On 2nd april at a press conference in Tokyo, Norio Ohga, chairman of Sony, stood up before an assembly of foreign journalists and declared in formidably polite English that the Japanese economy was on the verge of collapse. Japan's downward spiral would cause a worldwide recession, he said, if Japanese policy-makers did not act quickly. He paused to add a wintry smile before going on to compare Prime Minister Ryutaro Hashimoto to Herbert Hoover, the US president in office at the onset of the Great Depression.
A thoughtful three second silence followed this chillingly eloquent statement, whereupon the foreign media sat up and shrieked. Headline writers dug out their thickest black pens and began composing for the front page-"Japan Economy Near Collapse" (Guardian) and "Japanese Economy on Brink" (Financial Times)-with which to greet the unfortunate Hashimoto who was due to arrive in London that day for an Asia-Europe summit.
Commentators, too, mesmerised by the prospect of a failing Japanese economy, began unravelling the multiplying skeins of bad news from Japan. To add to Ohga's dismal predictions they found that the tankan, the country's leading business survey, published that day by the Bank of Japan, showed business confidence had sunk to its lowest level in four years. There was also a report by Moody's, the US credit rating agency, which had reduced the outlook for Japan's sovereign debt from stable to negative. Then came the comments from Masaru Hayami, the new governor of the Bank of Japan, who called on the government to cut income and corporate taxes to banish the "dark prospects" now hanging over the economy. For lighter relief we also had more corruption scandals with Bank of Japan employees accused of exchanging confidential information for cash and outings to No-Pan-Shabu-Shabu establishments (the restaurants for executives who like to have their beef dinner served by knickerless waitresses).
The point of all this is that the hysteria about the Japanese economy which dominated the British press during Hashimoto's visit was deliberately manufactured by Ohga. He chose 2nd April (being a westernised chap he avoided April Fool's Day which the architects of the Big Bang financial deregulation, launched the previous morning, had failed to consider) because it was the day Hashimoto landed at Heathrow. Ohga spoke in English, in the sort of blunt, finger-wagging language he would never have used for a domestic audience. And his aim was to whip up a little gai-atsu, a special Japanese agent often translated as "foreign pressure," which is brought out of its box for use when painful domestic measures need to be taken and Japan would prefer to put the blame elsewhere.
Ohga's message was therefore not that the economy is collapsing. Rather, it was a code, designed to give Hashimoto the excuse to come back to Tokyo and declare that Britain, Europe and the rest of the world insist that Japan implement low interest rates and tax cutting, pump-priming measures to save the world's economies.
In London, Hashimoto had been treated to an oleaginous speech from Tony Blair (more Tammy Wynette than EU president) declaring that Britain and Europe would stand by Japan through thick and thin, good times and bad, and that perhaps a few new economy-boosting measures might be helpful for all of us.
Hashimoto turned his head like a sleepy old iguana and flew back to Tokyo where he gave a speech about the necessity for tax cuts. He knows the rules of this game.
Now the prime minister's task is to use his supply of fresh gai-atsu to persuade rebellious factions within his ruling Liberal Democratic party of the need to repeal the fiscal reform law to allow corporate and income tax cuts. Packages produced to date have had a certain Heath Robinson tendency, funnelling much of the ¥75 trillion spent between 1992 and 1995, into building tunnels through mountains, new harbours for dying fishing villages and even concreting the beds of rivers to improve their flow. All this was nice for the construction industry and those Liberal Democrat politicians associated with it, but of little value to the wider economy.
Tax cuts may now be a more effective means of stimulating the economy; but nobody in Japan really believes that the economy is on the brink of collapse. Richard Jerram, economist at ING Barings, believes that the economy began a slow upturn at the end of 1997. He is predicting growth of 0.1 per cent in 1997, 1.6 per cent in 1998 and 2.2 per cent in 1999. Consumer spending was up 10 per cent in January, housing prices are beginning to bounce back in Tokyo, total exports are growing, and there is no evidence of a new credit crunch. The high level of gloom in the tankan survey probably reflects the anxious anticipation of a wave of bankruptcies needed to purge the financial system following the Big Bang deregulations.
So, next time you hear Japanese businessmen in Tokyo predicting imminent disaster to a foreign audience, remember that there may be special Japanese reasons for it. The hapless Hashimoto may have been compared to Herbert Hoover and Frankie Howerd in his time but, titter ye not, gai-atsu usually works.
