No. 46 — December 10, 1999


Feature Article


Jon Choy


After nearly a decade of denial, the Japanese now acknowledge that key economic, political and social structures have gotten out of step with their nation's rapidly evolving needs. This reappraisal has penetrated even to what some consider the bedrock of Japan's harmonious society and what has been until recently a successful economy the educational system. The current system's weaknesses have been studied extensively since 1970, and a government-led effort to implement reform was launched in the mid-1980s. At that time, however, the problems were not viewed as acute, and the reform movement was stalled by entrenched, conservative political and bureaucratic interests.

Many problems related to education in Japan now have reached very worrisome levels, a shift that has solidified the consensus favoring reform. Key players the Ministry of Education, teachers' unions, university associations, students, parents, employers and politicians haltingly have lined up behind the effort. As the Japanese throw themselves into the task of preparing the country to compete in the new millennium, the prospects for substantive reform of the educational system are better now than at any time in the past 50 years. Whether the changes being considered will deliver the desired results, however, depends on a broad range of variables.

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Weekly Review

--- by Douglas Ostrom

Just when most analysts were beginning to debate how robust Japan's economic comeback would be, the Economic Planning Agency released gross domestic product figures for the July-September period that put the recovery itself in question. EPA said December 6 that on an annualized basis, GDP adjusted for price changes and seasonal factors had dropped 3.8 percent from the previous quarter (see Table), easily surpassing the predictions of the bare majority of forecasters who had expected some decline as a payback of sorts after two consecutive quarters of growth. The summer slump put GDP lower than its level six months earlier and smaller, in fact, than it was as long ago as the second quarter of 1996.


--- by Jon Choy

Even though Japan's 17 largest banks posted mixed results for the first six months of FY 1999, bank officials and analysts agree that the industry has begun to rebound from the worst of its nonperforming-loan problems. While many banks continued to report increases in bad loans, the cost of getting this deadweight off their books declined sharply in the April-September period compared with the previous two reporting times. The easing of the nonperforming-loan burden will allow bankers to focus more energy on their next major task: restructuring to compete in a deregulated, internationalized market.


--- by Marc Castellano

The World Trade Organization's Third Ministerial Conference — convened November 30 to December 3 in Seattle to set the agenda for a new round of global trade negotiations — ended without agreement among the WTO's 135 members. Participating officials blamed the collapse of the talks in large part on the complexity of the issues. The leaders of the environmental, labor and human rights groups that had organized massive anti-WTO demonstrations that turned violent and disrupted the conference hailed the meeting's failure as an indication of the success of their protests.


--- by Barbara Wanner

Seemingly oblivious to plunging public approval ratings and international opinion, senior officials of the triparty government of Prime Minister Keizo Obuchi continue to dicker over issues that have a direct bearing on Japan's security and regional diplomacy. Most notably, the Liberal Democratic Party and its junior partners, the Liberal Party and the New Komeito, remain at odds over a provision in the 1992 United Nations Peacekeeping Support Law that limits the Self-Defense Forces' role in U.N. peacekeeping missions to logistical, medical, humanitarian and other nonmilitary support.



Long-frozen relations between Japan and North Korea soon may begin to thaw as a result of an unofficial diplomatic visit to Pyongyang by former Prime Minister Tomiichi Murayama and 16 lawmakers from both the ruling and the opposition parties. The Japanese government in late September had hinted that it might consider loosening the sanctions that it had imposed on North Korea following Pyongyang's August 1998 launch of what many suspect was a Scud-based Taepodong-1 missile over Honshu (see JEI Report No. 37B, October 1, 1999). The success of the Murayama delegation's December 1-3 meetings with Kim Yong Sun, secretary of the ruling Workers' Party of Korea, in establishing a more positive atmosphere for addressing long-standing points of contention between the two countries apparently eased some reservations in Tokyo about dealing with Pyongyang.

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