East Asia CenterNewsletter On-line

The University of Virgina
east asia center
April 1999

The Japan That Can't Say Grow:  Causes and Cures

“Things are not that bad,” began Richard Katz’s lecture on the Japanese economy.  On his recent trip to Japan, Katz says that he heard over and over again that the banking crisis would be over as of March 31 and that the economy had finally bottomed out in the fourth quarter of 1998.  If you believe those claims, Katz says he would like to talk to you about a nice little bridge he has on sale up in Brooklyn.

Katz, noted Japan journalist and author of the recent book, Japan:  The System that Soured, presented his views on the current Japanese economic difficulties in a lecture for the East Asia Center on March 26, 1999.  Katz argues that there is a large gap between what the Japanese policymakers and businessmen cited above actually believe and what they feel compelled to say about the Japanese economy.  Their theory seems to be that current problems are largely the result of a crisis of confidence among Japanese consumers and investors and that if confidence can be restored through “happy talk” things will
improve.  Katz strongly disagrees.  He believes that instead of facing a crisis of confidence, the Japanese are facing a ‘crisis of reality’ even as they see their fifth straight quarter of negative growth.  Katz’s less optimistic view centers around the “structural stagnation” that he argues is the fundamental cause of Japan’s problems.  Attempts by the government in recent years to spend its way out of the crisis have produced few positive results and have only left the Japanese economy saddled with a budget deficit equal to 10% of GDP.  In Katz’s view structural reform of business and trade practices are the only hope.

Unfortunately, Katz sees little reason for hope in the near future.  He claims that the ruling Liberal Democrats have no strategy for helping Japan achieve a sustained recovery.  Instead, the LDP is focused only on its own recovery as a party.  In July 1998 the party suffered a serious defeat in the elections for the less-powerful upper house of the Diet, failing to win even a single seat in the major cities.  The lesson that the party took from this defeat is that at least a few quarters of positive growth prior to the next lower house election (which must be held before October 2000) are essential.  This leads the LDP to look toward short-term fiscal spending solutions rather than the longer-term structural reform that Katz believes will ultimately be necessary.  Furthermore, the new LDP-Liberal Party coalition in power has the solid backing of business, further evidence that “the momentum is for stability rather than reform.”  Nevertheless, economic forecasters are not predicting any quarters of positive growth in the year 2000.  Katz sees the Japanese government’s continued use of macro-stimulus as “heroin [used] to avoid reform” rather than as “anesthesia to prepare the patient for radical reform.”

“Why have the Japanese avoided reform for so long?” asks Katz.  His answer is that the so-called “Japanese miracle” made famous by scholars such as Chalmers Johnson, while creating incredible growth in Japan until the 1970s, has left the Japanese with a legacy of two major obstacles to growth.  Katz’s view is that the Japanese model was a “brilliant system for taking a poor country and making it an economic powerhouse; the miracle is genuine.”  The problem is that the model is only appropriate for the process of catching up.  Once an economy reaches higher levels of maturity, it is no longer possible or desirable to continue to operate as a catch-up economy; a shift must be made to a system that is more market-oriented and less government-directed.  The Japanese needed to make this shift in the 1970s and appeared to be heading toward such changes when the first oil shock hit in 1973, says Katz.  Even in the face of the oil shock, the Japanese economy was still projected to continue growing at about 6% per year.  However, rather than letting market forces work, the government responded to cries about the pain of downsizing with the now-famous recession cartels and collusion in industries such as steel and construction.  The inefficient business practices, over-capacity, and protectionism that were allowed to flourish as a result have created the two obstacles to growth, one supply-side and one demand-side, that Katz identifies.

The first of these, the supply-side obstacle, is the dual nature of an economy divided between efficient internationally-oriented sectors (firms such as Sony and Toyota) and inefficient domestic sectors to a degree seen in no other industrialized nation.  The inefficiencies of the domestic sectors have resulted in high degrees of protectionism against imports, leading to conflicts with the United States and the continued atrophy of these industries.  Thus the Japanese auto industry see levels of productivity comparable to those of the US, while Japanese food processing reaches only one-third of US productivity.  These problems have persisted so long because the efficient industries have indirectly subsidized the inefficient through high prices for domestic goods.  In 1985, the appreciation of the yen caused by the Plaza Accords made it no longer possible for these costs to be transferred to the efficient sectors; the expensive yen forced export industries to begin shifting production to other countries.  It was easier for these efficient exporters to leave Japan than to stay and force true reform.  Now as Japan is faced with a situation in which the only basis for growth is increased productivity, the exit of efficient firms creates the perverse outcome of continued falls in productivity.

