Actually, Japan has changed a lot

The 2020s are not the 1990s.

By 稲妻ノ歯鯨 - Own work, CC BY-SA 4.0

Reading the widely discussed farewell essay by the BBC’s outgoing Tokyo correspondent, Rupert Wingfield-Hayes, I felt a deep sense of frustration. The veteran journalist summed up his impression of Japan — where he has lived and worked since 2012 — as one of stagnation and stasis, declaring that “after a decade here I have got used to the way Japan is and come to accept the fact that it is not about to change.”

And yet as someone who has lived in Japan, and who has gone back there for about a month out of every year since 2011, and who has written fairly extensively about the country’s economy, I can tell you that it absolutely has changed, in important and highly visible ways.

But before I go through Wingfield-Hayes’ article and explain all the things I think it gets wrong, I should say that although I’ve never met him, he seems like a good guy who honestly wants to see Japan do better than it’s doing. And some of the criticisms he makes are both accurate and very important.

For example, I think he’s absolutely right to identify gerontocracy as Japan’s fundamental problem. Wingfield-Hayes points to political gerontocracy — elderly voters maintaining the power of an elderly, ossified political class — but I think an equally or even more important problem is corporate gerontocracy. The near-universal practice of seniority-based promotion, combined with low startup rates and population aging, has led to an ossified class of corporate executives and managers who would rather preside comfortably over declining little empires than embrace new technologies and business models and take new risks. That in turn has caused Japanese companies to fall behind foreign rivals as they miss technological revolution after revolution — microprocessors, smartphones, semiconductor foundries, battery-powered cars, etc.

Wingfield-Hayes is also right to decry the low-productivity menial jobs that Japan has in abundance. Hiring 6 people to do the job of 2 is sadly common in Japan, and it’s a big reason why Japanese people earn such low and stagnant wages. The heart of the problem is the lack of new high-growth companies, which is due to deficiencies in R&D, lack of late-stage startup funding, and (especially) Japanese companies’ failure to tap export markets in lieu of their shrinking home market.

So Wingfield-Hayes is right to see Japan as a country that used to embrace the future and no longer does, and he’s right to point the finger at gerontocracy as the key problem. But his broader characterization of Japan as a stagnant, static society is very much off the mark. And I worry that this kind of article leads Western readers to think about Japan in terms of the cliches of the 1980s and 1990s — the postwar manufacturing successes, the bubble economy, the lost decade, etc., all of which Wingfield-Hayes repeatedly mentions. Those events were certainly important, but they don’t really define modern Japan or the challenges it faces in the 2020s.

Anyway, now let’s talk about some of the big recent changes in Japan that I think Wingfield-Hayes failed to appreciate.

Japan builds and builds and builds

The BBC correspondent’s most baffling argument is — if I read him right — that the built environment of Japanese cities has stagnated. This would be very strange indeed for a country that famously tears down its buildings after 30 years. Every time I go to Japan, I’m stunned at how many new buildings there are.

Wingfield-Hayes’ waxes nostalgic about the urban landscape of early 1990s Japan:

When I arrived in Japan for the first time in 1993…[what struck me was] how exquisitely clean and orderly Tokyo was…Tokyo was a concrete jungle, but it was a beautifully manicured one…In front of the Imperial Palace in Tokyo, the skyline was dominated by the glass towers of the country's corporate titans - Mitsubishi, Mitsui, Hitachi, Sony.

This was true enough, but in fact Tokyo is much more like this now than it was in 1993. The city is actually much more beautifully manicured than when I first saw it two decades ago. Grungy “shitamachi” areas have been modernized, many dowdy old “Showa” style apartment buildings have been replaced with modern construction, sculptures and decorations have been added everywhere.

Meanwhile, the glittering signs and soaring towers that we associate with urban Japan have only multiplied. If you’re impressed by big buildings, for example, it’s impossible to miss the vast, towering structures that the Mori Building Company is putting up all over the city. The biggest one, shown in the photo at the top of this post, is due to open this year. But it’s not just big towers getting built. Shopping centers, bars, clubs, and glittering zakkyo buildings (the ones with all the signs) continue to multiply. How could you live in Tokyo for a decade and miss all that?

In fact, Japan’s fervor for constant scrap-and-build construction is a major reason why rent there is so affordable, and why local politics haven’t halted dense development as they have in the West. Wingfield-Hayes opens his article by complaining that Japanese houses tend to depreciate instead of appreciate:

In Japan, houses are like cars.

As soon as you move in, your new home is worth less than what you paid for it and after you've finished paying off your mortgage in 40 years, it is worth almost nothing.

It bewildered me when I first moved here as a correspondent for the BBC - 10 years on, as I prepared to leave, it was still the same.

Weirdly, this is presented as a chronic problem — something Japan should have fixed long ago, but hasn’t. But in reality, depreciating real estate is one of Japan’s biggest strengths. Because Japanese people don’t use their houses as their nest eggs, as they do in much of the West, there is not nearly as much NIMBYism in Japan — people don’t fight tooth and nail to prevent any local development that they worry might reduce their property values, because their property values are going to zero anyway.

