Japan, The Reluctant Reformer

TOO MUCH OF A BAD THING

At the end of last year, Japan's citizens, having struggled for years with a bitter recession, were hit with still more bad news: another arbiter of international opinion had forecast their country's imminent decline. In its Global Trends 2015 report, the CIA predicted that, in view of China's ongoing rise, Japan "will have difficulty maintaining its current position as the world's third largest economy [after the United States and Europe]." Just a few months earlier, Japanese bonds had been demoted for the second consecutive time by Moody's, the U.S. credit-rating agency. After long enjoying Moody's highest rating, Japan's credit was now judged to be as risky as Portugal's.

Both stories made big news in Japan, as did the underlying problems that provoked such negative appraisals in the first place. Yet despite the widespread attention these economic woes received, the Japanese public remained strangely quiescent. This resignation has become a typical response to the ailing economy. Voters keep returning the long-dominant Liberal Democratic Party (LDP) to power, although it has presided over a decade of stagnant growth and sunk the government deep into debt. Japanese investors accept interest rates of less than one percent on their savings accounts, labor unions swallow pay cuts, and the business community watches meekly as the government's attempts to end the financial crisis fail to revive the nation's banks or alleviate the credit crunch.