The second demand-side obstacle Katz identifies is the problem of excess savings, which he terms “economic anorexia.”  This problem grew out of the catch-up focus on using investment to propel miraculous levels of growth.  In order to invest at such high levels, savings levels had to also be high and the household share of GDP stayed low relative to business savings.  This strategy, which drew purchasing power out of the economy, is successful in catch-up economies but not in mature ones.  Katz argues that the Japanese have needed to raise the household share of GDP for some time but have so far failed to do so.  Now that investment cannot be sustained at the levels of the high-growth years, the economy is saddled with an excess of savings over investment, preventing it from consuming what it makes.  The government has used deficit spending, trade surpluses with other countries, and “monetary steroids” to fill the gap.  However, each of these fillers face limits and together have led to a rising yen and slow growth in the 1990s.

Katz points out that the Japanese have been aware of this problem for some time; the Maekawa Commission Report of 1986 argued for a transition to a consumer-led economy.  Instead the Japanese government elected to use monetary policy to restore growth.  The result was the over-investment of the late 1980s and the economic “bubble” that burst with the 1990 stock market crash.  “Anorexia returned with a vengeance,” says Katz.

Katz’s pessimistic view of the possibility for near-term reform is based on the fact that the obstacles to growth are also tied to the pillars of the Japanese system—lifetime employment, anti-competitive behavior, and high domestic prices.  A safety net for workers will be needed if this system is to be transformed, but the Japanese have a welfare society rather than a welfare state.  The welfare society has worked well in the past but is not designed for the mass unemployment that is likely to accompany true structural reform—it is estimated that 10 million workers will have to lose their jobs in order to bring the Japanese economy up to world standards.

Katz sees the LDP one-party state as a major cause of Japan’s inability to make needed changes.  He argues that true political competition will be necessary for reform and that several more political realignments will have to take place before real changes are implemented.  Thus he predicts that in the future the LDP will split again and that true reform will not occur for at least five more years. Given the seriousness of the current situation, Katz does not believe that reform will wait much longer than that.

Richard Katz is Senior Editor of The Oriental Economist Report, a monthly English-language newsletter on Japan, and is also Visiting Lecturer in Economics at the State University of New York at Stony Brook.

Richard Katz (second from left) with students Weston Fox, Müge Kökten, and Wimonkan Kosumas.
 Keep Cool and Learn Japanese Over the Summer!

East Asia Center and Related Speakers, Spring 1999

Friday, April 9 Jin Di, University of Virginia Center for Advanced Studies, “The Adventure of Joyce’s ‘Ulysses’ in Chinese:  The Encounter Between an Irish Masterpiece and Chinese Culture.”  Conference Room 168A, Newcomb Hall, 4:00pm.

Tuesday, April 13 Richard J. Smith, Rice University, “The Languages of the I-Ching and the Representation of Reality.”  Commonwealth Room, Newcomb Hall 3:30pm.   (See below.)

Wednesday, April 14 Richard J. Smith, Rice University, “The Legacy of the I-Ching.”  Commonwealth Room, Newcomb Hall 3:30pm.   (See below.)

Thursday, April 15 Richard J. Smith, Rice University, “The I-Ching in World Culture.”  South Meeting Room, Newcomb Hall 3:30 pm.  (See below.)

Monday, April 19 Patricia Ebrey, University of Washington and Institute of Advanced Study, Princeton; “The Song Emperor Huizong (r. 1100-1125) and His Art Politics.” Commonwealth Room, 3:30 pm.  Co-sponsored by the Department of Art and the Bayly Museum.

Please note that the Elizabeth ten Grontenhuis lecture originally scheduled for April 15 has been postponed indefinitely.

The East Asia Center is beginning to solicit, from faculty members, ideas for the lecture series for 1999-2000. Tentative suggestions include the following.  Fall 1999:  Norma Field, University of Chicago, Japanese literature and Robert Linrothe, Skidmore College, Tibetan art.  Spring 2000:  Keiko McDonald, Japanese film and literature.  Please send further suggestions to the speaker's committee (Dorothy Wong, Gilbert Roy).


Richard J. Smith
Professor of History and Director, Asian Studies, Rice University

"Ordering the World and Fathoming Cosmos: The I-Ching in China and Beyond"

The I-Ching (The Book of Changes) is one of the earliest Chinese texts, and it is still a major intellectual experience for anyone who encounters it.  Its "bottom-line" practical appeal is of course fortune-telling, but guiding the answering of such questions implies a developed viewpoint on the interactive structure of reality.

