reaching effects on domestic [agricultural] production." Even negotiations for a tariffs-busting trade agreement with Singapore, a city-state with almost no farming sector, was scuttled after the agricultural ministry raised the alarm about imports of ornamental fish and cut flowers.

While Koizumi has said he is in favor of sweeping measures that break with the previous LDP practice of massively subsidizing inefficient industries and projects initiated by major construction firms, subsequent statements have raised doubts about his readiness to take on whole sectors of the ruling class that benefit from such policies. "American officials are waiting for evidence that Japan's latest recovery plan will actually be implemented," wrote Richard Stevenson in the July 8 New York Times.

On July 10 the finances and economics ministers announced that a supplementary budget to stimulate the economy might be in the cards. Koizumi insisted that this was only an option, and that if it eventuated the money would be allocated differently than in the past.

The many U.S. business advisers and "assets managers" in Japan, and the mouthpieces of capitalism in the United States, are urging the government on to greater efforts. "Japanese companies must be forced to abandon their old ways, and the only way to accomplish this is to present them with hard budget constraints. In other words, more will have to go bankrupt," wrote the editors of the Wall Street Journal in March.

U.S. firms favor an end to traditional restrictions that hamper their attempts to buy out bankrupt Japanese businesses at bargain basement prices. In one of an increasing number of such deals, the Dallas-based Loan Star Fund bought out the Tokyo Sowa Bank Ltd. in January. Loan Star Fund's owners had bought bad loans in Japan for the past three years.

Whatever measures are undertaken by the Koizumi government against "bad loans" and in favor of foreign investment and ownership will inevitably lead to more layoffs and social dislocation for working people. The only question is how massive the impact will be. Japanese economists scoffed at predictions by the economics minister that the reforms announced June 22 would throw no more than 100,000 to 200,000 people out of work. "Either Koizumi hasn't fully grasped the consequences of his policies, several argued, "or he isn't truly serious about reform, reported the Washington Post.  
 
 
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