The Perennial Question

Is Japan Changing?

Hugo Dobson, School of East Asian Studies, University of Sheffield [About | Email]

Volume 3, Issue 1 (Book review 6 in 2003). First published in ejcjs on 2 October 2003.

Schaede, Ulrike and William Grimes (eds) (2003) Japan’s Managed Globalization: Adapting to the Twenty-first Century, New York: M.E. Sharpe, Paperback, ISBN: 0-7656-0952-5, 263 pages.

Regardless of the historical period or field of inquiry, one of the most frequently asked questions about Japan in almost any sphere of activity has been, Is Japan changing? While this question has been posed ad nauseam, a truly convincing answer has yet to be made. ‘Little consistency exists in the extant literature and the conclusions of a number of previous studies have ranged from “hardly” to “possibly” to “definitely”’. This contribution to the debate, Japan’s Managed Globalization: Adapting to the Twenty-first Century, goes some way to providing a more holistic answer to this perennial question.

Like most edited volumes, this book originated at a conference, namely a panel at the New England Political Science Association’s annual meeting. However, unlike a large number of edited volumes, rather than simply lump together a collection of broadly similar papers in the hope that they might “gel”, this collection does present “a unified framework for understanding Japan’s complex, managed response to globalization” (page xii). In an ever-globalising world, it is argued that “[n]one seems more challenged by these pressures [engendered by globalisation and multilateralisation] than Japan, a country that has resisted global rules for its domestic markets for many years” (page xi). Thus, we arrive at the question of whether Japan is, in fact, changing. In attempting to provide a satisfactory response, the chief contribution of this volume is the concept of permeable insulation, which (rather than appearing to be a horrible oxymoron, or defective building work in the loft) can be defined in the following terms:

‘Insulation’ is the outcome of a set of policies that have at their core an attempt at continued protection of domestic interests—for example, by allowing restrictive practices in the distribution system that fall outside the scope of international agreements. However, in contrast to previous instances of industrial policy, this new insulation is ‘permeable’ in that it allows those sectors in need of more freedom in corporate strategy to break free from the fetters of domestic production.

Permeable insulation is Japan’s attempt to manage the forces of globalization by affecting both the speed and reach with which global rules and markets affect domestic players. It is Japan’s attempt to structure a process that is potentially upsetting and disruptive. It is the outcome of a mix of active and passive measures by both governments and firms taken in response to world changes in the twenty-first century. (page xi)

This strategy means that “Japan’s response to the global and domestic challenges of the 1990s [and beyond, one can presume] is neither one of retreat and denial, nor one of full acceptance of global standards and practices. Instead the basic thrust is one of pragmatic utilization of new rules and circumstances to continue industry policies of promotion or protection in a new, post-developmental, paradigm” (page 8). In other words, we are far from witnessing the setting of the sun or the end of the Japanese model. Rather, Japan is instrumentalising a much more nuanced strategy that supplements the core of its traditional, postwar policies of the developmental state with multilateral initiatives. The contrast between Japan’s reluctance to use the General Agreement on Tariffs and Trade (GATT) to resolve trade disputes and its recent embrace of the World Trade Organization (WTO) is one of many examples to illustrate this point, but probably the one with most resonance for this reviewer. All the chapters presented here are united in their focus upon the same goal of exploring a specific area in light of this concept of permeable insulation. To this end, the selection of topics appears to have been erudite and the chapters seamlessly flow smoothly into one another.

The over-arching structure of the book is eminently sensible: Introduction, International Political Economy and Permeable Insulation, Domestic Political Economy and Permeable Insulation, and Conclusion. The Introduction consists of two chapters: in Chapter 1 Ulrike Schaede and William Grimes (the name order is reversed for Chapter 2) describe the state of the field and the extant literature on Japan’s political economy and whether Japan is in fact changing. The major difference with Japan’s Managed Globalization is its argument that, “at the turn of the century, the past is a less than perfect predictor of Japan’s future strategies” (page 4). In other words, Japan is no longer operating from a position of strength and, thus, has developed the strategy of permeable insulation. The second introductory chapter continues to set the scene by exploring the damage in reputation suffered by the traditional 1955 system of pork-barrel politics and compensation, and notes that despite this system’s widespread decline, many practices, such as amakudari, have continued. It also provides a review of developments in the political, economic, bureaucratic, corporate and banking spheres in order to bring the reader up to speed on recent adaptations. These introductory chapters do the proverbial job well but it is not clear why two chapters are necessary and whether they could not have been conflated.

