Japan

The poor in Japan find nowhere to turn | theage.com.au

JUST about every impression you have of Tokyo is correct. It throngs with the constant motion of its 12 million people. The subway meets its exacting schedule with impossible precision. And, of course, there's the neon onslaught that defines this city. The logos of a million multinational corporations decorate the sky, reminding you that the world's second-biggest economy surrounds you. Anyone who doubts the capacity of the free market to produce dazzling wealth should visit this place.

And yet, Japan is now a deeply worried country. In his New Year message this week, Prime Minister Taro Aso saw fit to invoke Japan's recovery from its crippling defeat in World War II to inspire his people in the face of the global financial crisis. Certainly, the challenge is ahead. Japan's industrial output shrank an incredible 8.1 per cent in November alone. The Government has predicted another fall of 8 per cent for December.

The economy is in recession, and shrinking at a rate approaching 2 per cent a year. There are 100,000 fewer people in employment than a year ago. Companies like Toyota, Sony and Cannon are slashing jobs. If you want a good view of the global recession, Japan makes an excellent vantage point.

That's because Japan's story, and its short-term future, embody the best and worst of globalisation. The same forces that have contributed to its prosperity are also bringing it to the brink of profound social and political difficulty. And they are forces that, to varying degrees, have an impact on most of the developing world, including Australia.

Japan wasn't always an economic colossus. Its emergence came in the 1960s when policies of partial trade liberalisation and openness to international competition allowed it to grow at an average of 10 per cent a year.

But Japan encountered recession in the 1990s. The response under prime minister Junichiro Koizumi in the first half of this decade was to embrace the creed of neo-liberalism, and put the nation's future more fully in the hands of the free market. That meant a suite of laws aimed at encouraging foreign investment and increasing privatisation.