Japan’s Fragile Wealth


  1. Introduction
  2. A Fragile Wealth

·       Build-up of Wealth

·       Japan Bashing

·       Debt Problems

  1. Corruption
  2. The Human Condition

·       Quality of Life

·       Search for Leisure

  1. Conclusion
  2. References


At the end of World War II, Japan’s economy was in a dismal state.  During the allied occupation, which lasted from 1949 to 1952, attempts were made to decrease deflation and improve the economy.  However, a “gift from the gods” came in 1950 in the form of the Korean War, which jump-started the Japanese economy.  Between 1955 and 1973, the country went through a period of  “income doubling,” and then from 1973 to 1990, it went through a period of “income expanding” (McCormack 2001:xii).  Because of this, Japan was both looked up to and envied by countries around the world.  But as the twentieth century came to an end, it became increasingly apparent that the affluence of Japan was “empty.”  Gavan McCormack, a scholar of Japanese studies at the Australian National University, wrote a book in the 1990s on this subject.  In this book, The Emptiness of Japanese Affluence, he states that the “prosperous, stable, and economically triumphant Japan of the 1970s and 1980s rested on foundations as insecure as those that the earthquake of 1995 brutally exposed in Kobe” (2001:6).  Even though Japan has rebuilt after the earthquake and continues to prosper, the world has seen that the country is not as economically strong as once thought.  Because the country had worked so hard to gain economic prosperity, its true wealth in its human, social, and ecological capital was eroded (McCormack 2001:297).  Now that problems in the Japanese economy have been exposed, the country must find a way both to solve past problems and reform its system for the future.


A Fragile Wealth

In 1993, Hedrick Smith’s documentary Challenge to America aired on American television.  This film, which compared Japan, Germany, and the United States, displayed the 1980s mentality of the Asian model minority.  The language, such as “challenge,” showed how the United States struggled to compete with the thriving nation of Japan.  The Japanese workers were orderly and the children were perfect.   During World War II, Japan became “the Other” that the United States was out to kill, but after the war it was elevated to the position of a superior and model country.  Japan’s industry and economy appeared to be flourishing.  In April 1995, Japan was “fabulously wealthy” with a GNP that was more than 80% of that of the United States (McCormack 2001:7).  Japan’s GNP was double that of all other Asian countries combined, including the Indian subcontinent (McCormack 2001:7).  Fifty years after the end of the war, Japan was on track to become the largest economy in the world (McCormack 2001:7).

            Japan bashing peaked as people became angered at the county’s economic success.  In 1982, unemployed workers in Detroit beat to death a Chinese man, who they mistakenly thought was Japanese (Miyoshi 1991:63).  Articles in papers and magazines discussed the “danger” Japan presented.  People stressed the trade imbalance that stood at 50 billion dollars annually in Japan’s favor and the fact that Japan’s per capita income was higher than that of the United States.  Others complained that one Japanese corporation, Nippon Telegraph and Telephone, was worth more than IBM, AT&T, General Motors, General Electric, and Exxon combined (Miyoshi 1991:64).  These facts, along with others, brought out many bashers who openly shared their anxiety and resentment of the Japanese.  In Ishinomori Shotaro’s manga, Japan Inc., he shows how the Japanese would like to unify Japan and America for a common good by creating a Dolen (a cross between the dollar and yen).  The United States, however, could never have accepted this because they saw Japan as a threat.


Although economists knew that Japan’s economic expansion could not last forever, it continued to mushroom into the early 1990s.  However as the last decade of the 20th century progressed, it became clear that Japan was not the affluent country so eagerly emulated, or so ruthlessly bashed.  The growth of Japan’s GDP has been illusory because it was far exceeded by debt that must one day be repaid with interest (McCormack 2001:xiii).  In fact, 16 percent of Japan’s tax revenues went towards paying interest on the debt (McCormack 2001:39).  The Wall Street Journal calculated that by 2001, Japan’s national debt would be 36 percent of the total global debt (McCormack xiii).  In 1999, Prime Minister Obuchi Keizo called himself the “king of the world’s debtors” (McCormack 2001:xiii).  Even in the 1980s, a period of economic growth in Japan, the annual increase in public debt was larger than the increase in the GDP (McCormack 2001:xiii).  Japan’s deflation during the past decade was unmatched (McCormack 2001:xiii).  Between ten and twenty trillion dollars, approximately half of the global GDP, disappeared from the national assets (McCormack 2001:xiii).  In 2000, money had to be borrowed from future generations in order to balance a budget that continued to use money for “inefficient, destructive, unnecessary, and often corrupt public works” (McCormack 2001:xiii).  Although Japan has in the past been viewed as the “favored child” of the West, it is beginning to look more like an orphan, “unsure of its identity, lacking a sense of direction, drifting, unable to conceive of a goal beyond GDP expansion, yet increasingly dissatisfied with it” (McCormack 2001:xii).  Clearly, the current economic system in Japan is unsustainable.



