Bending Adversity: Japan and the Art of Survival (16 page)

Murakami was wearing a deep blue suit and a collarless shirt. His short haircut emphasized the wideness of his face. There were a few lines around his mouth, but he still looked good for a man in his mid-fifties. He wouldn’t have a lunchtime beer, he said, as he intended to go for a swim afterwards. Murakami had an intense, slightly pensive gaze. He spoke in English. His style was to pause for long periods, weighing up the words, and then to squeeze out everything at once, like toothpaste. Every sentence had a heaviness about it, as though it was his definitive word on the subject. We began our conversation not in 1995, but in the 1960s, in the fast-growth years when Murakami was growing up. ‘My parents expected me to join the system, to go to some big company and to marry a good girl. That’s the course I was expected to follow. But I just didn’t want to live that way,’ Murakami was saying. ‘Japanese society has a kind of power system. If you are part of it, you are OK. But if you are out of it you are not OK. I was out of it by choice. When I graduated from university, I just dropped out.’

Murakami was born in 1949. His parents were both teachers of Japanese literature. His grandfather on his father’s side had been a Buddhist priest. His maternal grandfather had been an Osaka merchant. A teenager during the income-doubling decade of the 1960s, Murakami had felt from an early age that not all was well with Japan’s economic miracle. Something troubled him about the ceaseless quest for growth and status. His own life had been a rebellion of sorts
against the easy certainties into which he had been born. At Waseda University, where he studied drama, he met and married his wife, Yoko, much to the annoyance of his parents. When Yoko went to meet them for the first time, tension was so high she suffered a temporary attack of paralysis.
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Alongside his studies, Murakami worked in a record shop and, before graduation, started a jazz bar in Tokyo called Peter Cat. Clearly he loved it, though he described it as hard labour. ‘I had to work until two or three o’clock in the morning. It was full of cigarette smoke and drunks. I had to kick those drunks out sometimes. I had to do everything.’ While he was working at the bar, he began to write fiction for an hour every night, eventually producing
Hear the Wind Sing
, which was published in the literary magazine
Gunzo
in 1979. He sold Peter Cat and devoted himself full time to writing, winning wider recognition in 1985 with
Hard-Boiled Wonderland and the End of the World
, a story set in a surreal version of Tokyo inhabited by flesh-eating creatures living underground called INKlings. After that came
Norwegian Wood
(1987), a novel about love and suicide that unfolds against the background of student agitation in 1960s Tokyo. It went on to sell 4 million copies in Japan. Murakami became so uncomfortable with his growing fame that he fled the country, first to Europe and then to the US, where he taught at Princeton. Partly he sought to escape the furore his novels had created. But partly it was to extract himself from the late-1980s excesses of the bubble economy and what he called the mindless ‘Number-One-ism’ overwhelming society. ‘I just wanted to escape from Japan. I was so sick of living here. We were too confident, too arrogant, too rich.’

Murakami returned from self-imposed exile in 1995. It was quite a year in which to make his reappearance. The first of the twin shocks took place in the port city of Kobe where he had been brought up. At 5.46 a.m. on 17 January, a powerful earthquake measuring 6.8 on the Richter scale ripped through one of Japan’s most prosperous cities, killing 6,500 people and injuring thousands more. In
After the Quake
, a book written several years later, Murakami describes the destruction and chaos of an imaginary temblor.

Derailments, falling vehicles, crashes, the collapse of elevated expressways and rail lines, the crushing of subways, the explosion of tanker
trucks. Buildings . . . transformed into piles of rubble, their inhabitants crushed to death. Fires everywhere, the road system in a state of collapse, ambulances and fire trucks useless, people just lying there dying.
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Although the disaster was a natural phenomenon, its impact was worsened by man-made decisions. Buildings and highways that Japanese engineers had confidently proclaimed to be earthquake-proof collapsed like cards. Reclaimed land around the city of 1.4 million people turned to mud. The Hanshin expressway, a showcase of modern engineering, crumpled and buckled. Only months before, Japanese experts had gone to Los Angeles to investigate the recent earthquake there. Their arrogant conclusion was that such destruction could never occur in Japan because of the superiority of its building techniques. The damage in Kobe turned out to be far worse.

