Unsticking Japan
By wchung | 22 Feb, 2025

Hatoyama's election victory could mark the start of Japan's awakening to its true potential.

I am delighted that the LDP has lost power in Japan after 55 years of nearly continuous rule. It’s not because I believe that the Democratic Party of Japan (DPJ) espouses policies superior to the LDPs. In some respects they are inferior. It’s because I really want Japan to stop being stuck.

Why do I care? Because as an Asian American I pay both a psychic and an economic price when the Asian nation seen as the richest and most advanced — which happens to be the world’s second largest economy — behaves like an economically impoverished U.S. territory.

Here’s what I mean. Nominally the Japanese have a $5 trillion economy. That comes to an impressive per capita GDP of $40,000 for each of its 125 million citizens. On a PPP (Purchasing Power Parity) basis, however, Japan’s GDP is only $3.8 tril. or $29,620 per person. That represents a 26% redution of its standard of living attributable to its governmental policies.

By comparison, the U.S. has a nominal GDP of $14.3 tri. or $46,580 for each of its 307 mil. citizens. On a PPP basis, the U.S. GDP is $11.6 tril. or $39,319 per person. That’s only a 15.6% discount (which still represents a substantial discount resulting from protectionism and other inefficiency-making U.S. policies).

In other words, the “average” Japanese has to work about 10% harder than the average American to buy the same amount of housing, food, clothing, electronics or a night on the town. In reality for those Japanese who actually work, it’s closer to 20% harder due to the fact that only 50% of Japanese women over the age of 16 participate in the labor force as opposed to 60% of U.S. women — yet another symptom of Japan’s “stuck” society.

Why do Japanese suffer such a big discount to their proper standard of living? In a nutshell, because the LDP has stayed in power by protecting Japan’s most backward and least efficient sectors from change — farmers, construction workers, retailers and distributors from competition from countries like the U.S. For example, Japan’s arcane electroral system continues to be rigged to give each rural voters about 3 times the clout of each urban voter. Despite some progressive positions on other issues, the LDP has consistently been protectionist in favor of its core constituency.

The result is that Japanese builders can’t buy farmland to develop comfortable, spacious new housing. Big, efficient retail stores like Wal-Mart find it virtually impossible to open up to compete against myriads of small, overpriced shops. Japanese pay about 7 times as much for rice and several times what they should for beef.

This inefficiency has not only impoverished the Japanese standard of living; it’s also keeping them from enjoying personal space commensurate with their affluence, keeping one of the world’s best-educated, most productive populations from playing its proper role in global culture. How can you think creatively when you barely have room to wield a pair of chopsticks? Where are the garages that can nurture promising startups?

From the perspective of Asian Americans like me, Japan’s inability to fill its role as a dynamic, powerful nation leaves a cultural vaccuum. Unfortunately, that vaccuum is being filled by Hollywood which, for the most part, has not accorded Asians a position commensurate with our numbers and achievements. This has helped create the impression that Asians are a marginal race rather than the central one on for this millenium. This chafes all us Asian Americans who are saddled with stereotypes based on impressions of Asians in Asia.

There’s also Japan’s dampening effect on the world’s economic vitality. When a nation that accounts for 10% of the global industrial output behaves like a small, impoverished one, it brings down economic opportunities for everyone else, including Americans. For example, anyone who has visited Japan and seen the offices that look like broom closets and beehive apartments with living areas barely big enough for a small sofa and a postage-stamp dining-coffee table, will sense the enormous role that American developers and builders could play in raising real living standards.

The old argument that Japan is a crowded country that doesn’t have enough land to afford spacious homes for its people is nonsense. The population density of the populated coastal counties of California or the Eastern Seaboard, for example, are at least equal to that of Japan’s. The truth is that land for development is scarce only because of longstanding policies that encourage small inefficient farms and discourage large-scale development with the aim of preserving loyal rural political constituencies.

I’m not hopeful that Yuko Hatoyama’s DJP will do much to give Japan’s citizens their due and unlock that nation’s potential. But he and his party have taken an important first step toward that goal by giving Japanese voters a taste of the power they can wield to unstick a society that has been trapped in a feudal time warp.