Arthritic Japan: The Slow Pace of Economic Reform

Brookings Institution Press
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In the late 1980s, Japan's strong economic performance put it on a the verge of becoming a major player in regional and global affairs. But nearly a decade of economic stagnation, a mounting of bad debts, and a continuing stream of scandals have tarnished the country's distinctive economic model. At the turn of the millennium, the Japanese economy remained mired in a pattern of stagnation. As this disappointing condition dragged on, the government pursued policies to restore economic health. Yet Japan has been slow to embrace the systemic reform on which a robust economic recovery depends. In Arthritic Japan, Edward J. Lincoln examines the causes and implications of this weak response. Concluding that Japan is unlikely to pursue the vigorous reform necessary for economic growth, Lincoln warns of serious consequences: a stumbling economy bedeviled by recession and financial crisis, eroding leadership in economic and security issues, a continued defensive trade posture, and a disgruntled population that could turn a more nationalistic stance in foreign policy.
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About the author

Edward J. Lincoln is a senior fellow in Asia and Economic Studies at the Council on Foreign Relations. His previous Brookings books include Arthritic Japan (2001), Troubled Times: U.S.-Japan Trade Relations in the 1990s (1999), Japan's New Global Role (1995), and Japan's Unequal Trade (1990). In the mid-1990s, Lincoln served as special economic advisor to Walter Mondale, former U.S. ambassador to Japan.

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Publisher
Brookings Institution Press
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Published on
May 13, 2004
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Pages
247
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ISBN
9780815798712
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Language
English
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Genres
Business & Economics / Development / Economic Development
Business & Economics / Economics / General
Political Science / World / Asian
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This content is DRM protected.
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Pulitzer Prize in General Nonfiction finalist

Winner of the 2014 National Book Award in nonfiction.

An Economist Best Book of 2014.

A vibrant, colorful, and revelatory inner history of China during a moment of profound transformation

From abroad, we often see China as a caricature: a nation of pragmatic plutocrats and ruthlessly dedicated students destined to rule the global economy-or an addled Goliath, riddled with corruption and on the edge of stagnation. What we don't see is how both powerful and ordinary people are remaking their lives as their country dramatically changes.

As the Beijing correspondent for The New Yorker, Evan Osnos was on the ground in China for years, witness to profound political, economic, and cultural upheaval. In Age of Ambition, he describes the greatest collision taking place in that country: the clash between the rise of the individual and the Communist Party's struggle to retain control. He asks probing questions: Why does a government with more success lifting people from poverty than any civilization in history choose to put strict restraints on freedom of expression? Why do millions of young Chinese professionals-fluent in English and devoted to Western pop culture-consider themselves "angry youth," dedicated to resisting the West's influence? How are Chinese from all strata finding meaning after two decades of the relentless pursuit of wealth?

Writing with great narrative verve and a keen sense of irony, Osnos follows the moving stories of everyday people and reveals life in the new China to be a battleground between aspiration and authoritarianism, in which only one can prevail.

Something new is happening across East Asia. A region notable for its lack of internal economic links is discussing regional cooperation on trade, investment, and exchange rates. Because of negotiations elsewhere around the globe on regional trade—such as those that led to the consolidation of the European Union, the formation of the North American Free Trade Area, and the rapid proliferation of bilateral free trade areas—the talk is not surprising. Nevertheless, East Asia's past inertia with regard to forming a regional partnership raises many questions about its emerging regionalism. Why has the region suddenly shifted from taking a global approach to economic issues to discussing a regional bloc? How fast and how far will the new regionalism progress? Will the region become a version of the European Union, or something far less? What is the probable impact on American economic and strategic interests—are the likely developments something that the U.S. government should encourage or discourage? Edward Lincoln takes up these questions, exploring what is happening to regional trade and investment flows and what sort of regional arrangements are the most sensible. Lincoln argues that an exclusive grouping is unlikely. Free trade negotiations have brought some economies in the region together, but they also have led to links with nations outside the region. Some regional governments most notably Japan, continue to have difficulty embracing the concept of free trade, even with favored regional partners. In the wake of the Asian financial crisis, governments also have looked at cooperating on exchange rates, but they have done little to move forward. The U.S. government must decide how to respond to these developments in East Asia. An exclusively Asian form of regionalism could run counter to American economic interests, and the U.S. government has reacted negatively to some of these proposals in the past. Because trade and investment links between the countries of the Asia Pacific region and the United States remain very strong, Lincoln argues that the Asia Pacific Economic Cooperation forum remains the appropriate institution for pursuing regional trade and investment issues.
A groundbreaking history that considers the attack on Pearl Harbor from the Japanese perspective and is certain to revolutionize how we think of the war in the Pacific.