Japan’s institutions proved just as fragile as its supposedly unshakeable buildings. In Tokyo, it took politicians several hours to work out what was going on. A cabinet meeting in the morning had been told erroneously that a quake had hit Kyoto, fifty miles from the actual site of the disaster. Communications had collapsed, meaning little information was getting in or out. Authorities dithered about whether they should send in the Self Defence Forces, Japan’s army-equivalent, which was still mistrusted by the public half a century after the war. The rescue response was so haphazard that
yakuza
gang members, famed for their tattoos and supposed honour code, were reported to be first on the scene with food and blankets. Into the institutional vacuum poured hundreds of thousands of volunteers whose actions began to seed the idea that people, not governments or bureaucrats, were the ones who could get things done. It was an unsettling turn of events for a population that had, by and large, trusted the authorities for four decades to do the right thing.

‘The structure of society is very unstable,’ Murakami told me, adding that the Kobe earthquake and the authorities’ ill-judged response to it brought that home. In one of the stories in
After the Quake
, a collection of short stories that takes place in the weeks between Kobe and the subsequent poison-gas attack on Tokyo, a child has nightmares about ‘Earthquake Man’. In another, a giant frog and an unassuming loan collection officer at a trust bank, Mr Katagiri, team up to save
Tokyo from Worm, a malevolent serpent bent on unleashing a second, even more devastating, quake. The blurb on the book jacket speaks of the ‘inconsolable howl of a nation indelibly scarred’.

As if Kobe were not enough, just two months later, on 20 March, members of a religious cult called Aum Shinrikyo caused terror by scattering deadly sarin poison on the Tokyo subway, injuring thousands of people. Aum was a quasi-religious organization led by Shoko Asahara, the son of a tatami-mat maker who had been born in 1955 as Chizuo Matsumoto. Asahara had begun his destructive career as a peddler of make-believe when he made $200,000 by selling Almighty Medicine – tangerine peel in alcohol – at $7,000 a dose to desperately ill elderly people. In 1984 he had set up the Aum Association of Mountain Wizards, a yoga and health club that became even more sinister when it was renamed Aum Supreme Truth. Asahara stitched together a set of beliefs from Shiva the Destroyer, Nostradamus and biblical notions of Armageddon. He began to predict a nuclear war that would soon lay waste to civilization. Before long he had set about trying to hasten that end. Only paid-up followers of Aum would survive.

Asahara attracted a better class of cultist. Many were drawn from Tokyo University and other top-flight academic institutions where the bureaucrats – the midwives of the national miracle – had been trained. Members signed over all their possessions to Aum and cut ties with their families. They took part in bizarre rituals, including one in which they paid to drink Asahara’s dirty bathwater, otherwise known as Miracle Pond. Improbably, Aum acquired thousands of members. Asahara sent his lieutenants, known as monks, to search for chemical and even nuclear weapons. Fortunately they never got their hands on the latter. But they did discover sarin, a nerve gas developed by Nazi German scientists in the 1930s.

On the morning of 20 March, Aum members boarded several different subway lines, each of them rattling towards Kasumigaseki, Japan’s bureaucratic nerve centre. They punctured plastic bags containing sarin, at least one with the tip of a specially sharpened umbrella. As the gas spread through the crowded metro tunnels, thousands fell ill. By the end of that horrible day, 5,500 people had been struck down. Some were left in a vegetative state. One woman, whose
contact lenses fused to her pupils, had to have both her eyes surgically removed. Thirteen people, including station staff, died.

