SpecialArticle 3Author
Sébastien Lechevalier

By Sébastien LECHEVALIER

Although Japan attracted much attention from around the world up until the early 1990s, it has almost
disappeared from discussions in Europe today. In the 1970s and the 1980s, economists competed inproposing interpretations of the Japanese model of capitalism and explaining its extraordinaryperformances. Among experts outside Japan, the dominant explanation for the poor performance of theJapanese economy since the early 1990s is maladjustment to a new environment. More precisely,
according to most analyses, an absence of reforms in a new environment characterized by globalizationand technological progress caused the “decay” of Japan. This is, for example, what Edward J. Lincoln
argued in an article published in 2001, “Arthritic Japan: The Slow Pace of Economic Reform.” (JPRIWorking Paper No. 81.) This image of Japan is similar to the way Europe in general (and France in(Japanese QC)
particular) was characterized in the 1990s by the expression “eurosclerosis”.
In this article, I adopt a European perspective on the Japanese trajectory since the early 1980s and argue
that the previous explanation is misleading. Japanese capitalism has in fact changed substantially as aresult of a set of structural reforms. This change is underestimated because it has been gradual.
Moreover, it is difficult to perceive this change for those who define the change – at least implicitly – as aconvergence towards the Anglo-Saxon type of capitalism. In fact, in the course of this change, Japan has
followed its own way, without convergence towards the Anglo-Saxon type of capitalism or towards theEuropean types of capitalism. To understand this change, which is irreversible, we need to take a freshlook at the trajectory of Japanese capitalism since the early 1980s.

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Ambassador’s View

TPP:A New Zealand Perspective

How Did Japan Change?
The Role of Neoliberal
Transition

introduced by two prime ministers,
Yasuhiro Nakasone (1982-1987) andJunichiro Koizumi (2001-2006). First, it
is important to include the contribution
To have a fresh look at the trajectoryof two other prime ministers, Ryutaroof Japan since the early 1980s, we must
Hashimoto and Keizo Obuchi. Second,
adopt an alternative understanding of
the influence of neoliberal policies has“change” by focusing more on its
been broader and deeper than usually
institutional and organizational
thought, although the chronology hasdimensions. First, we have to recognize
been non-linear.
that gradual but nonetheless substantial
In order to avoid any ambiguity, it ischange is possible. Second, we have toimportant to define neoliberalism. My
move away from the previous focus on
approach has two characteristics. First, Ichange that is purely functional, forfocus on the bureaucratic dimension ofexample a set of reforms resulting in
neoliberalism rather than the intellectual andincreased efficiency. In the case ofpolitical dimensions (see “What isJapan, reforms were initiated before theNeoliberalism?” by S. L. Mudge, Socioso-called “Lost Decade” (1992-2004)
Economic Review No. 6, 2008). I am
when the economic system was at its
interested in the implementation of neoliberalpeak, not for functional but for politicalpolicies. We should not limit our focus toreasons. This highlights the importance“structural reform” but examine variousof neoliberal policies for the process ofpolicies. For example, in the case of Japan,institutional change in Japan.
they also concern the structure of families
The neoliberal experience in Japan(see H. Takeda, The Political Economy of
By Fabiana ILLESCASTALLEDO& transformation
Matthew STARNES
Sébastien Lechevalier,
La grandeduis not limited to the structural reforms
Reproduction in Japan, Routledge, 2005).

From an Evangelist of KAIZEN

Accept Foreign Labor for Fiscal Resuscitation
Economic GrowthSocial Impact ofAmbatovy Project’s
Resettlement Process
capitalisme japonais, Presses de Science Po, 2011