When Japan launched hostilities against the United States in 1941, argues Eri Hotta, its leaders, in large part, understood they were entering a war they were almost certain to lose. Drawing on material little known to Western readers, and barely explored in depth in Japan itself, Hotta poses an essential question: Why did these men—military men, civilian politicians, diplomats, the emperor—put their country and its citizens so unnecessarily in harm’s way? Introducing us to the doubters, schemers, and would-be patriots who led their nation into this conflagration, Hotta brilliantly shows us a Japan rarely glimpsed—eager to avoid war but fraught with tensions with the West, blinded by reckless militarism couched in traditional notions of pride and honor, tempted by the gambler’s dream of scoring the biggest win against impossible odds and nearly escaping disaster before it finally proved inevitable.

In an intimate account of the increasingly heated debates and doomed diplomatic overtures preceding Pearl Harbor, Hotta reveals just how divided Japan’s leaders were, right up to (and, in fact, beyond) their eleventh-hour decision to attack. We see a ruling cadre rich in regional ambition and hubris: many of the same leaders seeking to avoid war with the United States continued to adamantly advocate Asian expansionism, hoping to advance, or at least maintain, the occupation of China that began in 1931, unable to end the second Sino-Japanese War and unwilling to acknowledge Washington’s hardening disapproval of their continental incursions. Even as Japanese diplomats continued to negotiate with the Roosevelt administration, Matsuoka Yosuke, the egomaniacal foreign minister who relished paying court to both Stalin and Hitler, and his facile supporters cemented Japan’s place in the fascist alliance with Germany and Italy—unaware (or unconcerned) that in so doing they destroyed the nation’s bona fides with the West.

We see a dysfunctional political system in which military leaders reported to both the civilian government and the emperor, creating a structure that facilitated intrigues and stoked a jingoistic rivalry between Japan’s army and navy. Roles are recast and blame reexamined as Hotta analyzes the actions and motivations of the hawks and skeptics among Japan’s elite. Emperor Hirohito and General Hideki Tojo are newly appraised as we discover how the two men fumbled for a way to avoid war before finally acceding to it.