The rise of the Aum doomsday cult was the sort of freak occurrence that could have happened anywhere. Yet Japanese intellectuals, Murakami among them, sought to link its emergence with a broader crisis in Japanese society. In
Underground
, a book of interviews with victims and perpetrators of the poisoning, he wrote, ‘I can’t simply file away the gas attack, saying: “After all, this was merely an extreme and exceptional crime committed by an isolated lunatic fringe.”’ Rather than seeing the event as ‘Evil Them’ versus ‘Innocent Us’, he raked over mainstream society for clues about what could have led to Aum. ‘Wasn’t the real key,’ he wrote, ‘more likely to be found hidden under “Our” territory?’ To me he said, ‘The cult people got out of that system and they entered the right system, or at least a system they thought was right . . . They decided to live for something good. But they committed a crime.’

Other writers, including Kenzaburo Oe, Japan’s only living recipient of the Nobel Prize for Literature, also spoke sympathetically about Aum. Of Asahara’s mad brigade, Oe once told me, ‘They wanted to show the Japanese people how we have reached a dead end in our mental situation, a dead end in our soul.’
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I thought it was strange that two of Japan’s leading authors should have spoken about Aum in such terms. It was true, though, that people had long been looking for inspiration beyond the cult of gross domestic product, which had become a national obsession before the bubble burst. They were not short of alternatives. L. Ron Hubbard’s Church of Scientology, the Unification Church of Reverend Sun Myung Moon and Bhagwan Shree Rajneesh all vied for acolytes. In the Japan of the 1980s, dozens of new religions had taken hold, prompting one academic to term the restless era ‘the rush hour of the gods’.
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‘Nineteen ninety-five was the most important year after the war,’ Murakami told me.
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‘It was a critical year, a kind of milestone for our country.’ He fell silent while a waiter placed bowls, dishes and small pots on the table. We listened to the gentle scraping sound of clay against wood. The waiter’s every movement seemed precisely choreographed as though he were performing a martial art. It struck me that his task was a little like the stage hands in kabuki drama, the
kuroko
or ‘black people’. Dressed from head to toe in black, they glided about the stage in full view of the audience, moving props and changing actors’ costumes. Yet, by convention, they were treated as invisible to the spectator’s eye.

The Japanese are good at role-playing and suspension of disbelief. But 1995, Murakami said, awoke them from their reverie. ‘We believed in our system. We had been getting richer and richer and we thought our system would be stable for ever. We believed that, if you were part of the Mitsubishi Corporation, you would be all right for ever. But after 1995, we are no longer so confident. We have come to think that there is something wrong with our system. It is a time of great change in our way of thinking.’

For Murakami, the events of that year were connected with the collapse of the old economic model. They marked the violent death throes of a system that he had always felt was somehow rotten. ‘I think the burst of the bubble economy was good for Japan. When we were rich, I hated this country. It was stupid, foolish and arrogant. We were so confident about our system. This system was right. Japan was Number One, stupid things like that,’ he said. ‘The bubble burst and we have problems these days. But I think it’s good. I think our society is healthier than it was ten years ago. Back then, we thought we were right. But now we are kind of cool and we are thinking, What am I? What are we? I think that’s good. It happens in history. I think it is only a matter of time before we recover, economically and mentally.’

Life after Growth

Japan as Number Three

The envelope was stiff with ice. It sat in the icebox of the Tokyo house I moved into in the winter of 2001. On it, in neat, handwritten characters, were the words ‘Cat Money’. Inside, as crisp as the day they were printed, were three Y10,000 notes, at the time worth around $250. The envelope in question had been left by the previous residents of the house in Higashi Kitazawa, a lovely, upper-middle-class neighbourhood of little lanes, topiary pine and walled-off homes in central Tokyo. Sometimes, when they were gone for the weekend, they would ask neighbours to look after the cat. The money was for anything the indulged feline might require while they were away.

