Japan's Unique Strength: A Vision Beyond Conventional Norms
Why embracing its uniqueness is key to navigating the future amidst global shifts.
The recent steep fall in the stock market is, to me, merely a symptom of a deeper malaise, reflecting the inadequacies of Japan's elite. Japan's current leaders aspire to make the nation "normal," yet they stubbornly employ outdated and discredited methods. This approach fundamentally ignores the fact that Japan's Uniqueness is precisely what makes it exceptional and resilient. Indeed, the current state of so-called 'normal' nations hardly serves as an appealing benchmark.
Japan's post-war evolution has been nothing short of a miracle. No other country has so completely renounced military force while simultaneously building such immense wealth. Until the disruptive era of Koizumi and Takenaka, this prosperity was also distributed remarkably equitably. The US policies towards Japan immediately after the war were astonishingly enlightened. While not without challenges, Japan absorbed crucial lessons. After the bubble economy collapsed in the 1990s, Japan consciously moved away from asset-price driven growth—a model still favored by Western financial policies. Despite this, Japan’s per-capita growth has steadily increased, crucially, without the devastating financial crises that have plagued national economies and the global system.
As one quote aptly puts it, "Morally, there is a clear sense among many Japanese that Japan was not really Japan during the bubble years - that it had lost direction in a welter of shoddy luxury goods and greed."
The Evolution of Governance and the Peril of Over-reliance on Financial Markets
Japan's governance has transformed significantly from the days of unchecked 'construction state' and government embezzlement. Bureaucracy is more controlled, corruption has been curbed, and the state is arguably leaner and cleaner than in many other major economies. Consider recent scandals in the US or the pronounced incompetence in UK public services for stark contrasts. This demonstrates Japan's Uniqueness in governance.
Yet, Prime Minister Abe appears to overlook these inherent strengths. His primary goal is to revitalize the Japanese economy by making capital markets the central pillar of his plans. This strategy, however, was attempted in Japan 30 years ago with disastrous results, and similar policies led to even greater ill effects in the West just five years prior. While financial markets are theoretically powerful, we desperately need bolder thinking to address the damage from events like the Libor scandal. The continued over-reliance on financial markets is a critical misstep.
In essence, Abe's ideas are not innovative; they are profoundly reactionary. The lesson is undeniable: an excessive focus on finance-driven 'growth' (which often reverses dramatically after inevitable crashes) and an obsession with GDP have proven extremely damaging. It’s perplexing that, despite a brief re-evaluation post-2008, so many commentators advocate for Japan to revert to this approach.
The Nikkei bubble, for instance, is already showing signs of unraveling. This will not harm hedge fund managers, many of whom have profited handsomely by advocating reflation; they’ve already secured their hundreds of millions. The pain will fall on individual retail investors, who have significantly increased their presence in the Japanese stock market. While once holding just 20% of the market, recent data (July 2025) shows a surge in retail investor numbers to 83.6 million people as of FY2024, influenced by NISA and a shift from savings to investments. Meanwhile, foreign investors still hold nearly one-third of the market. Is Abe's true aim to further enrich foreign hedge funds and Japan's existing wealthy seniors through this over-reliance on financial markets?
International Relations and Adapting to a Shrinking Population Society
The Trans-Pacific Partnership (TPP), rather than a genuine free trade initiative, seems more like a US effort to push Japan into a more anti-China stance. Its economic benefits are likely to be negligible, primarily opening doors for low-quality agribusiness products. The real intention of TPP appears to be granting unprecedented access for foreign investors into areas normally protected by national governments. This radical arrangement, to which Abe is seemingly bowing, might stem from his perceived inability to manage the critical relationship with China, leading him to overcompensate by aligning closer with the US. This could severely undermine the wonderfully symbiotic economic relationship between China and Japan, highlighting a lack of confidence in Japan's Uniqueness on the global stage.
Abe’s fiscal program, while generally a good idea for generating job opportunities and alleviating poverty, seems driven more by a desire to inflate Japan’s GDP. This again reflects a borrowed Western idea largely irrelevant to Japan's unique situation. With a national debt-to-GDP ratio standing at 236.70% in 2024 (Trading Economics), Japan should not be fixated on propping up its gigantic GDP. Instead, it needs to figure out how to shrink gracefully and effectively, maximizing per-capita wealth as its population declines. Japan's population has been falling for eighteen consecutive years, with a net decline of roughly 919,000 people in 2024 (UPI.com, June 2025). This suggests the population is shrinking significantly faster than the economy. If ignored, the fiscal program will likely just add to Japan’s massive debt and fizzle out, as has happened many times before, failing to truly address the challenges of adapting to a shrinking population society.
Embracing a Radical Future
Here lies a truly radical and innovative path for Japan, though it remains a taboo topic: becoming the world's first economy to voluntarily tailor its GDP to its shrinking population. Imagine how transformed Japan would be if it confronted this truth and implemented fresh, imaginative policies to manage this transition. This would be profoundly groundbreaking and a testament to Japan's Uniqueness in solving modern challenges.
Politically, Abe's vision offers nothing new either. His desire to revert to an 'emperor system' represents a dark and sinister direction. Reports, such as one by Tamzin Booth in The Economist, highlight an army general leading the LDP's constitutional revision committee, with drafts seeking to weaken women's equal rights and human rights clauses, and make the emperor head of state. This is deeply concerning.
What is genuinely new and creative about Japan is its post-1945 identity. It is the only Asian country not to have engaged in armed conflict in the last 60 years. It has enriched its citizens far more fairly than China and serves as an economic model for its neighbors. Moreover, it is the region's only functioning democracy. Japan consistently excels in quality of life studies (education, health) despite spending a fraction of what its global peers do. For instance, Japan's education spending at 4.1% of GDP is below the OECD average of 5%, yet its students consistently rank high. Its healthcare spending per capita was approximately $4,500 USD in 2023 (ReportLinker), significantly lower than the US's $13,432 in 2023, yet Japan boasts one of the world's highest life expectancies, with females reaching 87.14 years and males 81.09 years in 2023 (MHLW). These achievements underscore Japan's Uniqueness in delivering high quality of life efficiently.
The lack of confidence and intellectual shallowness of Japan's leaders leads them to neglect the nation's obvious strengths and uniqueness. Instead, they pathetically copy policies from the West, continuing a historical pattern where Japan’s greatest blunders have occurred when it blindly imitated others. From the militarism of the 1930s to the financial engineering of the 1980s, an over-reliance on financial markets has repeatedly proven problematic. I sincerely hope Abe faces a significant defeat in the Upper House election. While the Japanese are quick to embrace new leaders, they are equally swift to detect incompetence and chauvinism, especially when it comes to the critical task of adapting to a shrinking population society.