As a result, Japanese cities like Tokyo have managed to build enough housing to make housing costs fall, even as people continued to stream from the countryside into the city. If you think Japan is stagnant, consider this comparison between Tokyo and some leading Western cities:

Source: James Gleeson

Even more amazingly, Japan managed all of this while increasing the size of the average person’s home:

Source: James Gleeson

In the bubble era that Wingfield-Hayes pines for, Japanese urban apartments were widely derided as “rabbit hutches”, but four decades later their floor space per person is similar to European standards and higher than in the UK.

Why does Wingfield-Hayes think depreciating housing is a problem? Perhaps he believes this means the Japanese middle class is unable to build wealth. But when property tends to depreciate, it means that houses don’t cost as much to buy in the first place; that lower price frees up household cash that can be put into stocks and bonds.

Basing wealth on productive assets instead of unproductive land is good for the economy — housing scarcity might pump up prices and build individual wealth for homeowners, but at the national level it simply holds back economic growth. And as it turns out, it’s good for middle-class wealth as well — in 2022, Japan’s median wealth per adult was about $120,000, compared to around $93,000 in the U.S. (And this is despite the fact that Japan’s once-legendary household savings rate has collapsed!)

So Japan’s somewhat unusual choice not to tie middle-class wealth to housing prices seems like a smart one. Over the past two decades, the country has done better in terms of housing policy, construction, landscaping and urbanism than just about any country in the West. And it did this by embracing constant change rather than the physical stagnation that has prevailed in Western cities.

Babies, immigrants, and women in management: more than you think

Wingfield-Hayes, like many others, dings Japan for its low birth rate:

A third of Japanese people are over 60, making Japan home to the oldest population in the world, after tiny Monaco. It is recording fewer births than ever before.

As I wrote in a post earlier this week, aging is a real problem. But it’s a problem that every developed country is dealing with. What few people seem to know is that Japan’s fertility rate is actually higher than any of the other countries in its region:

Mike Bird @Birdyword

A reminder that Japan, the poster child for demographic issues, now has the highest fertility rate in developed East Asia, above Hong Kong or Macau, China, South Korea or Taiwan. (Data from the Population Reference Bureau)

As Bloomberg’s Gearoid Ready has noted, the only reason we associate the low fertility trend with Japan is that it started there first.

The BBC correspondent also claims that Japan has not embraced immigration as a solution to its aging problem:

[Japan’s] hostility to immigration has not wavered. Only about 3% of Japan's population is foreign-born, compared to 15% in the UK…If you want to see what happens to a country that rejects immigration as a solution to falling fertility, Japan is a good place to start.

This would have been a very fair characterization in the 1990s or the 2000s. But during Wingfield-Hayes’ decade in the country, Japan’s immigration policy changed substantially, and he ought to have noticed. Here’s a Bloomberg article I wrote in 2019 about the changes implemented by the late Prime Minister Abe Shinzo:

In recent years, the Abe administration has adopted major changes that will probably sustain the influx of immigrants. In 2017 Japan implemented fast-track permanent residency for skilled workers. In 2018 it passed a law that will greatly expand the number of blue-collar work visas, and -- crucially -- provide these workers with a path to permanent residency if they want it.

These changes thus represent true immigration, as opposed to temporary guest-worker policies (despite the common use of the term “guest worker law” to describe the new visas). In time, it will mean a more ethnically diverse Japanese citizenry. Permanent residents are allowed to apply for Japanese citizenship after five years.

The BBC even reported on some of these changes when they happened.

As a result of these policies and some others, the number of foreign-born workers in Japan doubled in the first few years Abe was in power.

Source: Bloomberg

The 3% number that Wingfield-Hayes cites represents a dramatic increase over the 1% of just a few years earlier. Tokyo itself is an international city now; in 2018, 1 out of 8 people turning 20 in the city proper wasn’t born in the country.

Yet another example is the role of women in the workforce. Wingfield-Hayes rightfully dings Japan for not having enough women in corporate management, but neglects to mention that the percentage increased from 11% to 15% during his time there — not a massive social transformation, but not a picture of stasis either.

Source: McKinsey

And this was accompanied by a large-scale movement of women into the workforce, such that Japan’s female employment rate now exceeds America’s.

Out with the old cliches

In other words, although Wingfield-Hayes lived in Japan during the 2010s, his assessment of the country seems very much stuck in the 1990s. Despite the fact that (by his own admission) he does not speak much Japanese, he really ought to have noticed the big changes that were happening all around him.

Anyway, perhaps you’re asking: Why does any of this matter? I admit that part of my determination to rebut charges of Japanese stasis is just personal pique — irritation at the cliched cultural essentialism that still defines Japan in the minds of too many Westerners. I suppose thinking of Japan in terms of the bubble and crash of the 80s is less ridiculous than thinking of it in terms of samurai traditions and The Chrysanthemum and The Sword. But still. Come on.

Perhaps, though, there actually might be a little bit at stake here. As Japan becomes a more open, globalized country, Western ideas and opinions have the potential to change Japan for the better. Outside perspectives could help Japan to solve the very real problems of the 2020s — corporate ossification, technological slowness, etc. But if Westerners essentialize Japan — if they think of it as a country and culture frozen in amber — they won’t have much to offer the country in the here and now. Japan is, in fact, a very dynamic and changeable place.

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