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Great Expectations

Grassroots reformers pushing individual responsibility are charting a new course for Japan. The changes that lie ahead will be profound.

By Peter Landers in Yokohama

November 12, 1998

If you think Japanese schoolchildren are trained to be meek, visit Tamiko Sato's third-grade class at Ooka Elementary School. Her eight-year-olds have been studying their neighbourhood in Yokohama, a city south of Tokyo, gathering beetles at a river near the school and interviewing local shopkeepers. Now they've written up their discoveries in a poem and, with a little help from their teacher, set it to a tune accompanied by drums, wind chimes and a xylophone. After a rehearsal, a girl stands and asks for suggestions. Hands shoot up and one by one the pupils offer ideas: Make this part faster; hum that part instead of singing it. They debate a line in the poem about a "strange swing" in their schoolyard and eventually revise it to a "swing with a strange shape," just to make things clearer. Sato mostly stays quiet, interjecting only at a few points to keep the discussion going.

A few years ago, Sato would have been lecturing her charges from officially prescribed texts. Today, the Ooka Elementary School represents one small corner of a transformation. Its watchwords -- individualism, personal responsibility and decentralization -- cut to the core of the country's conformist foundation and could be the key to the rebirth of the Japanese juggernaut over the next decade or two.

That may not be apparent at a time when attention is focused on fixing the nation's immediate woes. But more and more Japanese have decided that a sweeping approach -- one that goes far beyond plugging leaks in the economy -- is needed to ensure that Japan remains a global powerhouse. These Japanese are pushing ahead with fairly rapid change at the grassroots, even as bureaucrats charged with reviving the country drag their feet. The emergence of a national leader committed to reform and able to overcome the entrenched conservative opposition would only accelerate the pace. And given the ruling party's recent troubles, for the first time that sort of leader has begun to look like a possibility.

Despite its stubborn recession, Japan hasn't lost many of the key ingredients for growth, such as social stability and a high literacy rate. Reforms promise to add vibrancy to the mix. Education that emphasizes creativity over rote learning can help foster an entrepreneurial spirit, while clearer laws will make it easier for entrepreneurs to flourish. If the central government's grip over the economy is eased -- still a distant goal -- regions will have to sink or swim on their own, which will likely produce new and more competitive industries. And if courts handle business-related disputes in a year or two instead of the 10 it now takes -- as they're being prodded to -- the benefits to economic efficiency will be immeasurable.

Many Japanese refer to this societal shift as the third transformation since the feudal era ended. One of the earlier two is well known: After World War II, American occupiers under Gen. Douglas MacArthur imposed upon Japan representative government, an end to emperor worship and a peace constitution that limited Japan's army. But when it comes to today's reforms, it's the other transformation -- the Meiji Restoration of 1868 -- that's more relevant.

The oligarchs who led Japan in the late 19th century, governing in the name of Emperor Meiji, had the overriding goal of catching up with Europe and America. So they made education universal, and ordered teachers to drill facts into their pupils' heads to match the West's level of learning. Power was centralized in Tokyo, so that government officials could more easily direct rapid industrialization. A legal system based on French and German models was introduced, but the oligarchs didn't feel bound by it. In their philosophy, the emperor ruled rather than the laws. Anyway, the priority was to build up the fledgling economy and army, not a legal framework.

Although the frenzied rush to catch up with the West is history, much of the Meiji philosophy lingers on. The Ministry of Education continues to dictate the curriculums of schools nationwide, and entrance exams for high school and college stress rote learning. Classes still have 30-40 students each, a legacy from the days when class size didn't matter much because teachers simply lectured the whole time.

But educators say regimentation is fading. One sign of this is the number of children who are allowed to refuse to go to school; it more than doubled in a decade to 77,000 in 1996, a little less than 1% of the total. In one sense, the low but escalating figure is a sign of the still-strong pressure against individualism in Japanese schools. However, students who were bullied into conforming by classmates or had problems with their teacher would once have been forced to go to school regardless. Now, authorities wink at alternatives such as home schooling or special study centres.