Richard Smith is one of the most versatile and stimulating historians working on China.  His books include works on Chinese relations with the West in the 19th century, on Qing culture, on Chinese mapping.  Most relevant to his upcoming lectures is Fortune-Tellers and Philosophers:  Divination in Traditional Chinese Society.  The I-Ching lectures will eventually be published by the University of Virginia Press.

Smith is also one of the most highly honored teachers at Rice University, a school that prides itself on fine teaching.  His talk at UVA a few years ago was enthusiastically received, leading to the invitation to return as a distinguished lecturer in the Richards series. In short, this is an unusual opportunity not only for those interested in Chinese culture, but also in the more general issues touched on by the I-Ching.  (See above for times and dates.)

Shepherd’s Research Takes New Directions

John Shepherd, Associate Professor of  Anthropology, currently serving as his department’s Director of Graduate Studies, retains a set of daily responsibilities and scholarly activities that are quite distinct from those of last year. But then again, Professor Shepherd is used to tackling new challenges.  After publishing two books in the field of Taiwanese historical anthropology, the former student of Arthur Wolf received a Mellon Fellowship to pursue training in anthropological demography at the University of California, Berkeley during the 1997-98 school year.

Shepherd, particularly interested in the causes of mortality, their regional variation and the impact these patterns had on changing marriage strategies in the early 20th century Taiwan, has been collecting relevant archival data since 1990.  According to Shepherd, the newly invented germ theory of disease was first introduced to Taiwan in the 1870’s by medical missionaries and Maritime Customs medical officers, but Western  methodologies for the prevention of disease did not take root until their implementation under the Japanese colonial government in the first two decades of the 20th century.  In 1905, the Japanese administration conducted the first census and began keeping annual vital statistics that recorded the causes of death.  Shepherd detects great regional differences in life expectancies within Taiwan in the first decades of this century.  Variations in life expectancies lessened over the next two decades with the Japanese employment of modern medical techniques, public health measures, sanitation, quarantine and vaccination, to arrest the spread of diseases such as small pox, malaria, and cholera.

Shepherd has also been examining the data to detect sex-linked mortality differentials, analyzing for excess female mortality.  Gender differentials in mortality in certain regions of Taiwan resulted in high ratios of available grooms to brides. The heavy competition for brides led to alternative marriage patterns in which young girls were adopted by the future husband’s family (minor marriage) or uxorilocal marriages, in which husbands joined the brides family.  As the mortality rate decreased by 1920, so did the rate of sex differential mortality, resulting in a more balanced sex ratio at marriage ages. These transitions, according to Shepherd, influenced a trend toward major marriages in which the bride joins her husband’s family after puberty, attended by the standard marriage rituals and negotiations for exchange between the two families. Shepherd plans on  adding a chapter to studies of Taiwanese marriage strategies by stressing how differences in mortality drove the marriage market, a problem he sees as neglected in the published scholarship.

Shepherd has presented numerous papers at academic conferences on his findings to date.  Once he finds time to apply his new methods for statistical analysis to the voluminous records he has carted back from Taiwan, he plans to write a book on the project.

 Faculty News

Frederick H. Damon of the Department of Anthropology has been invited to attend and give a lecture in the Fourth Senior National Seminar on Sociology and Anthropology to be held this summer at the Yunnan College of Minority Nationalities in Kunming, Yunnan Province, Peoples Republic of China.  These seminars have alternated between the Institute of Sociology and Anthropology, Peking University, and the Yunnan College of Minority Nationalities. Forty to fifty Chinese anthropologists will be participating, most of them from Yunnan, Guizhou, Sichuan and Guangxi Provinces.  Damon will be one of seven or eight international scholars,  invited to provide a comparative perspective on issues of matter to Chinese anthropologists.  The topic for this year's Seminar is "Ethnicity: Sociological Approach and Cross-Cultural Understanding."  Damon will give a lecture based on social transformations in his own region of expertise, Papua New Guinea.  His lecture is entitled “From Regional Relations to Ethnic Groups?—the transformation of value relations to property claims in the Kula Ring of Papua New Guinea.”  This will be Damon's second trip to Yunnan.  He will use the opportunity to define his own research interests, either in Yunnan or along the Southwestern coast of China.

Paul Groner of the Department of Religious Studies will be on leave during the 1999 fall semester.

