[Viewpoint] Wake up, Japan!

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[Viewpoint] Wake up, Japan!

The frosty spring is not unique to Korea. The air in Tokyo last week was wintry, too. The mercury was higher than in Seoul but the air felt just as bitter. Tokyo by this time should be enjoying the blossoming of plum trees, but the unseasonable cold wave has kept their buds tightly closed.

When I arrived at the Izu Peninsula, Shizuoka Prefecture, spring was awaiting me. The 1,200-year-old Shuzenji Shrine was encircled by fully blossomed plum trees. What a sight the forest of white and pink petals made with the snow-topped Mount Fuji in the distance.

However, the Japanese weren’t in much of a mood to enjoy the fragrance and visual delight of spring blossoms. The impression I received after meeting a number of entrepreneurs, politicians, scholars and journalists during my stay in Japan, which was sponsored by the Keizai Koho Center, a social and economic institute, was that the Japanese were starting to consider themselves as old trees. They had once been trees of youth and vigor, either evergreens or plentiful with blossoms, standing tall enough to brush the sky. But now their branches are bent and withered as if their days of sap and sweetness are almost over.

The 2011 budget that passed painfully through the lower house of the parliament mirrors the pitiful state of Japan. Of the record 92.4 trillion yen ($1.16 trillion) budget - quadruple that of Korea’s - just 40 trillion yen will be financed by tax revenues and the balance through government bonds. More than half the budget will be paid for by borrowing. Spending plans are equally grim, with 21.5 trillion yen - 23 percent of the budget - going to service sovereign debt and interest and 28.7 trillion yen - or 31 percent - to finance social welfare spending.

Japan’s sovereign debt is at the world’s highest level of 700 trillion yen, 200 percent of Japan’s gross domestic product. The debt servicing cost is getting heavier, and social welfare costs never stop rising to sustain a rapidly aging society with a diminishing workforce due to the low birth rate. Net population has shrunk since last year, and out of every four people, at least one (23.1 percent) is over 65 years of age. The economy has lost vitality, and the tax base is collapsing due to a shrinking working population. The government has no better option but to take on new debt to support its elderly population.

Tetsuro Sugiura, chief economist at Mizuho Research Institute, is one who believes Japan won’t end up in a debt dilemma like some European countries as nearly all - 95 percent - of its government debt is raised domestically. But he warns that without radical fiscal reform, Japan will face a credit crunch catastrophe within the next five years.

Rating agencies have all turned skeptical of the country’s long-term financial sustainability. Moody’s lowered its outlook on Japan’s sovereign debt to negative from stable, and Standard & Poor’s downgraded its long-term debt rating one notch to AA- from AA. If such a negative outlook continues, even Japanese investors may lose confidence in government debt, and that could dry up the government’s cash source.

Young Japanese shun marriage or having children, and life expectancies are getting higher. If such a trend continues, the population of 127 million would shrink to 95 million by 2050, of which four out of 10 Japanese would be over 65. The youth have lost much of its normal vigor. A corporate recruiter said 40 percent of novices shy away from overseas assignments. The young Japanese are devoid of passion and enterprise.

Japanese opinion leaders are united in warning that Japan Inc. can sink if change doesn’t come. Yet the country can’t unclog the bottleneck of political inertia. Since 2007, prime ministers have not lasted more than a year. The country needs a fundamental shake up as radical as the Meiji Restoration to save it from tumbling into the abyss.

Many Japanese envy the fearlessness, risk-taking, speed, vitality and leadership of Koreans. But the grass is always greener on the other side. Korea has followed in Japan’s footsteps. It is time Japan wakes up and gets its act together. We want to see our neighbor remain as a big, venerable, thriving tree.

*The writer is an editorial writer of the JoongAng Ilbo.

By Bae Myung-bok
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