HAMBURG: Recently I visited a country I had lost sight of for some years -- Japan. When last there in the 1980s, it was full of self-confidence. Now it is singing the blues.
Overconfidence is always illusory. Japan lived in a dream world, admired as a model for industrial countries everywhere. It was the chief source of international capital. Protected by America, surrounded by a detente-eager USSR, a divided Korea, and a China awakening from economic backwardness, it had no real security problem. By its own standards and those of the world, Japan was an unmitigated success.
The blues are the fruits of this success: because things worked so well for so long, Japanese practices became petrified. Success discouraged change. Though good fortune has ended, its thought patterns linger, making it even harder to introduce needed changes.
This is obvious in finance as well as production. In the years of the bubble economy, Japanese banks handed out money as if they did not care about repayment. Manufacturers gave life time employment. Now the crisis of the country's financial institutions hangs as a dark cloud over the international financial system with many Japanese banks having to pay a premium to borrow on world markets. Big manufacturers are inching away from life time employment.