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Japan Enters Reiwa Era with New Identity: Heisei Changes Were Subtle Yet Profound

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Japan Enters Reiwa Era with New Identity: Heisei Changes Were Subtle Yet Profound Special Article 2 Japan Enters Reiwa Era with New Identity: Heisei Changes Were Subtle Yet Profound Author By Nobuko Kobayashi Nobuko Kobayashi On May 1, 2019, the new Reiwa Era began in the middle of a 10-day the Taisho Era (1912-1926) were fewer as the period only lasted 15 stretch of holidays. The Japanese were expected to spend an years. Those born in the Showa Era (1926-1989), by contrast, include additional $10 billion on travel and shopping during that period. my parents’ generation as well as mine. Showa was a traumatic Reiwa-branded cookies are being sold at every tourist destination. period. Those who were born in early Showa (who would be in their Tokyo’s Meiji Shrine saw people queuing for 10 hours or more to get 80s today) saw the rise of pre-war militarism, its catastrophic downfall “divine” Reiwa seal stamps. The atmosphere has been festive as there and the postwar economic rise of Japan. A rising militaristic power in was no mourning associated with the abdication of Emperor Akihito at the Far East at the dawn of it, the nation had been completely the age of 85. It marked the end of his three-decade reign, an era transformed as Showa drew to its close. called Heisei in Japan, as well as the start of the new era under his son Naruhito, the newly enthroned emperor of Japan. Uneventful Heisei? An era change marks a significant reset of time in Japan. Unlike a decade, an era is long enough to envelope the majority of one’s life. Even if Heisei still seems quite new for us Showa-born lot, 30 years Japanese, therefore, tend to recognize their peers by the era in which is a long enough time for a nation to emerge transformed. Yet, on the they were born and grew up. After all, Reiwa is only the fifth era since surface, what is notable about Heisei is that nothing particularly the Meiji Restoration in 1868, which began the awakening of a modern significant happened despite the burst of a horrendous financial nation that had been closed to the outside world for more than 250 bubble in 1989 and two major natural disasters – the Great Hanshin years. Earthquake in 1995 and the Great East Japan Earthquake and tsunami Growing up in the 1980s, I recall some survivors of the Meiji (1868- in 2011 (Chart 1). 1912) generation, some of whom had experienced World War II as Domestically, life in Japan proceeded without much drama. Even adults and helped rebuild the nation in its aftermath. They were the though property prices plummeted in the early Heisei years, overall tough ones with the backbone of old-school Japanese. People born in consumer prices were remarkably stable, rising by a scant 0.5% CHART 1 Heisei marked by traumatic events Historical timeline Nikkei average 40,000 Showa Era Heisei Era 35,000 30,000 2008 Financial crisis 1995 1964 January: Great Hanshin 2012 1985 Launch of “Abenomics” 25,000 Tokyo Olympics Bubble economy begins Earthquake March: AUM Shinrikyo sarin gas attack 20,000 1952 1973 2011 Treaty of San Francisco signed, First oil shock Great East Japan Earthquake ending US occupation of Japan 1990 15,000 Bubble economy collapses 10,000 5,000 0 1949-06-01 1950-06-01 1951-06-01 1952-06-01 1953-06-01 1954-06-01 1955-06-01 1956-06-01 1957-06-01 1958-06-01 1959-06-01 1960-06-01 1961-06-01 1962-06-01 1963-06-01 1964-06-01 1965-06-01 1966-06-01 1967-06-01 1968-06-01 1969-06-01 1970-06-01 1971-06-01 1972-06-01 1973-06-01 1974-06-01 1975-06-01 1976-06-01 1977-06-01 1978-06-01 1979-06-01 1980-06-01 1981-06-01 1982-06-01 1983-06-01 1984-06-01 1985-06-01 1986-06-01 1987-06-01 1988-06-01 1989-06-01 1990-06-01 1991-06-01 1992-06-01 1993-06-01 1994-06-01 1995-06-01 1996-06-01 1997-06-01 1998-06-01 1999-06-01 2000-06-01 2001-06-01 2002-06-01 2003-06-01 2004-06-01 2005-06-01 2006-06-01 2007-06-01 2008-06-01 2009-06-01 2010-06-01 2011-06-01 2012-06-01 2013-06-01 2014-06-01 2015-06-01 2016-06-01 2017-06-01 2018-06-01 Note: (1) not an exhaustive list of historical milestones Source: Statistics Bureau of Japan, National Institute of Population and Social Security Research, Mizuho Research Institute, EY-Parthenon analysis https://www.jef.or.jp/journal/ Japan SPOTLIGHT • July / August 2019 51 Special Article 2 annually. The unemployment rate at the beginning and end of Heisei 243% and China at an astounding 3,419%. are both coincidentally 2% with a surge to 5% only twice, around In the global ranking of companies by market capitalization in 1989, 2001-02 and 2009. Politically speaking, the once-dominant Liberal there were 32 Japanese names in the top 50, whereas in 2018 there Democratic Party briefly lost its grip on power but the non-LDP was only one, Toyota Motors. With the automobile industry being a administrations barely had an impact before voters returned to the rather anomalous bright spot, the technology industries once LDP, which now faces only weak challengers. Under the