Regional Outlook : Blinded by Success, Japan Searches for a New Vision : A nation driven by the pursuit of prosperity must regain control of the giant it has created. As it tries to relocate its center, the Land of the Rising Sun is finding that wealth has its responsibilities--and its costs.

For perhaps the first time since it resurrected itself from the ruins of World War II, Japan appears to be without a plan.

The country’s one-dimensional foreign policy--promoting commercial interests abroad--has been made obsolete by its very success. It brought home phenomenal wealth, but it also generated demands that Japan assume more of the responsibilities of a great power, demands that Japan is not yet prepared to meet.

The powerful bureaucracy that charted postwar development with a bold industrial policy is now in a state of near-paralysis, consumed with the task of reacting piecemeal to foreign criticism rather than establishing a clear set of national priorities.

And the conservative Liberal Democratic Party that has reigned for the past four decades is so ossified that it can barely cope with domestic and international pressures. This political sclerosis contributed to a general lack of confidence that nearly crashed Japan’s mighty financial markets earlier this year, as investors wondered whether anyone was in control.

Japan’s new drift is unwittingly documented in a major policy report, “Vision for the 1990s,” currently being patched together by the Industrial Structure Council, a prestigious advisory panel attached to the Ministry of International Trade and Industry (MITI).

Since 1960, the ministry has issued one of these reports every 10 years to serve as a blueprint for economic growth. Past “visions” have articulated the nation’s long-range, strategic aims: the aggressive push into steel and shipbuilding; the shift to precision machinery, automobiles and consumer electronics; and most recently, in the 1980s, the quest for frontiers in high technology.

Now, the vision taking shape is disjointed and ambivalent. One key section actually makes it a priority to suppress the drive for industrial prowess by curtailing marathon work hours, for example. The ministry’s advice for over-achieving Japanese is to reap the rewards of their own diligence, even to indulge themselves as consumers.

But the average Japanese workaholic knows that an array of problems must be resolved before he can stop to smell the flowers. The lack of a policy to restrain land prices and build affordable housing makes the report’s theme of “Comfort and Affluence” sound like a cruel joke for first-time home buyers. A critical labor shortage puts the goal of cutting down overtime into the realm of fantasy.

Bureaucrats may prescribe relaxation, but the most popular television commercial over the past year features a super “salary man” who bellows out an absurdly frenetic battle song: “Can you fight 24 hours a day?”

The ad is for Regain, a pep drink concocted of caffeine, nicotine and vitamin C. People have taken to singing the Regain song in Tokyo bars.

Another new visionary theme is that Japan, the economic superstate, must finally clarify its “ideals” for the benefit of a suspicious world. Lest there be any doubts,Japan’s “ideals” are to promote free-market economics “based on the principles of liberty and democracy,” declared the Industrial Structure Council’s subcommittee on international economic affairs.

Elsewhere in the same report--which is scheduled for release at the end of this month--MITI’s not-so-invisible hand is still itching to guide laissez faire market forces. The government should shape industry’s future, it notes, by “identifying the seeds of innovative technology.”

“The report is self-contradictory,” observed the conservative Yomiuri newspaper in an editorial. “While it points out the importance of a market economy, it also refers to a number of issues the government should become involved in.”

As if to deflect criticism that Japan cares only about its own “techno-national” interests, the drafters of the section on science and technology policy coined an enigmatic term, “techno-globalism.” The apparent meaning is that Japan now wants to share its know-how, instead of being “techno-stingy.”

If it sounds as though sweeping changes are under way in the mythical boardroom of Japan Inc., guess again. Between the lines is a message of confusion, obfuscation and a degree of political intransigence.

After decades of preparing ambitiously for the 21st Century, Japan is caught entering the 1990s without an idea of what it stands for, many Japanese fear.

“I’m finding that the failure on our part to articulate Japan’s future direction is increasingly responsible for the breakdown in the international dialogue,” said Tadashi Yamamoto, president of the Japan Center for International Exchange.

“We have no concerted effort to establish any kind of agenda, or foster any real debate on the issues we face,” Yamamoto said. “This is an acute problem because Japan has suddenly emerged as a major player in world affairs.”

In diplomacy, Japan has pledged its commitment to the status quo--its peace constitution and its 30-year-old security pact with the United States. But on the subject of how these arrangements might someday change, it is awkward, mute and misunderstood by its friends to the extent that it seems not to understand itself.

Japan now tops the United States as a donor of foreign aid. But at a time when it might be expected to step forward into the international arena with its own program for global leadership, it seems content to hesitate on the sidelines.

Vice Foreign Minister Takakazu Kuriyama drove home that point when he disclosed, in a recent position paper entitled “New Directions for Japanese Foreign Policy in the Changing World of the 1990s,” that Japan’s foreign policy is now that of a “major power with an unassuming posture.”

This blurriness of the vision is of profound significance because Japan’s massive trade surplus not only makes it an engine of international finance and investment, it throws it into confrontation with its most intimate economic partners.

Most notably, a seemingly intractable $49-billion annual trade surplus with the United States is the fulcrum of a contentious--sometimes panicky--bilateral relationship.

