First published in Asia-Pacific Review, Vol. 5, No. 2, 1998 (Tokyo Institute for International Policy Studies)
IF ANYTHING POSITIVE has emerged from the problems that have surfaced in the Japanese economy in 1998, it is the added sense of urgency that has been given to the task of understanding how Japan's politico-economic system actually works. An economic boom and bust has been followed by an intellectual boom and bust. What from the 1960s was widely regarded as a uniquely successful model of political economy has suddenly come to be seen as diseased and in desperate need of radical surgery.
It is acknowledged that, since the early 1990s, serious attempts have been made at reform. The fall of the Liberal Democratic Party (LDP) from power in August 1993 and the formation of the Hosokawa coalition government gave prominence to a reform agenda that has continued to be actively discussed, if not fully acted upon, throughout the decade. The underlying message of this reform agenda was that there were serious-even fatal-flaws in the existing system. Nevertheless, as late as 1994, David Williams, one of the most original of recent writers in English about Japan, in a forthright challenge to the Western triumphalism following the ending of the Cold War, could write as follows:
In the name of a foreign idea, Japanese free-marketeers would deny greatness to Japan. In its unsettling brilliance, the achievement of Japan's modern century represents a kind of glory unique to its millennial past. Pace thinkers such as Tachi (Ryūchirō) and Francis Fukuyama, the extraordinary character of the Meiji and Showa developmental models make Japan one of the twentieth century's very few candidates for a place in the pantheon of classical political systems. Post-Meiji Japan has, therefore, in its own way, been one of the monuments of world history. An unblinking politics demands that we recognize this achievement. 1
Even allowing for some possible overstatement here, this passage is a salutary reminder that the Japanese system of political economy has (or has had in the very recent past) its enthusiastic advocates. This, however, confronts us with the following conundrums. First, if the system has performed spectacularly well in the past by following its own rules, how should it be that it