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JAPAN’S NEW STRATEGY

- Aiming to be the technological capital of the world

Japan has long been an Asian exception, and has made a success of exceptionalism. Till the middle of the 19th century, however, it was a pretty average Asian feudal state. Then in 1853, Commodore Matthew Calbraith Perry steamed into the Tokyo bay with four steamships. The residents of Tokyo could not believe their eyes. They were not unused to Europeans; they allowed a few Dutchmen to visit once in a while. But they had never seen a steamship, made of steel, painted black all over, with a funnel belching smoke. They had seen a lot of dragons in their storybooks; they thought they were seeing real dragons.

But then, the ships put down boats, which filled up with long-nosed white humans, dressed in fancy naval uniforms. The Tokyans ignored the foreign devils, hoping that they would disappear as they had appeared. But Perry just waited and waited. Finally he wore down the Japanese; after nine months, he left with a treaty which permitted American ships to enter the two ports of Shimoda and Hakodate. The Japanese government was shaken, and decided that it would not be taken by surprise again.

In the next decades, Japan discovered the West, imported mechanical spinning and weaving machinery, and became a major textile exporter. It learnt to use Western ships and arms, invaded China and created an empire in Mongolia and Korea. By the early 20th century, Japan was the only industrialized country in Asia. That raised its ambition. It allied itself with Germany in World War II, and occupied the entire region from the western Pacific up to India’s borders. For that temerity, the Americans bombed Japanese cities to rubble. Japan still fought on, until 1945 when the Americans dropped just one atom bomb and annihilated Hiroshima. Three days later they dropped another one on Nagasaki. The Japanese government decided that it was wise to stop before all Japanese cities were destroyed, and surrendered. General MacArthur occupied Japan for seven years.

When occupation ended, Japan chose a pacific route to supremacy. It rebuilt industry. But instead of textiles, it concentrated this time on steel, engineering and automobiles. Soon it was exporting engineering goods and earning payments surpluses on an enormous scale. It became better at engineering than the veterans of Europe and the United States of America, and offered equipment at lower prices. It became the machine maker of Asia. Its exports zoomed ahead of imports, and it accumulated big payments surpluses. It invested them all over the world. It lent India a lot of money in the 1980s, which India blew up. By 1990, India was having another of its payments crises.

But by this time, Japan found a better imitator in China than it had been of the West: China started making Japanese machinery at much lower cost. China did not follow capitalist rules; it was no use asking it to pay royalties. So the Japanese packed up their factories and sent them to China; they became the biggest investors in China. It worked for both. China became the world’s biggest manufacturing exporter, and Japanese companies earned good dividends from the business. As long as the Japanese could go on developing new technology, the Chinese continued to value their connection.

Soon the Chinese were tired to be second to Japanese. They sent lakhs of young people to study and work in Japan. Japanese is a much easier language than Chinese — some would say it is a kind of pidgin Chinese — so the Chinese found it easy to pick up. And once they got familiar with Japanese culture and education, it was only a matter of time before they could start making up their own technology.

The Japanese had another problem. Their big companies could grow fatter on profits from China. But they could not create jobs for young Japanese. Britain had faced a similar problem after World War II: previously undeveloped countries had industrialized, and the demand for British manufactured goods had fallen. Britain had then turned to finance; it used the new information and internet technology to create a high-technology financial industry in London. While Britain’s industrial north declined, London boomed. But the Japanese could not do what the British did, for they were not good at English. They had become financiers to Chinese industry, but there was no capital market in China, and the Chinese had no intention of letting one develop. They were happier with their firms managing their own finances, going to government banks when they needed money, and making financial deals with the Japanese when they wanted.

So Japan sees itself facing a crisis. It has always had very low unemployment, because its big business saw it as its duty to give jobs to young people. But to survive, a people have to do some useful economic activity. The Japanese have seen the Chinese beat them in competition in one activity after another. They ask themselves: what will the Japanese of the next generation do to maintain their prosperity?

And they have come up with a very interesting answer: they would like Japan to become the technological capital of the world. The Japanese have been good at technology for a long time: they imitated others’ up to a point, and then they became good at making up their own as well. But now they do not aim to be the world’s best innovators. They see that as an uncertain game, in which the Chinese now excel; the Americans continue to have the best universities and research outfits, and to produce the world’s best technology in a few things like aeronautics and pharmaceuticals.

Instead of trying to beat everyone else and to make Japanese technology the world’s best, the Japanese have decided to invite the world’s best innovators to come and settle down in Japan. They thus hope to make Japan the world’s technology hub. If a foreign company CEO wants to go and have a look at Tokyo, JETRO will give him an office for 50 days, and arrange appointments for him. It advertises the fact that Dou Yee International set up an LCD manufacturing plant in Shobara City, that Jiangsu Tri-M Special Metals, a Chinese manufacturer, set up a subsidiary in Nagoya, that Juwi Holdings, a German developer of renewable energy, is going to set up an establishment in Japan, and so on. If it succeeds, Japan will look very different in a few decades: it may regain its technological superiority, but it will be very cosmopolitan. It will still not become a Western country; given the geography and the economics, Chinese presence will be substantial. But it will become much less Japanese. I think that will be a cultural tragedy, for I consider the Japanese civilization to be the world’s best; but Japan is prepared to pay a high price to continue to be the world’s best. Indians do not enjoy going to Japan; they miss curry. They will probably be better served in the future Japan; even if they are not, they will go there to shop for the world’s best technology. And if the British get there before them, they will make sure that Tokyo has good curry joints.