JAPAN SPOTLIGHT • May / June 201251

SpecialArticle 3

CHART 1

Increasing productivity dispersion in
the manufacturing sector

Second, I am interested in the implementation
1.7and diffusion of neoliberalism in a coordinated
10th percentile (indexed)
50th percentile (indexed)
environment, and in its power to generate
1.6
90th percentile (indexed)institutional change. Therefore, I adopt the1.5
institutional definition proposed by Campbell &Pedersen (The Rise of Neoliberalism and1.4
Institutional Analysis, Princeton University
Press, 2001): “The last two decades of the1.3
20th century (…) have been described as theones of rising neoliberalism – that is, a time of
1.2
market deregulation, state decentralization,
1.1
and reduced state intervention into economic
affairs in general. Cast in these terms,
1.0
neoliberalism has been a political project
concerned with institutional changes on a0.9
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
scale not seen since the immediate aftermath
Source: K. Ito & S. Lechevalier (2009), The Evolution of the Productivity Dispersion of Firms - A Reevaluation of itsof World War II and a project that attempted toDeterminants in the Case of Japan, Review of World Economics, 145 (3).
transform some of the most basic political and(FY)economic settlements of the postwar era, including labor markets
Changing Japan:
accords, industrial relation systems, redistributive tax structures,Firms, Coordination & Social Compromiseand social welfare programs.”
How should we characterize neoliberal policies in Japan? They have
Whatever the causes of the neoliberal transition in Japan, I argue
been progressively introduced, have included deregulation of markets
that it has substantially changed Japanese capitalism. The change(finance, goods, labor), privatization (e.g., JR, NTT, Japan Post), fiscalwas in directions that its promoters neither desired nor planned.
reform (though to a lesser extent than in the United States), changes
After years of (apparently) minor changes, Japanese capitalism
in industrial relations, and downsizing of the public sector, in a context
finally achieved its transition by the mid-2000s. This change is now
of rising public debt. They touched almost all dimensions of theirreversible. Japanese capitalism today is significantly different frompostwar social compromise. These policies have also shaken thethe “classical” model of the 1970s. Moreover, although the implicit& medium sized hydroelectric generation
Wind power on the land
ideological bases of institutions such as firms, families and schools.
or explicit aim Smallof neoliberalpolicies has been to promote a
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Geothermal
power
Although the content of these reforms is not unique, the process has Solarconvergence
towards
the power
liberal type of capitalism, they have not led
CoalPetroleum
Biomass
powerexpected outcome.
some peculiarities. It has been strongly non-linear and discontinuous. Nuclear
to thisLNG
Reforms have not been implemented quickly within a time frame. On theIn order to assess this point, it is important to consider various
contrary, they were slowly introduced by waves until the first half of thelevels: the firm level, the coordination level, and the social compromise
2000s. Therefore, it is better to characterize the process as a neoliberallevel.
transition rather than as a neoliberal revolution.
At the firm level, it is impossible to conclude that the “J model” –Why did Japan introduce neoliberal policies despite the absence ofdefined by relational employment and finance, and by opposition tosignificant public support and the logic of the comparative
market-style arrangements – has come to an end. As shown by Aoki,advantages residing in non-market mechanisms such as keiretsu,
Jackson & Miyajima (Corporate Governance in Japan. Institutional
long-term subcontracting relations or industrial policy? To put thisChange and Organizational Diversity, Oxford University Press, 2007),
question — formulated initially by Y. Tiberghien (Entrepreneurial
it is now one option among others with the emergence of “hybrid”
States: Reforming Corporate Governance in France, Japan, andmodels (different logic for employment and finance spheres). This is
Korea, Cornell University Press, 2007) — differently, the issue atsymbolic of the increasing heterogeneity of Japanese firms since thestake is to understand why and how neoliberalism was successfully
mid-1990s. What is striking is not that Japanese firms are diverse indiffused in Japan despite the apparently unfavourable environment of
their organization and performance but that this heterogeneity has
a successfully coordinated capitalism. The debate on this important
increased and exists among firms of similar size belonging to theissue is not over. The explanation that focuses on American pressure
same narrowly defined sector (Chart 1). Although the reasons behindseems too simplistic, because domestic actors played an important
this increasing heterogeneity are complex and deserve an analysis
part as well. For example, domestic players such as large banks andthat goes beyond the scope of this article, it is worth mentioning theJapanese multinationals have called for financial deregulation, whilerole of deregulation that has created a range of possibilities.
various groups in Japanese society that would benefit from theAs for coordination forms – a set of non-market institutional
reforms also supported them. The idea that some politicalarrangements that create complementarities and solidarity among
entrepreneurs like Koizumi initiated the reforms in order to promote
heterogeneous actors – we have observed, in a first step, the decay
their own careers is also worth considering.
of most of them including the keiretsu structure, long-term
52 JAPAN SPOTLIGHT • May / June 2012

