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Similarly, Japan's resistance to inward investment is indefensible, not least because it allows salvageable Japanese companies to wither; but its outward investment has helped to transform much of East Asia into a thriving economic region, putting a huge dent in global poverty. Indeed, one of the most impressive aspects of Japan's economic miracle is that, even while reaping only half the potential gains from free trade and investment, it has still managed to do the world so much good over the past half-century.
Setting an example Arguably, however, Japan's other big effect on the world has been even more important. It has shown clearly that you do not have to embrace "western" culture in order to modernise your economy and prosper. From the very beginning, Japan set out to have one without the other, an approach encapsulated by the saying "Japanese spirit, western things".
How did Japan pull it off? In part, because the historical combination of having once been wide open, and then rapidly slamming shut, taught Japan how to control the aperture through which new ideas and practices streamed in. After eagerly absorbing Chinese culture, philosophy, writing and technology for roughly a millennium, Japan followed this with 250 years of near-total isolation. Christianity was outlawed, and overseas travel was punishable by death.
Although some Japanese scholars were aware of developments in Europe--which went under the broad heading of "Dutch studies"--the shoguns strictly limited their ability to put any of that knowledge to use. They confined all economic and other exchanges with Europeans to a tiny man-made island in the south-western port of Nagasaki. When the Americans arrived in 1853, the Japanese told them to go to Nagasaki and obey the rules. Commodore Perry refused, and Japan concluded that the only way to "expel the barbarians" in future would be to embrace their technology and grow stronger.
But once the door was ajar, the Japanese appetite for "western things" grew unbounded. A modern guidebook entry on the port city of Yokohama, near Tokyo, notes that within two decades of the black ships' arrival it boasted the country's first bakery (1860), photo shop (1862), telephone (1869), beer brewery (1869), cinema (1870), daily newspaper (1870), and public lavatory (1871).
Yet, at the same time, Japan's rulers also managed to frustrate many of the westerners' wishes. The constant tension between Japan's desire to measure up to the West--economically, diplomatically, socially and, until 1945, militarily--and its resistance to cultural change has played out in countless ways, good and bad, to this day.
Much of it has reflected a healthy wish to hang on to local traditions. This is far more than just a matter of bowing and sleeping on futons and tatami, or of old women continuing to wear kimonos. The Japanese have also clung to distinct ways of speaking, interacting in the workplace, and showing each other respect, all of which have helped people to maintain harmony in many aspects of everyday life.
Unfortunately, however, ever since they first opened to the West, anti-liberal Japanese leaders have preferred another interpretation of "Japanese spirit, western things". Instead of simply trying to preserve small cultural traditions, Japan's power-brokers tried to absorb western technology in a way that would shield them from political competition and protect their interests. Imitators still abound in Japan and elsewhere.
In East Asia alone, Malaysia's Mahathir Mohamad, Thailand's Thaksin Shinawatra, and even the Chinese Communist Party all see Japan as proof that there is a way to join the rich-country club without making national leaders or their friends accountable. These disciples of Japan's brand of modernisation often use talk of local culture to resist economic and political threats to their power. But they are careful to find ways to do this without undermining all trade and investment, since growth is the only thing propping them up.
Japan's first attempt to pursue this strategy, it must never be forgotten, grew increasingly horrific as its inconsistencies mounted. In 1868, while western writers were admiring those bakeries and cinemas, Japan's nationalist leaders were "restoring" the emperor's significance to that of an imaginary golden age. The trouble, as Ian Buruma describes in his new book, "Inventing Japan" ()see page 79, is that the "Japanese spirit" they valued was a concoction that mixed in several bad western ideas: German theories on racial purity, European excuses for colonialism, and the observation from Christianity that a single overarching deity (in Japan's case the newly restored emperor) could motivate soldiers better than a loose contingent of Shinto gods. This combination would eventually whip countless young Japanese into a murderous xenophobic frenzy and foster rapacious colonial aggression.
It also led Japan into a head-on collision with the United States, since colonialism directly contradicted America's reasons for sending Commodore Perry. In "The Clash", a 1998 book on the history of American-Japanese relations, Walter LaFeber argues that America's main goal in opening Japan was not so much to trade bilaterally, as to enlist Japan's support in creating a global marketplace including, in particular, China.
At first, the United States opened Japan because it was on the way to China and had coal for American steamships. Later, as Japan gained industrial and military might, America sought to use it as a counterweight to European colonial powers that wanted to divide China among their empires. America grew steadily more furious, therefore, as Japan turned to colonialism and tried to carve up China on its own. The irony for America was that at its very moment of triumph, after nearly a century of struggling with European powers and then Japan to keep China united and open, it ended up losing it to communism.