The expanded freedom is clear at the public Ooka Elementary School, where teachers create their own study plans, trimming the time devoted to traditional subjects and using it for classes such as Sato's that combine social studies and art. When students asked first-grade teacher Mariko Tanaka why it's bad to throw plastic waste into the school pond, she devised an impromptu lesson about environmental hormones, explaining how chemicals from plastic can interfere with the natural male and female hormones.

Once upon a time, Tanaka might have received a stern lecture for straying from the official programme. But these days, the Ministry of Education is encouraging teachers like her. In late July, a ministry panel approved a new national policy to take effect in 2002 that will cut the prescribed curriculum by 30% and leave more of what is taught in the classroom up to individual schools.

Some parents still contend that students should be drilled in the traditional Japanese way. But Sato, who has taught for 23 years, says that's nonsense. "I think, on the contrary, that their ability to learn will grow in this way," she says. Shinzo Yamaguchi, a former elementary school principal who now is a researcher at an education institute in Yokohama, says times are changing and education must keep pace. "Nowadays you can find out anything by checking the Internet," he says. "Academic ability isn't just the amount of knowledge but the power to think."

The need to prepare students for rote-based college entrance exams continues to be a key brake on reform--although only half of Japanese high-school students go on to college. But even here a glint of change is visible. Last year, Kyoto's Doshisha University started a new programme that admits a few students without a test. Instead, students are judged mainly on essays and teachers' recommendations. Several national universities say they, too, plan to adopt the idea.

"From now on, you won't see the national government at the centre of education," says Manabu Sato, a professor of education at Tokyo University. "We have to replace the idea of accepting what is forced upon us from above with decentralization among regions." A similar message came in late September from another Ministry of Education panel, which suggested increasing local control of schools.

More and more, that message rings true in areas beyond education. Japan's recession has only served to crystallize reformers' conviction that the Meiji ideal of bureaucrats at the centre dictating national policy is damaging. With so much power concentrated in Tokyo, rural regions with little or no industry of their own have found it easier to achieve prosperity through the equivalent of welfare programmes than by developing new industries. The ruling Liberal Democratic Party pushes pork-barrel projects that provide jobs for economically backward areas, where its support is strongest.

In better times, taxpayers in cities were willing to foot the bill. But the economy's prolonged slowdown has redrawn the rules. In July parliamentary elections, the LDP failed to win a single seat in Japan's major cities--an unexpected backlash that many say could accelerate plans to give rural regions the independence they may not really want. "People in cities are getting the worst of the deal. They pay a lot of taxes and they don't get anything in return," says Ken Takeuchi, the mayor of Kamakura, a city an hour south of Tokyo. Takeuchi pulls from his desk a copy of a treatise by Meiji-era modernizer Yukichi Fukuzawa, in which Fukuzawa warned that unless regions were given control over their own finances they would become dependent on Tokyo. "We still haven't been able to do what Fukuzawa said 120 years ago," says Takeuchi.

Outside of a few large cities, industry has stagnated in Japan. "The regions aren't self-sufficient--they've descended to the level of chicks who simply wait with their mouths open for food brought by the mother bird," writes Hitotsubashi University professor Iwao Nakatani, a member of the prime minister's Strategic Economic Council, in a recent issue of the magazine Toyo Keizai. "Unless regions gain the strength to stand up on their own in the next four or five years, the Japanese economy will probably go to ruin."

The rural-based LDP is reluctant to change, but its mood is shifting in the wake of July's election. Minoru Mori, a leading real-estate developer with close ties to the LDP, predicts the party will move to cut subsidies for rural public works. "You can't take power if you make enemies of all the urban areas," he says. "You can print government bonds and scatter the money in rural areas, but it won't do any good." Mori says the LDP has begun to understand that urban investment is the best way to stimulate the economy, not one-off infrastructure projects that temporarily employ rural workers.

But that means changing the laws. Currently, regulations restrict high-rise housing even in many parts of central Tokyo. Within a stone's throw of high-rise office towers lie neighbourhoods where homes are limited to a floor area two to four times the area of the plot on which they sit. That makes living close to the city centre prohibitively expensive and forces one-way commutes of 90 minutes or more.