Corruption in the government has led to many of Japan’s current problems.  In 1993, forty-three percent of the national budget (31.8 trillion yen) went towards construction (McCormack 2001:33).  This is more than the United States spends on construction, and even more than it spends on defense. This does not result from a need for construction, but rather a system of corruption sometimes called the doken kokka, or construction state (McCormack 2001:33).  In this system, the Ministry of Construction gives contracts to firms that belong to officially recognized cartels, or dango.  Because these construction firms are guaranteed regular contracts, they do not have to worry about competition.  The inflated prices from the work allow generous profit margins that go to maintaining the political system (McCormack 2001:33).  In 1993 and 1994, it was learned that 1 percent of all public works contracts of up to two or three billion yen, and 0.5 percent of contracts for sums of more than ten billion yen, had been going as gifts to politicians (McCormack 2001:34).  Because of this corruption, it costs 9 times as much in Japan to build a road as it does in the United States (McCormack 2001:35).  In order to fund this corrupt system, the Japanese tax-paying citizens have become innocent victims of high-level extortion as money is taken to fund these projects, leaving Japan in debt to its own citizens.  Besides funding corruption, many projects have been carried out that were both unneeded and damaging to the environment.  For example, Japan decided to build dams to strengthen urban industry (McCormack 2001:45).  A large amount of money was put into the project, but the dams ended up useless, clogged, and hazardous to the environment.  Because of these mistakes made in the past, it will take additional money to remove or repair these dams and to improve the environment.  Japan has struggled so much to prosper economically, that it has often not considered affects on the environment, one of its most precious resources.


The Human Condition

Japan has also forgotten its people, another important resource.  Even with the seemingly higher per capita income in the early 1990s, Japan’s quality of life was generally far poorer than that of most people in the United States (Miyoshi 2001:65).  Japan’s housing situation is worse than in several developing nations, it has the greatest proportion of unpaved roads among the industrialized nations, and there are few parks and other public facilities  (Miyoshi 1991:65).  Even though the country is generally prosperous, the vital areas of cultural life are sorely deficient (Miyoshi 1991:65).  Thus, besides the so-called “emptiness” in material affluence (mono no yutaka), emptiness also exists in the spiritual affluence (kokoro no yutaka).  McCormack says that in no other country is the “social life so structured around the imperatives of economic life” (2001:289).  Approximately 10,000 people die every year from overwork, or karoshi (McCormack 2001:85).  The social organization of labor in Japan is generally stressful, requiring 200 to 500 more hours of work than in other industrialized nations (McCormack 2001:80).  The current system of lifetime employment does not work for many females as they are pressured to leave the workforce in their mid-twenties to marry and have children, only returning to the workforce after their children are older (Brinton 1993:28).  This creates an M-shaped diagram of female labor force participation rates, while other countries have a simple arc because females work throughout their twenties and thirties.  The pressure of having to leave the workforce or not being offered the same job as a male causes many young women to leave the country to study and work, resulting in brain drain.

  Because of the incredible stress of work, a new leisure industry was born in Japan.  In 1992, the nation became known as the “livelihood superpower,” as the country put much money into finding ways to relax (McCormack 2001:78).  Golf courses, amusement parks, and meditation chambers opened across the country.  But still, the purpose was to make money.   Economism, or the belief that economics is the most important element in a society, came out of Japan’s need to develop the country and improve technology after the end of WWII (Sugita 2001:86).  Social and cultural values were pushed to the back as “consumer euphoria and urban workaholism” came to the front (Sugita 2001:87).  Japan had to work to redevelop both its identity and rejuvenate its economy.



After the end of World War II, Japan worked at modernizing and gaining equality with the West.  They reached this point, managing to both influence and frighten Americans.  While some companies in the United States chose to follow such Japanese examples as emphasizing group effort over individuality, others were angered.  But in Japan, even though they were experiencing continuing economic growth, people were dissatisfied.  While some countries try to replicate Japan’s economic model, its affluence is problematic. Japan has exploited its natural and human resources carelessly in order to achieve its goals.  McCormack suggests that Japan should try to become a “zero-growth state” (McCormack 2001:293).  He quotes John Stuart Mill as saying, “It is only in the backward countries of the world that increased production is still an important object:  in those most advanced, what is economically needed is a better distribution” (2001:293).  Japan certainly has many economic problems, but by recognizing and addressing these issues, the country should be able to resolve many of its problems. 



Brinton, Mary C., Women and the Economic Miracle:  Gender and Work in Postwar Japan.  University of California Press, 1993.  24-70.

Ishinomori Shotaro.  Japan Inc.  University of California Press, 1988:  171-223.

McCormack, Gavan.  The Emptiness of Japanese Affluence.  M.E. Sharpe, 2001.

Miyoshi, Masao.  Off Center:  Power and Culture Relations Between Japan and the United States.  Harvard University Press, 1991:  62-94.

Sugita Yoneyuki and Marie Thorsten.  “Managing Power Among the Vanquished:  The Question of Cultural Values in Postwar Japan.”  In S.K. Chakraborty and Pradip Bhattacharya, eds., Leadership and Power:  Ethical Explorations.  Oxford University Press, 2001:  76-89.


Sarah Peterson, Nov. 20, 2001