8. Japan

Redesign or demise of old Developmental States? East Asia in the post-financial crisis of 2008

“…In the case of Japan, the analysis is particularly relevant because the country was the pioneer reference -in terms of State action and management-labor relations -for other nations of the region and also by the fact that, at that time, it was the largest Asian power being the core of that capitalist block; with a developmentalist and industrialist model based on massive investments and manufacture exports that allowed it to successfully escape from the middle-income trap (Tsunekawa, 2015). It should be noted, however, that when the crisis broke out the country was already in the midst of a severe recession and stagnation due to the burst of the national speculative bubble at the beginning of the decade, whose origins in turn date back to the 1980s.…”

“…Also, the reform of the administrative structure in wake of the liberalizing wave decentralized and fragmented industrial policy among different ministries, with a subsequent emptying of attributes of the MITI (Lechevalier et al, 2017). This set of measures represented the erosion of established practices and institutions that facilitated the coordination of interests between market and government (Tsunekawa, 2015;Lechevalier et al, 2017).…”

“…In the 1990s, the continuity of such neoliberal policies weakened previous developmental orientations, provoking a decline of the corporatist support base of the dominant conservative party (LDP). The US pressures from the Washington Consensus in favor of such policy line, even after the severe economic conditions of the bubble burst, contributed to a rhetoric blaming these same institutions for such problems, under the pretext that they were costly for new investments (Tsunekawa, 2015).…”

“…When the Asian crisis broke out in 1998, the political forces behind such attempt found a window of opportunities to demand an even larger contingency of welfare and pension programs as an additional part of the menu of policies. If the episode of the 1998 Asian regional crisis has not caused the economic problems of a Japan already plunged in volatilities and insolvency of the domestic financial sector, it certainly aggravated the magnitude of its recession (Tsunekawa, 2015). On the opposite, the crisis served as an additional rhetoric for the Japanese political forces in government to internalize the private debt and reduce social policies as a supposedly "necessary" response to market dysfunctions (Lechevalier et al, 2017).…”

“…Beginning with Japan, the global financial crisis (GFC) hit the country at a very precarious political moment for the LDP, shortly after DPJ's significant victory in the Legislative and additional stimulus on governance. Although Japanese exposure to US toxic financial derivatives and assets was not particularly high, especially in comparison with Europe, the economy was still impacted by the severe contraction in global trade (Tsunekawa, 2015). Moreover, the years following the crisis contributed to a period of stagnation and deceleration of demand in the international economy, imposing a considerable challenge to the Asian productive regimes; which, after decades of exports as one of the main drivers of growth, could no longer rely on the good momentum of world trade.…”