security brandished as the Japanese hallmark of industrial success have lost blanket of the US-Japan alliance, possible invasion by a foreign force their way to global competitors – firstly to South Korea and Taiwan, was a non-issue to ordinary people, with the exception of North then more recently to China. While the Japanese market share of Korean provocation. semiconductors reached 49% in 1990, it was at a dismal level of 7% Moreover, a strict immigration policy resulted in a mere 2% of the in 2017. population being foreign born, which helped contribute to political In lockstep with its declining industrial position, gone are the days stability unlike in European Union countries or the United States. when traditional Japanese management practices symbolized by life- Large-scale immigration, the root cause of political unrest in many time employment were touted as the best. developed nations, left Japan untouched. Between 1990 and 2017, the ratio of foreign-born nationals grew from 8% to 14% for the US and The Fraying System 23% to 29% in Australia. Japan, on the other hand, saw an increase from only 1% to 2%, according to Pew Research. Could an aged Japan be discreetly moving away from the center of The most notable demographic phenomenon in fact is not about the global stage, whose audience is transfixed by the new Cold War foreign-born citizens but about aging. Japan’s population, among the between China and the US? The stagnant-looking surface only needs a youngest in the developed world at the start of Heisei, is now the ripple to reveal dramatic change. In fact, it would be quite wrong to oldest (Chart 2). The total population hit a peak in 2008, and is now write off Japan as a geriatric sunset country where the only changes declining at a pace approaching 400,000 a year. The population that can be expected signal decline. increase over the whole of Heisei was just 3% compared to 32% in the Heisei Japan, too, went through a profound transformation, but it US and 23% in China. On the bright side, the average lifespan of a has been a subtle and much less tangible transformation compared to Japanese male grew from 76 to 81, and of a female from 82 to 87. As that of Showa. The change, in a nutshell, is the crumbling of a rigid a result of longevity and a low fertility rate, the population over 65 shot socio-economic system, in which government ministries and large up from 15% of the total at the beginning of Heisei to 36% in 2019 companies dominated very much in the Showa fashion. The 30 years (Chart 3). of Heisei can be seen as the period of this transformation, during Relative to the rest of the world, the changes point to a quietly which the deep-seated skepticism at the beginning was broadly sinking sun. In the second half of Heisei, 2009 saw Japan being confirmed as we emerged from the era. overtaken by China and falling into its current position of third in terms The underlying fabric of postwar Japanese success was an efficient of GDP (Chart 4). While real GDP measured in US dollars grew by class system organized with a clear hierarchy. The public sector during 59% in Japan in 1989-2017, it pales by comparison with the US at Showa, with its powerful army of career bureaucrats, successfully led CHART 2 Japan undergoes rapid aging in short time ging in China states Japan Gany an UK anaa S na 39 y 2050 30 Japan 25 Gany 20 an UK anaa 15 S na 10 30 y 2050 5 0 190 192 194 19 19 190 192 194 19 19 190 192 194 19 19 1990 1992 1994 199 199 2000 2002 2004 200 200 2010 2012 2014 201 Note: *I Excludes Italy Source: World Bank, EY-Parthenon analysis 52 Japan SPOTLIGHT • July / August 2019 Special Article 2 CHART 3 Japan’s shrinking population turns silver Total population by age bracket (Million people, ratio of workers to beneficiaries) Showa Era Heisei Era Forecast 127 127 125 127 125 124 Workers per 121 123 121 117 117 beneficiary 121 115 112 12 15 1 22 2 112 112 105 11 29 33 107 10 9 3 102 99 7 3 97 94 9 3 90 6 92 5 3 84 39 87 5 5 65+ 4 39 3 4 3 3 86 35 9 6.6 76 87 2 86 55 0 67 5 4 1 50 76 3 1 4 68 3 5 39 54 15-64 33 50 4 2 44 23 20 19 1 1 15 30 14 13 13 30 2 2 25 2 2 2 22 20 1 13 1 1 1 15 13 12 11 11 10 9 9 8 0-140 1950 1955 190 195 190 195 190 195 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 200 Source: Mitsubishi UFJ, Ministry of International Affairs and Communications, Statistics Bureau of Japan, National Institute of Population and Social Security Research, Reuters CHART 4 Japan’s GDP outgrown by China’s during Heisei current US GDP value O Japan na EU1 S GDP share Japan na S Showa Era Heisei Era 90 35 0 30 0 25 share 0 50 20 40 Trillion US 15 30 10 20 5 10 0 0 190 191 192 193 194 195 19 19 19 199 1990 1991 1992 1993 1994 1995 199 199 199 1999 2000 2001 2002 2003 2004 2005 200 200 200 2009 2010 2011 2012 2013 2014 2015 201 201 Note: (1) includes Germany, UK, France Source: World Bank, EY-Parthenon analysis the rise of Japanese export-oriented industries from steel to various Tier-2s, so that OEMs seldom interacted directly with Tier-2s semiconductors under the convoy system.
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