The Sun Also Sets: The Limits to Japan's Economic Power [Paperback]

As "different" as the Japanese may appear or believe themselves to be, in the end they are subject to the same market forces as anyone else as Emmott argues with this fabulous, in-depth, comprehensive analysis of the Japanese economy in the late 80s/early 90s, and concluded that Japan's trade surpluses, capital exports, and savings rate are destined to subside as demographic, cultural, and economic forces follow their natural course. Must to the dismay of Japan, these predictions have indeed come about and will most likely not be easy to alleviate.

To give you an idea of the scope you can expect from this fabulous collection of essays, Emmott talks about the "Predictable 4" ills of this country, which is still quite impressive given that these may not have been the top priorities of those Japan-crazy times...

(1) Lack of natural resources
(2) Lack of a military
(3) Low birth rate and aging population
(4) Hostility towards immigrants

...but then even more impressively goes on to discuss at length some factors that were conventionally perceived as strengths in the 80s --

(5) Japan's high rate of personal savings, though understood to reflect frugality, actually derived from the complete absence of other outlets for consumers. With no opportunity to buy a home and no need for a car, the citizenry had nothing else to do with their money but to put it into low-yield savings accounts.

(6) Extensive trade barriers, which on an artificial level seemed to protect Japanese industries, actually stifled competition and drove up prices for domestic consumers.

(7) The homogenous population and practically one-party government, which were thought to provide stability and societal cohesion, predictably leading to stasis, insularity, and corruption.

(8) The conformity and obedience which made for such a good workforce also made for a supremely unimaginative people. Japan has become an economic force by manufacturing high quality products cheaply, but the products themselves were invented elsewhere, mostly in US or Germany. This was double trouble because there were several other nations (Korea, Taiwan, etc.) with equally disciplined labor corps, capable of meeting the same quality standards, and willing to work for lower wages. But more importantly, as the world economy moved from the old heavy manufacturing model towards one based on intellectual capital, Japan found itself unable to compete.

(9) The myth of centralized planning, as is recognized by all except pseudo-intellectuals, is so inefficient that it is almost entirely unresponsive to any changing circumstances, but especially to such an enormous paradigm shift. If no one, or very few, even recognize or understand what's going on in the economy, how are a few bureaucrats supposed to intelligently direct the economy.

For any astute watcher of the Japanese economy, this should perhaps be THE de facto introduction, even before anything by Alex Kerr or Ikujiro Nonaka. Some of the statistics may obviously be dated but the thoughts and the frame of analysis are both highly relevant even today.

Also recommended: Porter's Can Japan Compete? and Emmott's Japanophobia.