Japan Is Fading

Foroohar, Rana, Newsweek International

Byline: Rana Foroohar

One thing the nation's next leaders don't talk about is growth.

Japan is heading into a landmark election in a state of freefall. Stagnant since the early 1990s, Japan's economy fell off a cliff in the last quarter, dropping 15.2 percent in the worst collapse of any industrial nation in decades. Automakers--Toyota, Nissan, and Honda, once the heart of the Japanese industrial miracle--saw exports fall 70 percent in April, and were forced to shutter factories to clear inventory. Since pocketbook issues decide elections, it's not surprising that Japanese voters appeared poised to toss out the ruling Liberal Democratic Party (LDP), only the second time it has lost power in half a century.

Meanwhile, China is launching direct challenges to Japan's position as the leading economy in Asia. Beijing recently launched an official campaign to build a green car industry, a field in which Japan still holds a commanding lead. Some Japan watchers compare China's green car project to Sputnik, the Soviet satellite that trumped American preeminence in science and technology in the 1950s. Just as alarming, China has been making noises about replacing the dollar as the sole international reserve currency, and has begun conducting regional financing deals in Chinese yuan instead, a push Japanese officials see as a direct threat to the yen as well. "It brought home the fact that the yen is not used in this way by others," notes Yasuo Ota, an editorial writer for Nikkei. The worry grew in July, when top Chinese officials flew to Washington, D.C., to continue their high-level "strategic dialogue": "That caused concern, because the Japanese feel that we need to be involved in any conversation about security in the region," notes Shinzo Kobori of the Institute for International Policy Studies in Tokyo.

So Japan is preparing to …

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Publication information: Article title: Japan Is Fading. Contributors: Foroohar, Rana - Author. Magazine title: Newsweek International. Volume: 154. Issue: 09 Publication date: August 31, 2009. Page number: Not available. © 2009 Newsweek, Inc. All rights reserved. Any reuse, distribution or alteration without express written permission of Newsweek is prohibited. For permission: www.newsweek.com. COPYRIGHT 2009 Gale Group.

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