The goal of bringing global trade and current-account surpluses into balance has long been assumed to be fundamental in the international debate over Japan’s economic affairs--at least, until the end of last month, when an advisory panel to the Finance Ministry suggested that maybe the surplus is not so bad after all.

Rather than disrupting the world economy, the Japanese surplus is a benevolent thing that finances the U.S. budget deficit, generates development aid for the Third World and could supply investment funds for Eastern Europe, the panel surmised.

It is not clear how the new economic logic will play outside the Japanese islands. The U.S. position has been that Japan must bring down its trade surplus by increasing investment in its public sector and lowering its high savings rate, thus spurring a domestic demand that would draw more imports.

The conflict will be back in the spotlight early next week when U.S. and Japanese officials meet here to resume negotiations in a round of trade talks known formally as the Structural Impediments Initiative.

An interim agreement hammered out by the two sides in April was hailed as a turning point in the long-simmering bilateral dispute over trade. Japan acceded to several U.S. demands that it change its economic system to remove structural barriers to imports.

Prime Minister Toshiki Kaifu gave personal assurances to President Bush that he would turn Japan into an “import superpower” and see to it that concessions made in the structural talks are carried out.

The Bush Administration was pleased enough to subsequently drop Japan from a list of “unfair trading nations”--a label which, under the Omnibus Trade Act of 1988, carries a threat of sanctions when negotiations fail to improve market access for American products.

But the facade of trade peace may be cracking. U.S. officials have already expressed doubts about Japanese intentions to carry out some of the structural reforms promised in April--reforms such as setting concrete targets for boosting public works investment, or beefing up enforcement of antitrust laws. Kaifu, in turn, has retorted with a public display of irritation at the American charges of foot-dragging and indicated he will budge no further.

The problem, ultimately, appears to be that despite its accommodating rhetoric, Japan has not yet made up its mind whether it truly wants to change, and if so, how far, and in what direction.

Kuriyama, who as vice foreign minister is the top career officer in the Japanese diplomatic corps, stressed that from now on, Japan must assume the responsibilities of a major power, as part of a “trilateral” partnership with the United States and Europe. It’s a task, he added, that “will in fact require a national effort, including change in the consciousness of the people.”

How such a change in consciousness might come about in the absence of any serious public debate, however, is not part of the vision. The average Japanese is an intelligent observer of current events and extremely well informed about Japan’s impact on the world at large. But there is little sense that ordinary citizens have influence over the government in Asia’s leading democracy.

“The problem is that things happen spontaneously, by consensus, and we have no rational debate on policy options,” said Kinhide Mushakoji, a political science professor at Meiji Gakuin University. “Even if we had a bad plan, an evil plan, it would be better, because then we could criticize and change it.”

A new law on foreign laborers that went into effect at the beginning of June is a case in point: Japanese bureaucracy reacted to the recent influx of tens of thousands of illegal Asian workers with a knee-jerk of xenophobia.

The government started pushing the door shut by threatening employers with criminal sanctions, causing a frightened exodus of undocumented aliens. But it failed to address Japan’s urgent shortfall in unskilled manpower, or face the essential question of whether Japanese society must eventually “internationalize” by accommodating large numbers of non-Japanese in the domestic economy.

The recent visit by South Korean President Roh Tae Woo underscored how Japan still has far to go at integrating its minority community of 700,000 Korean residents, many of whom are descendants of laborers brought here forcibly during the 1910-45 colonial period. Roh appealed for an end to discrimination.

“I don’t think Japan will ever be able to open up to foreigners,” said Joe, 29, a Ghanaian who has worked at a foundry in the industrial suburb of Kawaguchi for the past four years. “It’s not a matter of race. They just don’t like foreigners.”

When it comes down to promoting the much vaunted “ideal” of free-market economics at home, meanwhile, political leaders have their hands largely tied. Interest groups like the farmers, who have a natural loathing for liberalizing agricultural imports, or the small store owners, who prefer the protected and inefficient distribution system that the Americans want to streamline, are the bedrock of Japanese-style democracy.

The perennial ruling party can ill afford to disinherit these traditional constituents, having been wounded over the past two years by a popular tax revolt and by sex and fund-raising scandals. In theory, the Liberal Democrats favor market liberalization and economic reform, but they are nearly powerless to act.

Without its own center of gravity, the Tokyo government has allowed--some say encouraged--the United States to set the agenda for change. What may have resulted, though, is a Japan that can neither say No, nor follow through after it says Yes.

“This apparent LDP government strategy of leaving the agenda for change to the U.S. government could backfire,” warned Kenichi Ohmae, a Tokyo business consultant and prominent social critic, in a recent article in the Japan Times. “Continued nagging by U.S. officials risks provoking an emotional reaction of the Japanese.”

Still, the mood here is one of strong anticipation that an external shock might rouse Japan out of its state of suspended animation. The Americans, once again, may force some traumatic changes that will ultimately revitalize Japan.

The cover of the March issue of Keidanren Geppo, the opinion magazine of the Federation of Economic Organizations--Japan’s most powerful industrial association--was a telling statement of the times: it featured a woodblock print inspired by Commodore Matthew Perry’s “black ships.”

The American naval hero is better known here than at home. Perry sailed into Yokohama harbor in 1854 to force Japan out of 3 1/2 centuries of feudal isolation and open its markets to trade.