Two things occurred to me about the cat money. The first was how expensive it appeared to be to feed a pet in Tokyo. Many people in the capital, even in those supposedly straitened times, maintained an extravagant attitude towards money. Certainly, well-to-do Higashi Kitazawa, known for its artists and authors, was not typical of Tokyo living standards, let alone those of Japan’s more economically depressed regions. Still, I had been struck by how willing even ordinary people – secretaries, students, telephonists and office workers – were to spend quite large sums on little luxuries. Some seemed happy to splash out $200 per head on an exquisitely prepared meal or $400 a night per person for a room at a hot-spring resort. Luxury goods makers such as Louis Vuitton had made a killing in a country where young women would line up for hours just for the privilege of purchasing an overpriced handbag. Naturally, such outlays were only occasional. Naturally, too, many Japanese – including the increasing number without work, those retired on meagre pensions or people in the new category of ‘working poor’ – could never afford such items. Japan felt much more
economically divided than before. Even so, though I arrived in what was said to be the midst of a deep recession, many Japanese appeared to have a lot of money. A visiting MP from northern England, on seeing the bright lights of Tokyo and throngs of people waiting outside overflowing restaurants and bars, remarked, ‘If this is a recession, I want one.’

The second thing that occurred to me was less obvious, but more important. Although the cat money lay forgotten in the refrigerator, it was actually appreciating in value. Because of the deflation that had been gnawing at prices since the mid-1990s, the crisp notes could acquire more goods the longer they remained in their frozen vault. If, for example, someone had stashed Y100,000 in the fridge in 1995, by 2012 its purchasing power would have risen to Y112,000. By contrast, if that money had been invested in the Japanese stock market, it would have halved in value to just Y50,000.
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At the time I moved to Higashi Kitazawa, the interest rate on a typical Japanese savings account ran to a derisory 0.01 per cent. That made the refrigerator a better bet than the high-street bank, since the refrigerator had neither withdrawal charges nor account fees.

I came to think of the cat money as a metaphor for the strange, almost Alice in Wonderland state into which the economy had slipped since the burst of the bubble. Because of prolonged deflation, normal economic assumptions no longer applied. Companies didn’t want to borrow money even if they could do so for free. A worker’s wages might fall, but he or she could still feel better off. In a normal economy, it made no sense to hoard cash. Besides the risk of theft – admittedly negligible in Japan – the value would be constantly eroded by inflation. In Japan it was the reverse. The longer you held cash the more it was worth. For years, the central bank had kept interest at zero in a losing effort to get prices moving. They kept edging downwards anyway. ‘We’ve been suffering deflation for twenty years and no doctor has diagnosed it,’ one frustrated Bank of Japan official told me. The Japanese had a similar concept to my cat money, though they spoke not of the icebox but of
tansu
savings, named for the traditional wooden chests in which they kept their kimonos and family heirlooms. One economist calculated that by 2003 as much as $300 billion – roughly the annual output of Denmark – had simply vanished into people’s cupboards and under their futon mattresses.
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No economy can function properly when all the incentives are to hoard cash. ‘The most significant fact about Japan is that prices are falling,’ Martin Wolf, a celebrated economics commentator, once wrote. For him, deflation was the root of all Japan’s post-bubble evil. Deflation was ‘a sorcerer’s apprentice of debt – a machine for making a bad situation worse’.
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If prices are falling, past debts – including the national debt – get progressively larger relative to current income. That is the opposite of what happens in a normal economy when mild inflation steadily erodes the value of past borrowings, making it easier to pay off a mortgage, a business loan or government borrowing. With deflation, debts incurred in the mad bubble years became increasingly hard to repay, clogging up the banking system with the detritus of long-forgotten exuberance. Companies stopped borrowing to invest, concentrating instead on paying back loans. Besides, if future revenues were to be continually worn away by the drip-drip of deflation, debts taken on today would inevitably become harder to repay in the future. Deflation was sapping what economists call ‘animal spirits’, the expectation of future growth that encourages investment and risk-taking. ‘If Japan cannot ever get out of deflation,’ says Takatoshi Ito, an economist at Tokyo University and former government adviser, ‘that means stagnation and slow death, right?’
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•   •   •