Mori, who also sits on the Strategic Economic Council, wants the rules on housing greatly relaxed. A boom in home building would have spillover effects, he argues, as people bought new furniture and electrical appliances. In addition, a reduction in commuting distance would increase leisure time and opportunities for spending. "We have failed in city development," says Mori. "Japanese lead a very miserable life."

The downside of many of these reforms is that they tend to promote inequality. While Japan's economy has stagnated in the 1990s and is shrinking now at about 2% annually, the country is still overwhelmingly middle class. The rich aren't getting richer, nor are the poor getting much poorer. But if local areas are left to fend for themselves, some will inevitably lose the competition to develop new industries. Without the safety net of the central government, the price of failure could be high.

The potential for social conflict explains why the pace of reforms is uncertain. While almost no one is proposing to reverse course, a conservative backlash could put the brakes on change. The battle over rural subsidies, for example, is just beginning, and local politicians are sure to put up a fight. Any slowdown is important, since the rapid ageing of the population and the government's ballooning debts mean Japan's economy can't wait forever to be revitalized.

Another way to boost the economy, reformers say, is to create a strong legal system to replace the informal "guidance" by bureaucrats that has dominated since the Meiji era. It's essential to have clear rules if there is to be an emphasis on individual responsibility, but the law now plays little role in Japanese business and society; court cases take decades to be decided and judges rarely overrule bureaucrats' decisions, no matter how unconstitutional they may seem.

"In Japan there's no concept of controlling business through the law," says Hideto Iida, a lawyer who has pioneered lawsuits by shareholders against corrupt management. Such suits became easier to file in 1993, when it was made possible for shareholders to sue companies for a low, fixed fee of ¥8,200. But Iida has yet to see a case come to a verdict because, he says, judges permit endless stalling by defendants. "Are we a civilized country or a barbarian country? However you look at it, we're close to barbarian," says Iida.

That's certainly an overstatement, but it's clear that the inability of creditors to pursue their claims through the courts has prolonged the bad-loan crisis at banks and created business for mobsters who specialize in handling debts privately, often by intimidating debtors and creditors, bankruptcy experts say.

What's more, at a time when Japan needs new businesses more than ever, the arbitrariness of bureaucratic fiat discourages entrepreneurs. There's no way of knowing if the government will approve any given plan, says Yukio Edano, a lawyer and MP from the opposition Democratic Party. "Currently there are no rules," he complains. "You can't be adventurous."

On a small scale, at least, legal reform is already under way: The number of applicants allowed to pass the bar exam will rise to 1,000 in 1999, up from 700 last year. Still, the number of lawyers per capita in Japan is well below that of Europe, not to mention the U.S. The law also is beginning to play a bigger role in the decision-making process at corporations (see box below). And the Justice Ministry plans to propose new bankruptcy laws next year partly based on U.S. models.

Edano, whose party is studying an overhaul of the legal system, thinks major change might come within the next five years. "We've reached the limit," he says. "The bureaucratic system has stopped functioning fairly... We're shifting in the direction of deciding things strictly under the law."

A parliamentary debate in late August between Edano, who is 34, and Hakuo Yanagisawa, 63, a cabinet minister who was recently named to lead Japan's banking-reform efforts, illustrated the clash between the old and new views. Yanagisawa was promoting a plan for an informal, but state-run, mediation committee to settle bad-loan problems. Edano demanded that such cases be left to formal court procedures: "When you have money being lent or borrowed, people paying it back or not paying, companies going under--bankruptcy, reorganization -- I say this is truly square in the middle of the law's territory." But Yanagisawa disagreed, saying such cases "have an aspect ... which, on the contrary, is not at all suited to legal procedures."

The debate shows that Japan is still in transition. But the trend is clear: Japanese a decade from now will be less dependent on the central government, and their success will depend more on individual and local efforts. It may be a rougher, less equal, world--but the third-graders at Ooka Elementary School look like they'll be ready for it.