Goodbye to The Godzilla Myth

By GEORGE J. CHURCH

Something funny happened on Japan's way into the '90s.

The country is stuck in a severe economic slump that after three years is at best beginning to bottom out -- maybe. Though the stock market has turned up, it is still 50% below its peak. The banking system is staggering under bad debts, and almost every week another big manufacturer announces plans to cut production and trim its work force.

The nation is going through political turmoil unprecedented in four decades. Corruption in the party that has governed since 1955 has become so noxious that some of its most popular members are threatening to walk out. The ruling party could even lose its majority in the lower house of parliament, starting a period of prolonged floundering.

Japan is experiencing social strains -- a generation gap, a progressive graying of the population, a growing refusal by women to accept their traditional roles -- that are profoundly disconcerting to a country that moves in orderly lockstep. The once docile public has become so discontented that in a government survey of 10,000 people, 44.3% said the country was going in the wrong direction; only 31.4% thought it was on the right course.

The era of unrestrained growth and infinite success is over. The Japan that is experiencing its most profound dislocations since its resurrection from World War II hardly looks any longer like the all-devouring Godzilla of Western myth. Former French Prime Minister Edith Cresson's publicly voiced fear of Japan's "desire to conquer the world" sounds off-key, and American workers can stop their bitter jokes about how they will all be laboring for Japanese bosses.

To be sure, no one counts Japan out, or even very far down. The stumbling economy still stands an outside chance of overtaking the U.S. in total production sometime in the next decade. Though the Liberal Democratic Party is torn by scandal and dissension, no other party or coalition is anywhere near strong enough yet to snatch away all its power. What passes for social protest in Japan might look like placidity elsewhere. A Japanese gripe session is likely to end on the word shoganai (roughly: nothing can be done about it). Though rap music has come to Japan, the most assertive lyrics decry too much monosodium glutamate in Chinese food.

Yet rappers could easily find serious ills to complain about. Japan being Japan, outright unemployment during these hard times remains a low 2.3%, but that may be misleading. Some layoffs have been disguised by the practice of kata tataki, or shoulder tapping. A boss tells an employee, We have no work for you so you'll have to go -- and by the way, this is voluntary, right? A 51-year-old executive at a major musical-instrument manufacturer claims he was sent to sit alone in the basement under half the normal amount of lighting with no work to do until he quit. Workers urged to take early retirement, like older employees of a plant that Nissan plans to close in Zama, are not counted as jobless either.

Overtime and expense accounts have severely been trimmed, radically changing the lives of many salarymen. The Ginza in Tokyo once sported 4,000 clubs where businessmen passed the late hours drinking, eating and chatting with young hostesses. Several hundred clubs have been forced to close, and many more are up for sale. Yuri Hirota, mama-san at the Club 48, used to keep an employee at the phone all night doing nothing but summoning hard-to-get taxis. Now cabs can be hailed by stepping out the door, but penny-pinching customers prefer to take trains -- and since the last ones leave for far-out suburbs around midnight, the club is emptying out early.

Not a few salarymen, bereft of overtime and entertainment allowances, are having to spend time with wives and children they have barely spoken to for years -- sometimes to their mutual shock. Japanese businessmen are traditionally so lost outside their offices and clubs that many a wife refers to a retired husband as a "damp leaf" -- a sticky annoyance to a woman tidying up a walk.

Some Japanese have lost everything: personal and business bankruptcies have soared. Shinichi Hoshino is afraid to reveal his real name. He has not declared bankruptcy, but that is a technicality. After running a bar and a mah-jongg parlor, he ventured into real estate in the early 1980s. By 1989 he employed 40 people, and that year he sold 100 apartments to customers who bought them as investments and tax shelters, netting $1.7 million in profits. In retrospect, he says, he should have realized that the boom was topping out, but "every month the prices continued to go up," and banks were eager to keep lending. Hoshino kept on expanding, buying golf memberships at prices up to $500,000 for his clients and employees and a house -- a luxury in apartment-filled Japan -- for his family.

Today his properties have been sold at a loss, his employees all dismissed and his wife and children moved from the suburban house to a small city apartment. His income, earned by running a small real estate management firm, has slid from a peak of $36,000 a month to $5,600. That is not enough even to begin repaying the $5.8 million he owes to a bank and a leasing company; he pays a pittance of $450 a month in interest to the leasing company, nothing to the bank. Hoshino resignedly says "the way things are can't be helped." But he does rail at politicians who "just work for their own political party or faction, and not for the entire country."

Many Japanese agree: the "money politics" that they shrugged off when the country was prosperous seems unbearable in hard times. As a result, Shin Kanemaru, the most powerful behind-the-scenes manipulator in the Liberal Democratic Party during the past decade, could actually serve a jail sentence. He was forced to resign his parliamentary seat for accepting $4 million in illegal political contributions from a trucking company. But public fury would not let prosecutors drop the case. In March they raided Kanemaru's office and found a safe containing $31 million in bonds, $960,000 worth of gold bars and $391,000 in cash -- all kept secret from tax authorities. He now faces trial on a charge of evading $8.8 million in taxes; if convicted, he could be imprisoned for five years.

The Kanemaru scandal has shaken the Liberal Democratic Party as none before. Some popular younger figures are threatening to bolt and form a new party; last week Tsutomu Hata even rejected an offer to become Foreign Minister in order to maintain his freedom of action. Some analysts think a new party might win as many as 40 seats in Diet elections that must be held by next February, possibly costing the Liberal Democrats their majority.

What then? Nobody knows. It seems unlikely, though, that the Liberal Democrats can carry on as an unquestioned force, solving all problems with backroom deals among faction leaders. Public revulsion has caused even party stalwarts to start talking about shaking up the corruption-breeding electoral system.