Deflation may be the underlying cause, but the litany of economic woes now associated with Japan does not stop there. While thirty years ago the country inspired awe as an economic trailblazer, today it is more likely to elicit a sorrowful shaking of the head. Among bankers and businessmen especially, ‘What has happened to Japan?’ has become a common refrain. So low has its economic reputation sunk that Japan has even become a verb. Like Americanization, we now have ‘Japanization’, at least on the pages of the business press. But unlike Americanization, which carries both positive and negative connotations, Japanization is all bad. It means to stagnate, to shrink, to stop competing, to lose one’s entrepreneurial and industrial edge and to be crushed by a mountain of debt. It means to suffer permanently falling prices. It means a stock market that hasn’t budged for years and property prices that make the US housing market look buoyant. It means a shrinking population, fading international visibility
and domestic policy drift. It means lack of innovation, insularity and a broken political system. Ultimately, it carries with it, as Ito says, an intimation of death. An economy that cannot grow surely must eventually die. One so indebted must eventually default. Japanization is a disease that no other nation in its right mind would wish to catch.

Such an interpretation – the strong consensus – is overblown. Japan’s policymakers have undoubtedly made many mistakes and its economy has fallen into a rut. High public debt and rapid ageing do, as pessimists suggest, make the future uncertain and, quite possibly, not all that rosy. But Japan’s economic performance has not been as grave as the economic obituaries make out. As we shall see, measured in per capita terms and accounting for deflation, Japan’s growth compares reasonably well with that of other rich nations. It has also managed to maintain a level of social cohesion, reflected in fairly low unemployment and extremely low crime, that contrasts with the social friction in supposedly more successful economies. Certainly, the go-go years of the 1980s, when the Japanese were living a credit-fuelled fantasy, are gone. Its economy overshot, crashed and has paid the price in subdued growth ever since. That much is true. Before long, though, we could be saying much the same thing about the once credit-enhanced economies of the US and Europe, still struggling several years after the 2008 financial crisis.

In one sense, Japan’s slowdown tells an obvious story. It is much easier to catch up with rich countries than to overtake them. Predictions in the 1980s that Japan’s economy would outstrip that of the US were always implausible. Now that Japan has fallen, there is a hint of
Schadenfreude
in seeing an upstart challenger brought low. The Japanese compounded the problem by believing the hype themselves. The drunken salaryman giving the western visitor a bar-stool lecture on Japanese superiority is a cliché for a reason. Edwin Reischauer, a scholar and former ambassador to Japan, once said jokingly that
Japan as Number One
, the 1979 book proclaiming Japan’s formidable strengths, should be required reading in the US – and banned in Japan.

If we take a longer-term view, Japan’s post-war economic performance remains impressive. Its income per head
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jumped from a fifth of US levels in the 1950s to nearly 90 per cent in 1990, a spectacular,
indeed unprecedented, catch-up. Japan is the only Asian economy, outside the city-states of Singapore and Hong Kong and the smaller countries of Taiwan and South Korea, to break out of what economists call the ‘middle-income trap’. By comparison, China is still at about one-fifth of US income per head, roughly where Japan was in the 1950s. It is commonly heard today that China’s leaders are desperate to avoid Japan’s post-bubble catastrophe. The truth is that China will be lucky if it can engineer the same standard of living, quality of life and social wellbeing that exist in Japan today.