The next four chapters investigate permeable insulation in the international political economy. In Chapter 3, based on a number of interviews with leading bureaucrats, Grimes locates a discussion of the yen’s internationalisation in the aftermath of the 1997–8 East Asian economic and financial crises, which “brought home to Japan both the desirability of insulation from external financial shocks, and the essential permeability of all national financial systems in the face of economic globalization — including its own” (page 47). It was thought in government circles that the greater use of the yen would have prevented the crisis. Thus, the Japanese government aimed at expanding the use of the yen, despite the associated greater permeability, as a strategy to stabilise the regional economic environment and ultimately as a means of insulating its domestic economy. In Chapter 4, Saadia Pekkanen highlights the importance to Japan of multilateral fora and international law in the resolution of trade disputes. Pekkanen lucidly demonstrates the skill displayed by the Japanese government in moving from bilateral (in preference to GATT) to multilateral mechanisms (the WTO). In short, Pekkanen’s argument, based on a survey of government officials’ opinions, is that “Japan has embarked on a strategy of using the WTO rules as both a ‘shield’ for controversial domestic policies and measures, and as a ‘sword’ with which to challenge its trade partners” (page 78). Within the WTO, Japan has responded actively by wielding this sword in automobile disputes with Brazil, US, Indonesia and Canada with little regard for the status of the trade partner in question; in contrast, it has employed a shield when resolving the Fuji-Kodak case with the US. In Chapter 5, Mireya Solís applies the concept of permeable insulation to Japanese FDI credit policy. Based on comprehensive and reliable data, Solís predicts that “Japan will persevere in its attempts to buffer domestic firms from shifts in comparative advantage through FDI credit, but it seems that the system will be increasingly decentralized with the involvement of more agencies” (page 120). In Chapter 6, Patricia Nelson highlights Japan’s multinational corporations (MNCs): “the beacons of its twentieth century success [and] the nation’s twenty-first century headache” (page 125). She elucidates how the top firms have led the globalisation of the insulated Japanese economy through offshore relocation and the hollowing out of the Japanese economy, and investigates the resulting tensions between firms and the state using the camera industry as a case study.

The focus in the next part shifts to the domestic political economy. In Chapter 7, Mark Elder focuses on continuity and change in the Ministry of International Trade and Industry (MITI) in light of the reorganisation of bureaucratic structures in January 2001 that led to the creation of the Ministry of Economy, Trade and Industry (METI). He argues that METI through utilising a strategy of permeable insulation has found ways of continuing to play an important role. In Chapter 8, Schaede explores protectionism in the Japanese economy, the consequent international pressure, and “the seemingly never-ending regulatory reforms” — a process that constitutes “a prime example of permeable insulation” (page 191). She argues convincingly that the government, as part of a policy of deregulation, has allowed the industries it oversees a degree of choice and self-regulation in order to promote stability. In Chapter 9, Christina Ahmadjian focuses upon corporate governance, an increasingly popular area of research, and explores pressures for its introduction after the burst of the bubble economy, and the responses of politicians, bureaucrats and firms. In contrast to the norms of corporate governance provided by US firms, permeable insulation is demonstrated in the “considerable gap between the rhetoric of a global standard and actual practice” (page 235).

The Conclusion revisits the concept of permeable insulation and justifies its application as a conceptual tool. As a result, “[f]oreign firms and governments, as well as Japan scholars, must therefore realise that while the twenty-first century brings new opportunities for doing business with Japan, these opportunities often have hidden limits. The extent of both opportunities and limits varies by sector, and the contours of permeable insulation are subject to change as economic and political conditions fluctuate” (page 245). Ultimately, the Conclusion neatly ties together the chapters to bring permeable insulation into relief so that the editors have produced an integrated whole — increasingly uncommon in the case of edited books.

Also refreshing is the background of the contributors. Rather than trotting out the great and the good amongst senior scholars of Japan’s political economy, this book consists of a number of younger and more dynamic scholars from a variety of backgrounds. Thus, the claim that the project has been “a truly multinational, multidisciplinary one, straddling the insights of political science, business, law and economics” is no empty boast (page xii).

One minor criticism concerns the level of editing. The editors claim that, despite various warnings from colleagues, “the headaches of editing” a volume of this kind were absent (page xiii). However, this reviewer is sorry to announce that a small number of typos, stylistic inconsistencies, contradictory bibliographical information, errors in romanisation, and straight-forward mistakes found their way into the final version — to describe the LDP as the “Liberal Domestic Party” is the most unfortunate of these errors (page 39). However, these are only minor criticisms and to find a book totally devoid of errors is akin to locating the whereabouts of the Holy Grail. A more substantial criticism is that, although the book introduces, defines and applies the term permeable insulation successfully, there is no accompanying attempt to problematise, or at least discuss, the nature of globalisation — the very process to which the Japanese government and firms were responding when they formulated this strategy. In addition, although the book frequently states that other countries face the same problems and argues that Japan is a special case, it never specifically compares and contrasts Japan to other countries in order to justify this claim.

Nevertheless, Japan’s Managed Globalization does make a useful analytical contribution by introducing and exploring the concept of permeable insulation, which should be applicable to a number of other fields, such as foreign policy, population movements and labour relations, to name but three that immediately spring to mind. This book will appeal to a number of scholars at various stages of development and from a range of disciplines. The rider applies that depending on each reader’s research interests different chapters will appeal, but for this reviewer the highlights of the book were Pekkanen and Schaede’s chapters, which provided a particularly lucid and edifying application of permeable insulation.

About the Author

Hugo Dobson is lecturer in Japan’s international relations in the School of East Asian Studies at the University of Sheffield, UK. His research interests are divided into two broad areas. The first includes “traditional” topics of international relations, chiefly multilateralism and norms, addressed in publications such as Japan’s International Relations: Politics, Economics and Security, Routledge, 2001 (co-authored); Japan and United Nations Peacekeeping: New Pressures and New Responses, RoutledgeCurzon, 2003; and Japan and the G7/8, 1975–2002 RoutledgeCurzon, 2004. The second includes the “visual” in international relations, explored in publications such as “Japanese Postage Stamps: Propaganda and Decision-making”, Japan Forum 14 (1), 2002; and “Mister Sparkle meets the Yakuza: Depictions of Japan in The Simpsons”, The Journal of Popular Culture, forthcoming, 2004.

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