Failure Offers Lessons Japan Would Rather Forget

September 6, 2009

By PETER S. GOODMAN

FOR Americans, failure tends to be accepted as an intrinsic feature of an economic system in which risk-taking often brings great reward. If necessity is the mother of invention, then failure is the unfortunate progeny of often-lucrative adventuring.

Failure is, of course, wrenching. Yet the American narrative is littered with examples of heroes’ transcending past calamities, their failures worn as badges of resilience.

In Japan, by contrast, failure traditionally carries a deeper stigma, an enduring shame that limits the appetite for risk, in the view of many of the nation’s cultural observers. This makes the Japanese far less comfortable with choices that increase the prospect of failure, even if they promise greater potential gains.

Recent Japanese governments have sought to inculcate greater tolerance for failure — often at the urging of American officials — to inject new life in a long-stagnant economy. The Tokyo government even chartered an Association for the Study of Failure, which aimed to “turn failure experience into knowledge at the society, corporation and individual levels.”

But last week, the differing cultural conceptions of the United States and Japan snapped into view, as Japanese voters emphatically dismissed the party that had ruled almost uninterrupted for more than half a century. In so doing, they offered up a palpable message: Enough with the failure thing already. And enough with Americans offering up pain as the cure for what ails Japan.

In the two decades since Japan devolved from a supposedly indomitable economic juggernaut in the 1980s into a stagnant economy mired in a Lost Decade, the country tried myriad reforms in the name of reinvigorating its economy. It took stabs at rooting out bad loans from the banking system and ending the inside dealing that had long defined Japanese business culture. It sought to pare down government-financed public works projects, a major source of jobs.

Yet all the while, Japan remained an economic laggard, a shadow of the nation that had previously occasioned overheated talk of Japanese global dominance. Despite the pain of reform, Japan never seemed to get the gain.

Many economists argue that Japan never shook off the hangover of speculative excesses on real estate that fueled the 1980s because it never genuinely reformed. Money-losing “zombie” companies were allowed to keep drawing fresh credit and survive. Insolvent banks were spared from collapse because they were deemed “too big to fail.”

Regardless, among ordinary people, the sense took hold that the reforms were both harsh and ineffective. Despite its capitalist trappings, Japan has sometimes been referred to as the world’s most successful socialist economy, a land in which life-long job security seemed a birthright. Amid the attempts to rein in government spending and pressure banks to cut off money-losing clients, Japanese workers learned the humiliation of unemployment; Japanese companies confronted the embarrassment of going out of business. More than an economic event, this tore at the fabric of Japanese life.

In 2003, I visited Kushiro, a port city on Japan’s northernmost island of Hokkaido, which had for decades been sustained by government-led construction. Japan’s reformist prime minister, Junichiro Koizumi, was then rolling back public works spending and pressuring banks to clean up their books.

The president of the Kushiro Credit Association complained that the new policies were effectively forcing him to inflict his customers with the stigma of failure.

“We can’t just cut them off,” he said. “Everyone would know about it. It would be very difficult for people who failed to live here.”

From the perspective of everyday Japanese life, shock treatment seemed both cruel and unnecessary. Japan had become a much darker place than in the 1980s, when the elixir of wealth seemed at hand, yet it was nothing like crisis-wracked Indonesia or Argentina, where people rioted in the streets as life savings vanished. It was a slow slide from a comfortable perch.

Tokyo never failed to shimmer with modernity. The national rail system was as efficient as any on earth. Even as ordinary Japanese gained economic anxiety and ratcheted down aspirations, most still had decent homes and cars, health care financed by the state, and a world-beating array of gadgets.

Many Japanese seemed perplexed by the dire talk that accompanied the push for reform. In Nagano, a city that had boomed with construction during the 1980s, suspicions about the reform trajectory were intense as Mr. Koizumi pushed to cleanse the banks of bad loans. Newspapers and television were full of grim talk about the corporate failures this would entail.

“I don’t really see how the economy will get better if you just close a big company and fire people,” said a 37-year-old housewife whose husband worked at the electronics giant Fujitsu. His pay had been cut by one-fifth. The local work force had been slashed by half. But she said she was more inclined to hang on to what they had — a 10-year-old Honda sedan, outdated kitchen appliances — than risk his paycheck in a bid for what seemed an abstraction: a healthy financial system.

By the time Japanese voters went to the polls last week, they must surely have noticed that, when crisis afflicted the United States, Americans seemed no more eager to ingest the medicine Washington once dispensed for Japan. Faced with soaring joblessness and financial calamity, Americans propped up their auto industry, saved banks deemed too big to fail, and unleashed nearly $800 billion in government spending to spare jobs. (Moreover, Americans have come to wish they had been a little more afraid of failure.)

Japanese voters did not appear to be approving a coherent economic policy so much as rejecting a seemingly bankrupt one. The new ruling Democratic Party of Japan gained votes with vague promises of subsidies and job protections.

Ultimately, the vote seemed to signal Japan’s verdict that the embrace of failure had, in the end, proven a failure, opting instead for the comfort of trying to muddle through.

Peter S. Goodman, a reporter for The Times, spent nearly a decade reporting from Asia. He is the author of “Past Due: The End of Easy Money and the Renewal of the American Economy.”

Copyright 2009 The New York Times Company