A half-century later, however, and with a great deal of help from Japan, America has achieved almost exactly what it set out to do as a brash young power in the 1850s, when it had barely tamed its own continent and was less than a decade away from civil war. Mainland China is whole. It has joined the World Trade Organisation and is rapidly integrating itself into the global economy. It is part of a vast East Asian trade network that nevertheless carries out more than half of its trade outside the region. And this is all backed up by an array of American security guarantees in the Pacific. The resemblance to what America set out to do in 1853 is striking.
For both Japan and America, therefore, the difficult 150-year relationship has brought impressive results. They are now the world's two biggest economies, and have driven most of the world's technological advances over the past half-century. America has helped Japan by opening it up, destroying its militarists and rebuilding the country afterwards, and, for the last 50 years, providing security and market access while Japan became an advanced export dynamo. Japan has helped America by improving on many of its technologies, teaching it new manufacturing techniques, spurring on American firms with its competition, and venturing into East Asia to trade and invest.
What, then, will the continuing tension between Japanese spirit and western things bring in the decades ahead?
For America, though it will no doubt keep complaining, Japan's resistance to change is not the real worry. Instead, the same two Asian challenges that America has taken on ever since Commodore Perry sailed in will remain the most worrying risks: potential rivalries, and the desire by some leaders to form exclusive regional economic blocks. America still needs Japan, its chief Asian ally, to combat these dangers. Japan's failure to reform, however, could slowly sap its usefulness.
For Japan, the challenges are far more daunting. Many of them stem from the increasing toll that Japan's old ways are taking on the economy. Chief among these is Japan's hostility towards competition in many aspects of economic life. Although competitive private firms have driven much of its innovation and growth, especially in export-intensive industries, Japan's political system continues to hobble competition and private enterprise in many domestic sectors.
In farming, health care and education, for example, recent efforts to allow private companies a role have been swatted down by co-operatives, workers, politicians and civil servants. In other inefficient sectors, such as construction and distribution, would-be losers continue to be propped up by government policy. Now that Japan is no longer growing rapidly, it is harder for competitive forces to function without allowing some of those losers to fail.
Japan's foreign critics are correct, moreover, that its macroeconomic and financial policies are a disgrace. The central bank, the finance ministry, the bank regulators, the prime minister and the ruling-party politicians all blame each other for failing to deal with the problems. All the while, Japan continues to limp along, growing far below its potential as its liabilities mount. Its public-sector debt, for instance, is a terrifying 140% of GDP.
Lately, there has been much talk about employing more western things to help lift Japan out of its mess. The prime minister, Junichiro Koizumi, talks about deregulatory measures that have been tried in North America, Europe and elsewhere. Western auditing and corporate governance techniques--applied in a Japanese way, of course--are also lauded as potential fixes. Even inward foreign direct investment is held out by Mr Koizumi as part of the solution: he has pledged to double it over the next five years.
The trouble with all of these ideas, however, is that nobody in Japan is accountable for implementing them. Moreover, most of the politicians and bureaucrats who prevent competitive pressures from driving change are themselves protected from political competition. It is undeniable that real change in Japan would bring unwelcome pain for many workers and small-business owners.
Still, Japan's leaders continue to use these cultural excuses, as they have for 150 years, to mask their own efforts to cling to power and prestige. The ugly, undemocratic and illiberal aspects of Japanese traditionalism continue to lurk behind its admirable elements.
One reason they can do so is because Japan's nationalists have succeeded completely in one of their original goals: financial independence. The desire to avoid relying on foreign capital has underlain Japan's economic policies from the time it opened up to trade. Those policies have worked. More than 90% of government bonds are in the hands of domestic investors, and savings accounts run by the postal service play a huge role in propping up the system.
Paradoxically, financial self-reliance has thus become Japan's curse. There are worse curses to have, of course: compare Japan with the countless countries that have wrecked their economies by overexposing themselves to volatile international capital markets. Nevertheless, Japan's financial insularity further protects its politicians, who do not have to compete with other countries to get funding.
Theories abound as to how all of this might change. Its history ought to remind anyone that, however long it takes, Japan usually moves rapidly once a consensus takes shape. Potential pressures for change could come from the reversal of its trade surpluses, an erosion of support from all those placid postal savers, or the unwinding of ties that allow bad banks and bad companies to protect each other from investors. The current political stalemate could also give way to a coherent plan, either because one political or bureaucratic faction defeats the others or because a strong leader emerges who can force them to co-operate.
The past 150 years suggest, however, that one important question is impossible to answer in advance: will it be liberalism or its enemies who turn such changes to their advantage? Too often, Japan's conservative and nationalist leaders have managed to spot the forces of change more quickly than their liberal domestic counterparts, and have used those changes to seize the advantage and preserve their power. Just as in the past, East Asia's fortunes still greatly depend on the outcome of the struggle between these perennial Japanese contenders.