After the Disaster
19 March 2014
David Pilling, the Hong Kong-based Asia Editor of the Financial Times, has been with the newspaper since 1990, serving as its Tokyo Bureau Chief from 2002 to 2008. Mr Pilling has won numerous reporting honours, including Best Commentator prize by the Society of Publishers in Asia in 2011 and 2012. He was also named Best Foreign Commentator for 2011 in the United Kingdom’s Editorial Intelligence Comment Awards for his coverage of China, Japan and Pakistan. Mr Pilling is the author of Bending Adversity: Japan and the Art of Survival. Published by Penguin in January 2014, three years since the March 2011 earthquake, tsunami and nuclear meltdown, the book analyses Japan’s resilience in the face of crisis.
What has 3/11, as it is known in Japan, revealed about Japan and its place in the global economy?
Actually, the disaster revealed how important Japan still is industrially in spite of two decades of apparent decline. Even though Tohoku, where the tsunami struck, is among Japan’s least industrialised regions, it turned out that some components essential to the global economy were made there. At one point, production at a General Motors factory half way round the world stopped because they couldn’t get the relevant parts. Japan is also the biggest importer of liquefied natural gas, and imported still more when it was forced to shut its nuclear power stations down after the Fukushima disaster.
Since 3/11, Japan has stepped up its foreign direct investment and its movement of manufacturing facilities abroad. What are the long-term implications of this for the country – and for the rest of Asia?
As Japan’s population, and workforce, shrinks, it is inevitable that Japanese companies will invest more abroad. You can either import labour or go out and employ it in other countries. Japan is relatively closed to immigration and will generally prefer the latter. In recent years, outward M&A from Japan has actually been greater than that of China. The impact for the rest of Asia is interesting. Japan is a huge investor in Southeast Asia. A large proportion of Thailand’s manufacturing jobs are Japanese. Japan is heavily invested in Indonesia and Malaysia and is increasingly looking at the Philippines, Myanmar and, above all, India. Much of this is purely commercial. Companies are investing in fast-growth economies. But partly it's geostrategic. Japan is trying to establish itself as an alternative source of finance to China and wants to form a block of “democratic” countries. Nations like Indonesia will inevitably try to court both Chinese and Japanese capital and play one off against the other.
What about Hong Kong-Japanese relations over the past three years? Do you see any significant change in cooperation between Hong Kong and Japanese business? Can Hong Kong serve as an effective bridge between Japan and mainland Chinese?
Hong Kong is generally far less hostile to Japan than mainland China. There have been some significant investments in Japan from Hong Kong, such as Peach, a low-cost airline that is a joint venture between All Nippon Airways and First Eastern Investment Group. I suppose that, if mainland Chinese companies are boycotting Japan for political reasons, Hong Kong may be able to fill the gap.
In your book on Japan, you note that the country’s life expectancy is now the world’s highest, its population “on the verge of rapid decline.” What does an aging Japan, a shrinking Japan, mean for the country’s economy?
Demographics is undoubtedly a challenge. Yet Japan is not the great outlier often presumed. Fully 66 countries in the world have fertility rates below that needed to keep a population stable. In Asia, South Korea, Taiwan, Singapore and Hong Kong all have lower birth rates. Japan is already rich. Its challenge is to maintain its wealth. The bigger challenge may actually be for China, which is not yet wealthy but which will shortly become one of the fastest-aging countries in the world. The cliché that China could become old before it becomes rich may turn out to be true.
You interviewed a great many Japanese people, from all walks of life, for your book. Was there any one individual who, through his words or his actions, seemed to capture the essence of the crisis and the uniquely Japanese response to it?
I worry about the idea of a “unique” Japanese response. Of course, all societies are unique, but the idea that Japan is uniquely unique – one perpetuated by the Japanese and many foreigners alike – can become something of a fetish. In terms of individuals who impressed me, I would have to single out someone I met in one of the coastal towns that had been devastated by the tsunami. He was called Seizaburo Sato. He was over 70 and blind in one eye. I found him sifting through the wreckage of his home only a few days after it had been destroyed. To me the task was pointless. To him he was starting on the long process of rebuilding his life. Within weeks he had picked up and started again.
The title and basic premise of your book suggests that you are, at heart, an optimist when it comes to Japan, its economy and its people, despite what you have termed its long-term “political dysfunction.” What makes you believe in Japan?
The idea that Japan would become Number One – the title of a book written in the late 1970s – was an exaggeration. Similarly, the idea that it has collapsed since 1990 is also exaggerated. There is an element of schadenfreude in that view. If you discount deflation and Japan’s stagnant population, in real per capita terms Japan’s economy has performed roughly the same as the United Kingdom or Switzerland in the past 20 years. No one talks about the “Swiss lost decades.” In the past, Japan has shown its ability to overcome adversity. I don’t buy the idea that its demographics or conservative social relations damn it to eternal decline. Like anywhere else, it will have its ups and downs. Like most other places, it will survive.
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