[Viewpoint] Japan: Running on empty

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[Viewpoint] Japan: Running on empty

So you’re Barack Obama and you meet with Japan’s new leader. Do you bother remembering his name?

This question isn’t as flippant as it sounds. Japanese have seen so many prime ministers since 2000 that many need Google’s help to recall them.

Yukio Hatoyama yesterday made way for the fifth leader since late 2006. It makes you wonder who would take Japan’s economy seriously and look on it favorably.

Japan, it’s often said, is really run by nameless, faceless bureaucrats - it doesn’t matter who warms the premier’s seat.

That argument no longer passes muster as deflation worsens and Japan’s global standing wanes. Japan badly needs leadership, and imaginative leadership at that.

Pundits claim Hatoyama’s less than nine-month stint ended because of scandals and bickering over U.S. military bases. The truth is, he was done in by a lack of creative thinking.

With interest rates near zero and debt almost twice the size of the economy, only fresh ideas will stabilize prices, raise competitiveness and get consumers to save less and spend more. Hatoyama failed to demonstrate he had any.

The dismal ranking Japan received in Swiss business school IMD’s latest competitiveness scorecard of 58 economies tells the story.

Japan fell to 27th place from 17th in 2009, putting it behind Malaysia, China, South Korea and Thailand.

The thousands of Japanese waiting in line for hours last week for iPads helped dramatize why. Steve Jobs’s Apple isn’t killing companies such as Sony because of high corporate taxes, as many executives say. It’s doing so because of a dearth of inventiveness.

Corporate Japan thrived for decades on selling high-end gadgets and making incremental upgrades to maintain the buzz. It still hasn’t adjusted to the idea that game-changing inventions are driving global business these days, not mere tweaks.

Hatoyama’s departure comes as local media obsess over the “iPad shock,” which followed the “iPhone shock” and “iPod shock.”

Where is the economy that once proudly produced cutting-edge technology that made Americans shudder?

Nor has Japan’s government tweaked its own business model. The focus is still on stimulus packages and prodding the Bank of Japan to pump more yen into the economy.

What’s needed is a new set of policies that encourage job creation and avoid deflation. April consumer prices, excluding fresh food, slid 1.5 percent from a year earlier, after dropping 1.2 percent in March.

It’s here that Hatoyama failed. His Democratic Party of Japan harnessed discontent over a stagnant economy - not unlike President Obama in the U.S. The DPJ promised a new politics and a new dawn, only to govern as incompetently as the party it unseated last August.

If Hatoyama had instilled any confidence that change were afoot, he would have survived the problems that allegedly caused his ousting. He didn’t, and in the process he showed why Japan’s sclerotic politics are increasingly tripping up investors.

It may come as a surprise to many that Asia’s richest economy has anything to learn from Thailand. Say what you want about Asia’s No. 8 economy and its deadly protests - at least Thailand can hang on to a prime minister for more than a year.

At the very least, Japan must reconsider its electoral process. It’s about choosing better leaders than the nation’s seniority-obsessed culture allows.

Let’s select prime ministers based on merit and ideas, not because of how many years they have been around or who their daddy is.

For all the talk about being different, the DPJ chose Hatoyama in the ham-handed way the ousted Liberal Democratic Party selected its own. He got the job because he’s the grandson of a prime minister and the son of a foreign minister.

Other than a knack for botching the job, Hatoyama’s three predecessors - Taro Aso, Yasuo Fukuda and Shinzo Abe - had this in common: They are part of family dynasties.

Japan also needs a true two-party political system. The DPJ’s leadership is comprised of refugees from the LDP, which until last year ruled virtually uninterrupted for 54 years. Once the LDP’s days became numbered, lawmakers fled to the opposition to ride its ascent to power. New dog, same old fleas.

And then there’s the cart-and-horse dynamic one observes here. Junichiro Koizumi is generally considered the most reform- minded prime minister of the last 20 years. Yet his 2001 campaign slogan said much about politicians’ misplaced priorities: “Change the LDP, Change Japan.” Party first, the people second.

Talk about getting things backward. Given the party’s cronyism and how it turned Japan into the biggest public debtor among industrialized nations, Koizumi’s manifesto should have read: “Destroy the LDP, Save Japan.”

Voters thought they had done just that, only to find out they are getting more of the same. Even the way Hatoyama announced his resignation - to party members, not Japan’s people in the form of a press conference - rubbed many in Tokyo the wrong way.

The DPJ may pick a replacement as early as this week. Leading candidates are Finance Minister Naoto Kan, National Strategy Minister Yoshito Sengoku and Foreign Minister Katsuya Okada. And then, that premier will hope to survive elections next month.

Will it change anything? Not until Japan’s leaders start displaying some imagination.

*The writer is a Bloomberg News columnist.


By William Pesek
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