Contesting Precarity in Japan

The Rise of Nonregular Workers and the New Policy Dissensus

Saori Shibata

• Publisher: ILR Press
• Year: 2020
• ISBN:
  9781501749940
• Topic: Política y relaciones internacionales
• Subtopic: Relaciones laborales e industriales

Contesting Precarity in Japan details the new forms of workers' protest and opposition that have developed as Japan's economy has transformed over the past three decades and highlights their impact upon the country's policymaking process.

Drawing on a new dataset charting protest events from the 1980s to the present, Saori Shibata produces the first systematic study of Japan's new precarious labour movement. It details the movement's rise during Japan's post-bubble economic transformation and highlights the different and innovative forms of dissent that mark the end of the country's famously non-confrontational industrial relations. In doing so, moreover, she shows how this new pattern of industrial and social tension is reflected within the country's macroeconomic policymaking, resulting in a new policy dissensus that has consistently failed to offer policy reforms that would produce a return to economic growth. As a result, Shibata argues that the Japanese model of capitalism has therefore become increasingly disorganized.

1

FROM COORDINATED TO DISORGANIZED CAPITALISM IN JAPAN

The Japanese economy was devastated by the Second World War. In the war’s immediate aftermath, the period 1945–1951, the country’s political economy was controlled by the occupation government. While far behind other countries with advanced economies such as the United States and the United Kingdom, Japan had unprecedented levels of economic growth (around 10 percent average gross domestic product [GDP] growth per year throughout the 1950s and 1960s), which attracted considerable international attention. Concepts referring to Japanese ways of doing business—including just-in-time production, keiretsu (closely knit business networks), kaizen (continuous and incremental improvement), and teamwork—each became popular buzzwords among international corporate elites.

In the 1970s, Japan experienced a slowing of GDP growth, although it maintained a growth rate of over 3 percent per year until the late 1980s. Efforts to maintain a sustained level of growth during the 1980s resulted in a “bubble economy,” with asset prices rising rapidly. This bubble burst in 1991, which was a pivotal point in the country’s postwar economic history and, as we shall see, led to a number of changes to Japan’s mode of regulation. This chapter describes the key changes that occurred throughout this process. It highlights the way in which each of the five institutions that are typically considered in regulation theory accounts underwent important changes, producing a disorganization of Japan’s political economy.

The chapter argues that changes to each of the five institutions—the mode of insertion in the international economy, the form of competition, the monetary and financial regime, the form of the state, and the form adopted by the wage-labor nexus—combined to produce pressures for increased economic competition. Changes to any one of the key institutions in Japan’s mode of regulation had effects—often mutually reinforcing—on each of the other institutions. One of the key consequences of these developments was the demise of long-term labor market security, which had been a feature of the postwar model in Japan. The institutional mix that had previously produced a degree of consensus over time mutated into a regime characterized by heightened instability, an absence of coordination and collaboration, the exclusion of organized labor, and intensified exploitation. Table 1.1 summarizes these changes, highlighting how different developments occurred and institutional dynamics shifted during the broad time periods described. While the dividing line between each of these periods is not always clear-cut, demarcating them as shown allows us to capture some of the key broad trends and changes that occurred over time. The Japanese model of capitalism has become increasingly disorganized, resulting in heightened anxiety and insecurity among workers.

Japan’s Insertion in the International Market

In terms of its relationship to the international market, the Japanese economy has been transformed over the past fifty years from a protected and insulated market to a more open and liberalized one that is integrated into the competitive international market. This process of increasing openness to the international economy has resulted in mutually reinforcing pressures to liberalize other aspects of the Japanese political economy. The process of internationalization has had implications in terms of the form of the state (less protectionist) and an increased inflow of foreign capital (which has altered the monetary and financial regime and the form of competition in Japan)—all of which has heightened the overall pressure of market competition across the country’s political economy.

Japan’s rapid economic growth in the 1960s through the 1980s was widely heralded as a successful model of development. However, this growth was also largely associated with trade surpluses, prompting criticism from and moves toward protectionist measures in both the United States and Europe. This in turn incentivized Japanese firms to relocate production in the United States and Europe to circumvent protectionist barriers to trade, and as a result the firms increasingly used locally produced input materials. Japan’s industrial bases therefore underwent what many considered to be a process of “hollowing out,” in which production was increasingly moved outside of Japan and to the country where sales would take place. This process of hollowing out reached its peak in 1995, prompting concerns over its impact on both production and employment in Japan (Schaede 2007, 82 and 96; Bailey and Sugden 2007, 136). It should be noted, however, that the potentially detrimental effect of these developments was in part mitigated during the 1980s as a result of state provisions such as subsidies, publicly funded research and development, and government supervision of declining industries, and thus in that period the state took on a coordinating role despite the impact of internationalization (Witt 2006, 88–89).