Yet even an imaginative government with strong popular support would be hard < put to ease some of the new social strains. For generations the country has relied on an unspoken bargain: citizens would work killing hours and accept surprisingly low standards of living -- long commutes, cramped living space -- for the sake of national economic power and pride. But now that fanatical work ethic seems to be faltering among the young, who have startled their elders by choosing more leisure time over higher pay. "They enjoy having barbecues with their families," marvels an aging Toyota executive. "My generation never even thought of such things."

Japan will need more, not less, labor to cope with its declining birthrate and aging population. By 2007, the number of Japanese will begin to shrink; in that same year, 20% will be over 65, making the population the most aged in the world. That means Japan will have fewer workers to support the costly medical, social security and other needs of aging parents and grandparents.

It's no mystery why the birthrate is dropping -- Japanese women marry at 26 on average, later than in any other country except Sweden. The mystery is why they wed at all. The young men who want to enjoy barbecues with their families are heavily outnumbered by the Fuyuhikos, named after a character in a TV drama who was raised by his mother to excel at school and work but never to do anything else for himself and who expects his wife to pamper him the same way. Young women are putting off marrying the Fuyuhikos as long as they can. Older women who married Fuyuhiko types decades ago sometimes express their resentment at the bitter end: they insist that they be buried in individual graves rather than alongside their husband, a practice called shigo rikon -- divorce after death.

Happy relationships with its global partners may be no easier for Japan. On Friday, Prime Minister Kiichi Miyazawa calls at the White House for his first face-to-face encounter with Bill Clinton, who has already shown how broad the gap in mutual understanding could be. Dining with Russian President Boris Yeltsin at the Vancouver summit, Clinton remarked that "when the Japanese say yes to us, they often mean no." While many Japanese acknowledge their penchant for the ambiguous, the White House rushed to forestall any damage to the U.S.-Japan relationship. Clinton, said spokesman George Stephanopoulos, was only making "a casual comment about Japanese courtesy and etiquette." Even so, the Clinton-Miyazawa talks are unlikely to be a love feast. Coming to power after the end of the cold war, the Clinton Administration sees Japan not as an ally that must be indulged -- the Reagan-Bush view -- but as a nagging problem. Its formative years were the 1980s, when supercharged Japanese industry and money seemed able to score at will in the U.S., while Japan's markets remained stubbornly resistant to American penetration.

That experience persuaded many U.S. trade experts, including close advisers to Clinton, to advocate "managed trade," implying much heavier-handed efforts to reduce the U.S. trade deficit with Japan, on the rise again at $49 billion last year. Miyazawa will try to hang tough but will probably wind up making at least some concessions -- though at the price of deepening resentment in both countries. And it is by no means sure how accommodating Japan will be this week when foreign and finance ministers from the Group of Seven industrial nations meet in Tokyo to put together a new package of aid to Russia. Japan no doubt will participate, but how much of the tab -- possibly $30 billion -- it can be encouraged to pick up is questionable. Even aside from its unresolved dispute with Moscow about the Kurile Islands, Tokyo has viewed funds poured into the chaotic Russian economy as money thrown away.

The economic and political troubles have delayed any Japanese effort to play a greater role in world affairs. The country's population and importance would entitle it to a permanent seat on the United Nations Security Council, which Tokyo wants. To assume one, however, Japan would have to overcome its scruples about sending troops abroad, so that it could participate in any peacekeeping operations it might vote on. Japan did send 600 troops to Cambodia to repair roads and bridges under a U.N. peace mandate, but only after a bruising political fight that the Miyazawa government has neither the will nor the strength to repeat.

Paradoxically, one source of friction with other countries has been lessened. Explains Peter Tasker, a strategist for the investment-banking firm Kleinwort, Benson International: "This is the first recession in Japan that is wholly homegrown. They can't blame the Arabs for an oil-price increase or the unions or the Americans."

What the Japanese can blame is overconfidence. Businesses built too much capacity, hired too many workers and forgot about controlling costs, assuming that sales would always rise fast enough to keep profits up. Speculators used soaring land and stock values as collateral on loans to buy more land and shares at still more inflated prices. The government kept pumping air into what is now called the bubble, making sure that credit was easily available at artificially low interest rates.

The inevitable bust began in 1990 with a fall in the stock market, which has now spiraled down into what, when all the figures are in, may rank as Japan's worst post-World War II slump. There is no convincing evidence that it is ending even yet. The stock market, after dropping 63% to a low of 14,309 on the Nikkei average last August, has rebounded and touched the 20,000 mark last week. Not only is that far below the 1989 peak of 38,915, but the recovery was partly a result of a government "Price-Keeping Operation" -- a newspaper term sarcastically echoing the official name of the Peace-Keeping Operation in Cambodia.

The government this week will announce a new stimulus package exceeding the $93 billion it poured in last August; preliminary speculation puts it at around $110 billion -- in contrast to the $16 billion Clinton is struggling to get through the U.S. Congress. But businessmen complain that the spending, mostly targeted at public works, will do little to strengthen the two big soft spots in the economy: consumer spending and business capital investment. Nobody yet knows how long and how seriously the shakiness in the financial system will drag down the economy. The government figures banks' bad debts to be $100 billion, but nobody believes that; other estimates run to over $300 billion.

Japan's economy, politics and society for decades have displayed an awesome combination of stability and dynamism that can hardly be discounted even now. But the nation that for so many years looked like a combination of political cipher and economic steamroller is changing in ways that for all the present stress and turmoil should eventually benefit its citizens as well as the rest of the world. Goodbye, Godzilla, and good riddance.

With reporting by Ann Blackman/Washington and Edward W. Desmond and Kumiko Makihara/Tokyo