CHART 2

The re-segmentation of the Japanese economy
subcontracting, shunto, industrial policy, and“bureaupluralism” (representation of various
Labor market (macro level):and potentially conflicting interests within an
re-segmentation
Rising employment security inequalitiesadministration). However, in a second step, we• Rising unemployment
observed a revival of these coordination forms• Rising share of non regular employment
Firms’ characteristics are• Low external mobility (source of segmentation)that have evolved over time, shunto being an
more significant thanindividual determinants
exception. For example, fragmentation ofproduction led by Japanese multinationals in
Asia has functionally replaced the former type ofsubcontracting, while a new type of industrial
Increasing heterogeneity of firms, basis of the re-segmentation
policy called “innovation policy” has emergedwith the clear aim of coordination. In thiscontext, it is possible to argue that Japanese
Increasing diversity of organization
capitalism is still coordinated (unlike liberal• Employment
Micro level:
increasing heterogeneity• Corporate governancecapitalism in the United Kingdom and the UnitedStates) but its forms of coordination have
No strong correlationchanged.
Changing lines of cleavages
Increasing dispersion of performance(less the size and the sector)
Another important evolution, which reveals• Records of bankruptcies
how Japanese capitalism has drastically• Records of profitschanged during the last 30 years, is risinginequalities. Although there has been a lively
academic debate on the extent and causes ofChannel: financial constraint, sensitivity to negative profits
this trend, most recent papers (e.g., R.
Kambayashi et al., “Wage Distribution in Japan,1989-2003”, Canadian Journal of Economics, 41(4), 2008) have shown that rising inequalities
Institutional context
are observed within a group (such as the• Deregulation
Pressures external to• Decay of previous forms of coordination
younger generation) and are directly linked to
the wage-labor nexus• Diffusion of international norms of management andthe dynamics of the labor market. Besides thecorporate governancerise of irregular employment, a key factor is theheterogeneity of firms (D. Gatti et al., “Wage andProductivity Differentials in Japan. The Role ofSource: S. Lechevalier (2011), La grande transformation du capitalisme japonais, Presses de Sciences Po.
Labor Market Mechanisms”, Global COE Hi-Stat
DP Series 127, Hitotsubashi University, 2010), which has led to areformers should take into account three additional constraints:
re-segmentation of the Japanese labor market (Chart 2). Rising— history or “path dependence” that makes any tabula rasa strategy
inequalities reveal a drastic change in the egalitarian postwar social
impossible;
compromise.
— institutional complementarities that define the comparative
In sum, instead of a rise of market-type coordination, there is anadvantage of a given form of capitalism and make it impossible toincreasing heterogeneity of firms, a weakening of previous
change one institution such as the financial market withoutcomplementarities, and more generally a decay of institutionalchanging other institutions;compatibilities. These trends suggest that the new Japanese— the ability of politics to present a goal to society as a whole,capitalism lacks coherence. These trends, however, are irreversible
beyond any conflict of interests.
(S. Lechevalier, La grande transformation du capitalisme japonais,
If this analysis is correct, it should lead to a recommendation to thePresses de Sciences Po, 2011).
Japanese people to develop a more critical view of the idea that only
one type of policy is possible. Moreover, the Japanese people need
Lessons for Japan & the Rest of the World
more self-confidence because “arthritic” Japan is a myth. Japan haschanged and is still able to change further, if there is an agreement on
An important lesson from an analysis of the Japanese trajectorya desired form of society and the goals to be achieved.
over the last 30 years is that there can be many forms ofS. Lechevalier is associate professor at EHESS (Paris) and founding director
contemporar y capitalism. Globalization and technologicalof EHESS Paris 日仏財団 (http://ffj.ehess.fr/), whose purpose is to strengthen
environment certainly constitute constraints that should be taken
intellectual exchanges between Japan and France.
Some parts of this article are inspired by his latest book, La grande
into account by policy makers. However, they do not determine
transformation du capitalisme japonais (Presses de Sciences Po, 2011).
everything. Instead of emphasizing only these two constraints,
JAPAN SPOTLIGHT • May / June 201253