Michiko Niikuni Wilson’s critical work, Gender Is Fair Game:  (Re)Thinking the (Fe)Male in the Works of Oba Minako, has recently been published by M. E. Sharpe.  The book is part of the Japanese Women Writing series edited by Professor Wilson.

In March Dorothy Wong of the Department of Art gave two papers, one on Mahayana Buddhism and Buddhist art at the Association for Asian Studies Conference in Boston, and one on "Women Patronage of Buddhist Art During the Northern and Southern Dynasties" at the "Women Art Patrons and Collectors: Past and Present" conference in New York.  Professor Wong also gave a lecture for the Weedon Lecture Series (sponsored by the Weedon Foundation and the Bayly Art Museum) entitled “Sealed Libraries and Buried Buddhist Treasures:  Beliefs and Practices in Medieval China,” on March 31.

Student News

Michael J. DePrenda (CLAS '91, Asian Studies) is currently living in Taiwan, running a company that sells advertising for an American website to Taiwanese companies, an exporting business, and a software sales business.  He and his fiancé plan to marry this summer.

John Kang (CLAS ’95, Asian Studies) returned from Taipei last fall and is currently preparing to enter a graduate program in Chinese traditional medicine.  He is also working on a translation of a work on police martial arts by a Taiwanese kung fu master that he hopes to have published in the United States.

 Schoppa Plans Research Trip To Japan

 Leonard Schoppa, Professor of Government and Foreign Affairs and Director of the East Asia Center, will travel to Japan this summer to engage in research and participate in an academic conference.  Schoppa will arrive in Japan at the end of May to lay the groundwork for a future book project.   The central question which Schoppa plans to flesh out is an important one: why has Japan’s economy slumped so severely in the 1990’s after its strong global performance during the previous four decades. By examining the performance of three overlapping sectors of governance (private, bureaucratic, and political) Schoppa aims to uncover what processes led to Japan’s economic stagnation.  Although he has compiled much of the information he needs on the political and bureaucratic governance mechanisms, he now feels the need to explore the economic and political strategies pursued by a handful of large Japanese firms over time, looking especially at key decisions they made in the 1990s after the collapse of the “bubble economy” led to a sharp decline in growth.   To accomplish this, Schoppa will first need to identify appropriate companies, make contacts, and collect background information, all of which he plans to accomplish during the first part of his stay.

After this initial period of research Schoppa, along with Olivier Zunz, professor of History at the University of Virginia, will attend a Tokyo conference on “Postwar Social Contracts Under Stress.”  Scholars from Europe, North America and Japan will be meeting to explore how the post-World War II grand bargains on welfare and growth strategies of these three regions are being challenged by globalization and the end of the Cold War. All of these nations, Schoppa explained, responded to the experiences of the Great Depression and World War II by adopting policies of one kind or another that were designed to ensure social stability:  while in Europe the welfare state was imposed to protect citizens from the vagaries of market forces, the U.S. engaged in a policy of consumption-led economic growth fueled by a growing and inclusive middle-class. Meanwhile, Japan adopted a system of corporate welfare. In this system, a network of ties between businesses, the bureaucracy, and banks helped ensure against the financial collapse of large firms.

All of these grand bargains, Schoppa noted, have been under pressure in recent years as a result of globalization, immigration, and technological change.  In Japan, a decade of stagnant growth have begun to force banks to cut back on lending to troubled firms while these firms have begun to unwind their cross-shareholding ties and stable business relationships.  All of this is threatening the ability of the system of corporate welfare to continue to cushion society from the effects of market forces. Schoppa also noted how the disparity between the wealthy and poorer sectors of American society has widened since 1979.  On the European front, unemployment rates have shot up in recent years, raising concerns about whether governments can afford to continue providing generous welfare state benefits.  Conference participants will examine how nations in the three areas have attempted to stave the tide of  pressures on their economies and will seek to determine how social contracts can be modified to preserve the achievements of the postwar era.

All work and no play? Don’t worry: Schoppa has his bases covered. After saving the world, he will join his wife and two daughters for a week of sun and sea at Duck, North Carolina.