Alongside pressure to relocate to the United States and Europe, firms based in Japan faced difficulties as a result of declining growth in the 1980s, especially after the bubble burst in 1991. This prompted a shift in the orientation of both investment and exports toward international markets, particularly in Asia (Yamada and Hirano 2012, 15). As a result of these efforts to increase access to international markets, Japan faced pressure from other advanced economies to “lower trade barriers, relax capital controls, and reduce anti-competitive regulation” (Vogel 2006, 33). The opening up of trade also allowed foreign firms to enter the Japanese market, thereby challenging the close keiretsu networks.

The combined effect of increased trade liberalization and the so-called hollowing out of Japan through a process of relocating production abroad resulted in increased competition between firms as established supply chains and relations between firms were increasingly disturbed by competitive pressures, especially to reduce costs. This in turn had an especially negative effect on less competitive small and medium-size enterprises (SMEs), as well as an indirect effect on Japanese labor—as firms were forced to exert greater discipline in the workplace in an attempt to respond to the heightened market competition that they faced (Isogai, Ebizuka, and Uemura 2000, 51).

Further efforts were made by Japanese firms to expand into foreign markets during the 1990s and 2000s. One of the consequences of the bursting of Japan’s economic bubble in 1991 was a sharp rise in the number of nonperforming loans.¹ The decline in consumer and investor confidence that occurred as a result of this financial instability in turn produced what many considered to be a domestic underconsumption problem. As a result, firms (supported by the Japanese government) put more emphasis on attempting to increase exports to Asian markets. Initially, this led to increased trade with Southeast Asia, bit after the 1997–1998 Asian financial crisis focus switched again, this time toward China (Calder 2003, 609). At the same time, China’s growth, especially in manufacturing, put further competitive pressure on Japanese firms (Mouer and Kawanishi 2005, 105).

These changing trade relations and growing internationalization can be seen in terms of Japan’s trade statistics. Exports to China accounted for 5.0 percent of Japan’s total exports in 1995, rising to 13.5 percent in 2005 and 17.5 percent in 2015 (Ministry of Finance 2019). Similarly, exports to Asia increased from 43.5 percent of Japan’s total exports in 1995 to 48.4 percent in 2005 and 53.3 percent in 2015 (ibid.).

This trend in internationalization advanced further in the wake of the 2007–2008 global financial crisis. This included an increase in Japanese corporations’ production and sales overseas, rising exports from overseas production bases, and increased purchases of more locally manufactured parts and components (Ministry of Economy, Trade, and Industry 2011, 96–100). Perhaps one of the most noteworthy aspects of this growing internationalization can be seen in the 2017 decision by the government of Prime Minister Shinzō Abe to join the Trans-Pacific Partnership. This represented a significant further liberalization of the Japanese agricultural sector, which had long been considered overly protected (especially by Japan’s trading partners). The strong opposition from the Japan Agricultural Cooperative—the country’s agricultural cooperative organization, itself politically important as a source of support for the LDP—also highlights the degree to which this represented a significant change in the Japanese model (Choi and Oh 2017).

Japanese firms continued to increase production and sales in Asia throughout the 2010s. The number of Japanese overseas affiliates in Asia increased from fewer than 2,000 in 1990 to more than 6,000 in 2010. In the period 2000–2015, over 90 percent of new Japanese overseas affiliates were based in Asia (Hirano and Yamada 2018, 436 and 444–47). This led to both a rise in production by Japanese firms based in Asia and an increase in procurement from local firms based there. These trends illustrate how Japanese firms continued to seek cheaper goods and workers in Asia, thereby increasing competition between Japanese domestic firms and other Asian firms. Yasuo Hirano and Toshio Yamada argue that this indicates a decreased competitiveness and reduced exports on the part of firms based in Japan. This has occurred alongside an improvement in the financial situation of Japanese overseas affiliates. Thus, we see a “decoupling of Japanese firms from the Japanese economy,” with improved performance of Japanese multinational corporations occurring largely outside of Japan (ibid., 444). This has enabled Japanese firms to improve their performance without at the same time increasing domestic economic growth. Heightened pressure from international competition has also produced a downward pressure on wages in Japan, as the domestic economy’s insertion in the world economy creates ongoing pressure to compete and be cost-effective.