Hotta peels back seventy years of historical mythologizing—both Japanese and Western—to expose all-too-human Japanese leaders torn by doubt in the months preceding the attack, more concerned with saving face than saving lives, finally drawn into war as much by incompetence and lack of political will as by bellicosity. An essential book for any student of the Second World War, this compelling reassessment will forever change the way we remember those days of infamy. 
Something new is happening across East Asia. A region notable for its lack of internal economic links is discussing regional cooperation on trade, investment, and exchange rates. Because of negotiations elsewhere around the globe on regional trade—such as those that led to the consolidation of the European Union, the formation of the North American Free Trade Area, and the rapid proliferation of bilateral free trade areas—the talk is not surprising. Nevertheless, East Asia's past inertia with regard to forming a regional partnership raises many questions about its emerging regionalism. Why has the region suddenly shifted from taking a global approach to economic issues to discussing a regional bloc? How fast and how far will the new regionalism progress? Will the region become a version of the European Union, or something far less? What is the probable impact on American economic and strategic interests—are the likely developments something that the U.S. government should encourage or discourage? Edward Lincoln takes up these questions, exploring what is happening to regional trade and investment flows and what sort of regional arrangements are the most sensible. Lincoln argues that an exclusive grouping is unlikely. Free trade negotiations have brought some economies in the region together, but they also have led to links with nations outside the region. Some regional governments most notably Japan, continue to have difficulty embracing the concept of free trade, even with favored regional partners. In the wake of the Asian financial crisis, governments also have looked at cooperating on exchange rates, but they have done little to move forward. The U.S. government must decide how to respond to these developments in East Asia. An exclusively Asian form of regionalism could run counter to American economic interests, and the U.S. government has reacted negatively to some of these proposals in the past. Because trade and investment links between the countries of the Asia Pacific region and the United States remain very strong, Lincoln argues that the Asia Pacific Economic Cooperation forum remains the appropriate institution for pursuing regional trade and investment issues.
Something new is happening across East Asia. A region notable for its lack of internal economic links is discussing regional cooperation on trade, investment, and exchange rates. Because of negotiations elsewhere around the globe on regional trade—such as those that led to the consolidation of the European Union, the formation of the North American Free Trade Area, and the rapid proliferation of bilateral free trade areas—the talk is not surprising. Nevertheless, East Asia's past inertia with regard to forming a regional partnership raises many questions about its emerging regionalism. Why has the region suddenly shifted from taking a global approach to economic issues to discussing a regional bloc? How fast and how far will the new regionalism progress? Will the region become a version of the European Union, or something far less? What is the probable impact on American economic and strategic interests—are the likely developments something that the U.S. government should encourage or discourage? Edward Lincoln takes up these questions, exploring what is happening to regional trade and investment flows and what sort of regional arrangements are the most sensible. Lincoln argues that an exclusive grouping is unlikely. Free trade negotiations have brought some economies in the region together, but they also have led to links with nations outside the region. Some regional governments most notably Japan, continue to have difficulty embracing the concept of free trade, even with favored regional partners. In the wake of the Asian financial crisis, governments also have looked at cooperating on exchange rates, but they have done little to move forward. The U.S. government must decide how to respond to these developments in East Asia. An exclusively Asian form of regionalism could run counter to American economic interests, and the U.S. government has reacted negatively to some of these proposals in the past. Because trade and investment links between the countries of the Asia Pacific region and the United States remain very strong, Lincoln argues that the Asia Pacific Economic Cooperation forum remains the appropriate institution for pursuing regional trade and investment issues.
Japan is the great economic success story of the postwar period, growing at unprecedented rates to become one of the world's most advanced industrial nations. But since the early 1970s, Asia's economic giant has had to contend with many of the problems encountered by Western economies--slower growth, increased unemployment, rapid changes in the financial and industrial sectors--problems that have permanently transformed its economy and pose crucial challenges for its leaders.

In this book, Edward J. Lincoln discusses Japan's burst of growth and the complex interplay of demographic, cultural, economic, and political forces that shaped the subsequent emergence of large domestic imbalances. The motivation and impact of Tokyo's successive attempts to deal with slower growth receive special attention: ballooning government deficits that supported domestic growth in the late 1970s, a determined switch to austerity measures in the 1980s as a surging current-account surplus conveniently buoyed the economy, and as yet uncertain responses to the recent appreciation of the yen that has capped the external surpluses.

Lincoln focuses on the changes experienced by Japan's financial institutions and their implications for international economic transactions. Slower growth and altered monetary flows have brought increasing domestic and international pressures for deregulating financial institutions, and the government has responded cautiously. The study analyzes the resulting tensions and crosscurrents within Japan and the strains that have developed in relations with the United States. It concludes with a lucid presentation of Japan's options for stimulating domestic demand through reducing private-sector savings, increasing investment, and raising government spending, as well as appropriate U.S. policies to promote these outcomes. Whatever policy decisions Japan makes in the next few years will be shaped by the economic forces and institutional framework Lincoln outlines.

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