It is true, though, that, when the bubble imploded, Japan’s convergence on American living standards went into reverse. By 2010, its per capita income had fallen to about three-quarters of US levels. It is not hard to make the case, then, that Japan entered the economic wilderness in 1990 and has stumbled about in the dark ever since. It has suffered, by this account, not one but two ‘lost decades’ in which its economy has barely grown and its industry has lost its competitive edge. A few data points appear to settle the case. In nominal
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terms, Japan’s gross domestic product – the total value of its output of goods and services – has been treading water since 1991. To be exact, Japan’s economy grew from Y476 trillion in 1991 to Y477 trillion in 2012, an increase of a staggeringly low 0.2 per cent in two whole decades. By comparison, the US economy – again measured in nominal terms – grew from roughly $6 trillion in 1991 to $15.6 trillion in 2012, an increase of 160 per cent. Britain’s economy, which went from £600 billion to £1.5 trillion, did nearly as well, expanding 152 per cent.
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Those nominal figures don’t tell the whole story. But they do explain why Japan is diminished internationally. In the mid-1990s, its share of global GDP was 17.9 per cent, a proportion that had halved to 8.8 per cent by 2010.
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Over roughly the same period, its share of world trade has fallen just as steeply to around 4 per cent. The fact that Japan’s economy has stood still while others have raced ahead (in nominal terms) has a real impact. It affects Japan’s global visibility and influence. It is the reason that, in 2010, China surpassed Japan as the world’s second-largest economy.
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Japan was Number Three. In terms of international prestige nominal GDP clearly counts.

Another measure of Japan’s decline can be found on the stock market pages of any business newspaper. As we have seen, the Nikkei
225 average, which tracks the share performance of Japan’s largest listed companies, peaked in December 1989 at 38,916. By July 2012 it was around 9,000. The fall of share prices, coupled with an equally precipitous collapse of land values – now roughly 60 per cent below their 1991 peak
¹⁰
 – has destroyed wealth, or at least the illusion of wealth, and sapped confidence. If we measure an economy’s performance in terms of returns to investors, again Japan’s performance has been catastrophic. The fall in asset prices also crippled companies and banks, both of which bought shares and property in the 1980s when prices were in perpetual upward motion. Banks extended loans to companies in return for collateral backed by overvalued land. When prices collapsed, the fantasy was exposed. As well as being saddled with bad loans, many banks owned huge portfolios of near-worthless shares. Since those shares were counted as capital, it left banks effectively bankrupt. Rather than owning up, most maintained the fiction their loans were good. Some even lent money to indebted companies so they could repay interest. The banks and their borrowers were like two drunks leaning up against each other for support. As a result, banks virtually stopped lending to new businesses. That made sense for individual institutions. For the economy as a whole it was disastrous. In the ten years from 1995, total bank loans shrank by a third.
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By 1997, the crisis bubbled into the open and some large institutions started collapsing.

Even if banks had wanted to lend, companies were in no mood to borrow. When they realized the good times were over – and many assumed for years that the stock market crash was a blip – they battened down the hatches. Companies cut overtime, bonuses and even wages. That took money out of the pockets of consumers, exacerbating a chronic lack of demand. Today, businesses hire far fewer permanent staff, taking on lower-paid part-time workers instead. As a result, nearly one in three Japanese employees is now temporary, compared with one in five in 1990. The creation of a labour underclass is hardly unique to Japan. But it has wounded Japan’s sense of having an egalitarian society and put a cap on consumer spending.

Tadashi Yanai, president of the clothing company that makes the Uniqlo brand and a specialist in provocative statements, told me, ‘Japan is shrinking. It will become like Greece or Portugal.’ In their
comfortable affluence, the Japanese were living a fantasy, he said. ‘People who believed that they were middle class will realize they are poor. Japan has been in a slump for twenty years. So that day will come soon.’
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Many outsiders agree with his assessment. Not untypical was the prognosis of Nicholas Eberstadt, a political economist at the American Enterprise Institute in Washington, who went so far as to suggest that Japan’s young and old alike should consider abandoning their blighted archipelago altogether. ‘Given the cost of ageing, Japan might establish “health care colonies” in places like India or the Philippines, spots where large populations of elderly Japanese could enjoy a good quality of life at a fraction of the cost at home,’ he wrote cheerily. ‘Younger Japanese, for their part, might find it attractive to embrace new opportunities abroad, rather than stay in a shrinking, dying Japan.’
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