Wolfgang Streeck in Tokyo: Japan’s secular stagnation as a delayed crisis of democratic capitalism

Abstract

Since the 1990s Japan has experienced a prolonged period of crisis. Much work has thus far focused on understanding Japan’s crisis on its own terms. Yet we must also consider Japan’s situation within the wider context of global capitalism, examining how the crisis in Japan may be related to, or even integrated within, similar crisis tendencies both within other Northern countries and at the level of the capitalist world system. This article thus asks how our understanding of Japan’s crisis can be enriched by situating it within a wider analysis of crisis and transformation across the Global North. It contends that a common thread of sporadic and yet chronic economic crisis emanating from unresolved contradictions that emerged in the wake of the crisis of Keynesianism in the 1970s can be seen to link Japan’s long-term crisis with similar dynamics in the US and Europe. In developing this argument, the article engages closely with Wolfgang Streeck's 2017 book Buying Time, using a careful reading of Streeck’s argument about the delayed crisis of democratic capitalism that has afflicted countries across the Global North since the 1970s to deepen our understanding of contemporary Japan’s secular stagnation. Following Streeck, it argues that many of the same factors that have driven this “delayed crisis” in the US and elsewhere are also found in Japan. At the same time, Japan’s crisis has been sharpened by global political economic challenges, including the decline of American hegemony and the rise of China, as well as the contradiction between conditions necessary for capital accumulation and stable social reproduction. The article seeks not only to show how Streeck’s argument can help us understand Japan’s crisis in relation to similar crises across the Global North, but also to explore how the Japanese case may point to limitations in Streeck’s argument.

Notes

1 An earlier version of this article was presented online at the Japan Society of Political Economy 69th Annual Conference, hosted by Hokusei Gakuen University, on October 16th, 2021.

2 Japan’s lifelong unmarried rate has grown from just 1.9% of women and 1.3% of men in 1960 to 14.1% of women and 23.4% of men in 2015 (AXA 2019). Surveys suggest that one reason for this decline relates to changing gender norms, as many women see marriage and childbirth as incompatible with their desire to pursue a fulfilling career. Another reason relates to how the decline in real wages and increase in precarious employment have deprived many people—especially men—of the economic security seen as a requirement for marriage.

3 Hikikomori refers to social recluses, often middle-aged men who retreat from society due to their own perceived inability to meet societal expectations and instead live with their parents and avoid going out; NEET refers to young people (usually single) who or “not in employment, education or training;” “freeters” refers to young people without a career path who move from one non-regular, casual source of employment to the next; parasite singles refers to young adults who prefer to live with and depend financially on their (usually middle class) parents rather than pursuing financial independence and autonomy.

4 The average fertility rate from the period of 2016–2020 was 1.4, only 0.1 higher than the historically low levels of the period from 2002 to 2006 (1.3) (MHLW 2019b; Nikkei 2021).

5 While the 1990s’ consolidation state featured welfare retrenchment as part of a strategy of deficit elimination (especially under Clinton’s “workfare” reforms), the 1980s debt state predated these reforms, and thus provided unemployed workers and others affected by the deflationary consequences of the Volcker Shock with a modicum of security under programs that were funded through public debt rather than taxation. Additionally, although Streeck does not explicitly discuss this, we can understand the economic and employment impacts of Reagan-era (debt-financed) increases in defense spending as fitting with this logic.

6 While the term “leverage ratios” is often used to refer to different financial indexes, here Streeck uses the term to refer to capital adequacy ratios, or the ratio of capital to assets, whereby a lower number (in percentage terms) indicates a lower ratio of capital relative to assets such as investments and loans and implies a higher degree of risk for banks. My use of the term “leverage ratios” throughout this article follows this understanding.

7 The drop in corporate tax revenues was further exacerbated by corporate tax cuts in the 1990s, which were reduced from a high of 43.3% in 1987 down to 30% in 1999 (CAO 2019).

8 However, beginning in 1997 under Hashimoto and continuing into the 2000s, Japan pursued a wave of consolidation measures aimed at reducing the deficit through consumption tax increases and spending cuts, measures that, combined with the effects of the Asian Financial crisis, backfired by pushing the economy back into recession (see also Lucarelli 2015).

9 While a thorough accounting of the reasons behind the different approach to buying time pursued by Japan compared to the US is beyond the scope of this paper, one explanation can be found in the different limitations of the American Keynesian-Fordist versus Japanese developmentalist state models. Compared to the US, Japan’s “lean state” developmentalist model brought relative productivity advantages that enabled it to avoid the same crisis of stagflation as the US (see also Johnson 1982). At the same time, the small tax base afforded by this model made it difficult for Japan to adjust to the changing fiscal demands imposed by population aging in the 1970s, leading to the birth of the debt state in Japan much earlier than in the US (Park and Ide 2014).

10 In contrast, the US saw a slower increase in the 1980s, from 49.7% in 1980 to 60.8% in 1990 and a rapid increase in the late 1990s and 2000s, from 64.4% in 1995 up to 98.5% on the eve of the Lehman Shock in 2007 (IMF 2021).

11 Nonetheless, as of June 2021, Japan’s three main banks, Mitsubishi UFG, Sumitomo Mitsui, and Mizuho all had leverage ratios below 5%, a comparatively low level that Streeck (2017b), citing Neel Kashkari, refers to as risky (Mizuho 2021; MUFG 2021; SMFC 2021).

12 For example, while the early 1990s saw a wave of financial bankruptcies, including Yamaichi Securities and Hokkaido Takushoku Bank, the late 1990s’ and early 2000s’ wave of mergers saw the number of major banks fall from eight to three.