 Gari Ledyard Speaks on
“The Korean Rediscovery of China in the 18th Century”
by Captain Seung Joon “Steve” Lee
MA Student, East Asian Studies

 On March 26 some 40 students and faculty members assembled in Maury Hall to take a journey to 18th century Korean and Chinese life through the writings of Hong Dae Young.  Their guide, Professor Gari Ledyard of Columbia University told a fascinating story of this Korean gentleman who went to China in 1766 to discover firsthand the wonders of the Middle Kingdom.  What he brought back in his extensive diary was a rediscovery of China that included knowledge on advanced technology, the role of markets, advanced astronomy and mathematics, Chinese infrastructure, and even Christianity.  Up to that time in Choson Korea, most information on China was derived from classical literature and the Confucian classics.  Hong’s journey and diary were different because he made an unusual effort to discover the human side of Chinese life.  He had even learned to speak Chinese -- an act considered beneath a man of his status -- in order to converse directly with merchants, artisans, soldiers, pawn shop owners, school children, and government officials.

Hong brought back a different perspective of the Ching outsiders who then ruled China.  In one account, Professor Ledyard recounted Hong’s casual conversation with a first rank military official.  The conversation itself was considered extraordinary to Hong, as he could not imagine a Ming general even entertaining the idea of talking to a Korean visitor, especially to one who wore the dress of a lower rank official.  (Professor Ledyard told an interesting aside of schoolgirls laughing at Hong’s dress, mistaking him for a theatrical performer, because the old Ming uniforms that the Koreans still wore were only seen in theatrical performances in China.)

Hong’s journey gave Koreans a different perspective on China.  Thereafter, not only did Koreans seek the usual traditional Chinese teachings, but now they wanted to learn about China’s advanced practical world, to include Western religion.  In fact, the first Catholics on Korean soil were Koreans who went to China as part of this rediscovery and brought back Catholic teachings to the peninsula in 1784.

Professor Ledyard hopes to publish the first English translation of the Hong diary in the near future.  This work will provide an excellent account of Chinese life at the zenith of the Ching court and Choson’s discovery of pragmatic Chinese and Western “wonders” a century and a half before the end of the Yi Dynasty.

Prof. Ledyard (second from left, first row) with East Center faculty members and students.

Summer 1999 Intensive Japanese at UVA

The following intensive Japanese language classes will be offered during the 1999 Summer Sessions at UVA June 14-July 14 and July 15-August 13.

JAPN 101-102     Instructor:  Mako Koyama, mk8q@virginia.edu
                                                924-0571; B23 Cabell Hall

JAPN 201-202     Instructor: Tomoko Marshall, tm5x@virginia.edu
JAPN 301-302                       924-0571; B23 Cabell Hall

Students interested in taking a summer Japanese course are urged to contact the instructors listed above by April 9 or as soon as possible.  Summer classes are only offered if there is a minimum enrollment.  For specific questions about summer language classes please contact Tomoko Marshall.

History Department Offers Summer Asian Studies Courses

HIEA 203  Modern China:  The Road to Revolution                             June 14-July 14; MTWRF 1030-1145
Bradly Reed

This course is about the revolutionary transformation of China in the twentieth century, from the world's oldest imperial order to the founding and development of the world's largest socialist state and society. In addition to political developments and issues of international relations, the course will also cover the social and intellectual revolutions that have so profoundly affected China and the Chinese people in the twentieth century.

Our subject matter can be divided into three chronological periods, each of which will occupy us for approximately one week. First, following a consideration of the political and social institutions of the last imperial dynasty (the Qing, 1644-1911), we will examine the interaction of foreign aggression and domestic upheaval that led to the fall of the imperial order and the establishment of a Republic in 1911. The second period, covered in week three, looks at the turbulent period of social unrest, Japanese invasion, and civil war from 1911 to the founding of the People's Republic of China in 1949. The final week will then be devoted to the post-'49 era under the leadership of the Chinese Communist Party, a period that has been described by some as the greatest attempt at revolutionary social change in world history.

HIEA 312  The Traditional Chinese Order                                             July 15-August 13; MTWRF 0800-1015
Ronald Dimberg

This course will provide an analysis of major Chinese social, political and intellectual movements and institutions against the background of Chinese history from the 6th through the 18th centuries.  The course is designed to explain how and why Chinese civilization developed as it did prior to the nineteenth century contact with Europe and the United States, and to explain why the traditional Chinese state was so durable.  During the course special consideration will be given to the development of the imperial and bureaucratic institutions, the civil service examination system, relations between the Chinese state and Buddhism, Neo-Confucianism as official state orthodoxy, the development of the Chinese economy, the role of serfdom/tenancy in Chinese society, and Chinese attitudes toward non-Chinese peoples.  Grading: mid-session examination (25%), a written assignment (25%), and final examination (50%).