‘Trouble’ With Japan? U.S. Advice

Watching each new American administration fumblingly try to deal with Japan reminds me of the old song “Gee, Officer Krupke.”

That was a dance number in “West Side Story” in which a cop named Krupke hauls a kid he’s arrested before a series of specialists. Each expert in turn comes up with a different explanation of what the problem is. “The trouble is he’s crazy,” says the judge. “The trouble is he drinks,” retorts the psychiatrist. “The trouble is he’s growing,” the shrink finally decides. “The trouble is he’s grown,” counters the social worker.

So it is that the Bush administration, in its first weeks in office, has offered its own fresh but questionable diagnosis of the “trouble” with Japan’s economy.

Treasury Secretary Paul H. O’Neill said the Japanese government needs to help its people “achieve a higher standard of living.” Under this reasoning, if consumers buy more goods, Japan’s stagnant economy will start to grow again.

O’Neill’s approach is a change from that of the Clinton administration. Treasury Secretaries Robert E. Rubin and Lawrence Summers argued that the “trouble” with Japan was that the government wasn’t spending enough money to stimulate its economy.

Under pressure from Clinton officials, Japan went on a binge of public-works spending, constructing dams and bridges that were often unneeded and which, in the end, didn’t produce an economic turnaround. Now, O’Neill says the Bush team will stop prodding Japan in this way.

Over the past two decades, we’ve had a succession of other redefinitions of the “trouble” with Japan.

The problem was the yen-dollar exchange rate, thought the Reagan administration. No, the first Bush administration said, we need to focus on “structural impediments,” the systemic problems that contributed to America’s trade deficit with Japan. No, Japan needs to buy more American cars and auto parts, thought the Clinton team in 1993.

O’Neill’s remarks sparked a brief, fascinating debate in America about living standards in Japan.

Some critics think he’s dead wrong, because the Japanese--despite a decade of low growth--are living quite well indeed. People in Japan often are paid as well as or better than Americans, dress in expensive clothes and live longer, on average, than do Americans.

“People like O’Neill . . . ought to be required to go to department stores and shopping malls in Japan on a Sunday, or to the evening clubs and restaurants in Tokyo on a busy night,” says Harvard University’s Ezra Vogel, an Asia scholar.

“Japan is still one huge La Jolla,” says Chalmers Johnson, president of the nonprofit Japan Policy Research Institute, referring to the upscale Southern California town. “It’s got the highest standard of living on Earth.”

Others respond that O’Neill was on target because people in Japan live in tiny homes that sometimes don’t have dishwashers, dryers and the other appliances that many Americans have.

“Japan’s standard of living is lower than ours, but not so much lower that it shows up on the streets of Tokyo,” says Edward Lincoln, a specialist on the Japanese economy at the Brookings Institution. “They live in small houses and, instead, they choose to spend their money on Gucci bags and Pierre Cardin clothing.”

It’s not clear what good it does for the U.S. government to goad Japan to promote greater spending on the few big items, like housing, that consumers lack.

Let’s imagine the impossible: that everyone in Japan decides his or her home is too tiny and goes out to order a new, bigger one. It would take many years for those homes to be built and equipped. O’Neill and the rest of the Bush team would be long gone by the time we could see what the economic impact would be.

The largest question of all is why Americans feel so compelled to proclaim to Japan what its “trouble” is. The answer seems to be embedded in the post-World War II relationship between the two countries.

“For the past 56 years, we [the U.S.] have been in the position of telling the Japanese what to do--at first literally, during the [post-war] occupation,” Lincoln says.

Of course, this is a two-way proposition. Japan also keeps asking each new U.S. administration for its advice and approval. Just like the guy in the song:

“Gee, Officer Krupke, we’re very upset. We never had the love that every child oughta get. We ain’t no delinquents, we’re misunderstood. Deep down inside us there is good!”

In fairness to O’Neill, what he seemed to be trying to say, if somewhat awkwardly, was that instead of telling Tokyo what to do, the U.S. ought to leave it up to the Japanese to decide whether they want greater economic growth. That would be a welcome step toward treating Japan like a normal nation.

Yet the Bush administration may have trouble with this hands-off approach if Japan’s lagging economy threatens to affect its neighbors and the United States as it did three years ago.

“The current administration’s views will last until there is any sign of financial crisis,” Johnson says. “Japan is the source of the capital that comes into this country and keeps inflation low. If that relationship ever stopped, the results would be catastrophic.”

In other words, America and Japan are so dependent on one another that, even when they try to change, the nations still keep falling back into their customary roles. “Gee, Officer Krupke” hasn’t done its last curtain call.

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Jim Mann’s column appears in this space every Wednesday.