Most obviously, the rise of China has had a considerable impact on Japan’s position in the world economy. This includes a further expansion of trade with and investment in China during the 2010s, with exports to China reaching a record high of 14.9 trillion yen in 2017—making China second only to the United States in terms of Japanese export destinations (Ministry of Economy, Trade, and Industry 2018, 3). A large proportion of the Japanese companies based in China are manufacturing companies, which have increased both their sales and their profits due to the increased demand related to the Chinese domestic market and its increasing trade (ibid.). While Japan benefits from the expansion of its trade and investment relations with China, Japan’s export competitiveness has gradually been reduced. Hirano and Yamada claim that the share of Japanese exports as a proportion of total world exports declined by almost half, from 9.5 percent in 1995 to 4.9 percent in 2011 (2018, 438). This is especially evident in terms of the export of machinery—a key focus for Japan—with such exports as a proportion of global machinery exports decreasing from 15.2 percent in 1995 to 8.5 percent in 2011 (ibid.). This contrasts with China, which has seen a sharp rise in its exports of machinery (Obashi and Kimura 2016, 7). In terms of trade within East Asia, a key trend is that both China and South Korea had a growth of about 50 percent in exports of machinery in the period 2007–2013, while Japan’s machinery exports were stagnant (ibid., 20).

In sum, therefore, changes to the integration of Japan in the international economy have produced a consistent process of liberalization and internationalization. This includes both the move of production overseas and an increase in trade. Moreover, the result of these developments has been to increase domestic competition—in turn putting indirect pressure on workers in Japan—as firms struggle to compete. We can see Japan’s declining wage share, a growing wage gap between workers with high and those with low skills, and increased pressure on rural economies—all of which have resulted from changes in the way that Japan’s economy is located in the international market (Ministry of Health, Labor, and Welfare [MHLW] 2008, 169–72). These changes have had a mutually reinforcing effect on the other key institutions identified by regulation theory.

Monetary and Financial Regime

As noted in the overview of regulation theory above in this chapter, monetary and financial regimes are considered crucial to any mode of regulation. This is because money is “the primordial social link in market economies,” serving as the fundamental institution in any market economy (Aglietta 1998, 46). As many commentators have observed, the post-Fordist mode of capital accumulation has been widely associated with a growing and increasingly central role for finance, including the heightened liquidity of capital markets and an upsurge in the role of investment funds (Aglietta and Rebérioux 2006). This process of financialization has occurred in Japan, with the initial postwar model being transformed since the bubble burst in 1991. Moreover, these changes have in turn produced a more general increase in the susceptibility of the Japanese political economy to the pressures exerted by the need to be competitive in the global market economy (Guttmann 2002, 62).

Three pillars were central to the classic mode of regulation that emerged in Japan during the postwar period: a regulated financial market that was overseen by the interventionist Bank of Japan operating in coordination with the Ministry of Finance, a financial system (based on main banks) that represented the key route through which corporations could gain access to finance, and a related system of corporate governance in which main banks monitored the use and investment of the finances to which they provided access. This system therefore depended on the role of what is commonly referred to as the main bank, meaning the key bank integrated in and central to the funding of each network of firms (keiretsu). The relatively regulated and monitored nature of finance in the classic model in turn ensured that Japan’s high levels of growth up until the 1970s could be achieved with a degree of stability, including stable interfirm and employment relations (Nabeshima 2000, 105–11; Tohyama 2000; Rosenbluth and Thies 2010).

The declining growth that was experienced in Japan in the 1980s produced a number of outcomes that began the unraveling of this monetary and financial regime. Large firms sought to reduce their costs by searching for cheaper funds. At the same time, Prime Minister Yasuhiro Nakasone implemented a program of financial deregulation that was prompted in part by the need to increase access to financial markets to finance growing levels of public debt (Lechevalier 2014e, 101). In addition, the Bank of Japan sought to stimulate growth through loose monetary policy. These developments prompted the larger firms to increase their reliance on alternative sources of finance, including through the stock market (Tohyama 2000, 79). There were two effects of this move toward alternative sources of finance: First, the role of main banks declined, as the relationship between firms and the banks eroded. Second, the increased financial stimulus, implemented at the same time as the monitoring role of the main banks was in decline, resulted in heightened (and nonproductive) speculation, fueling the bubble economy of the mid- to late 1980s that would eventually burst in 1991 (Nabeshima 2000, 113–14).

That bursting prompted a further increase in the role of international finance in Japan’s economy. Nonperforming loans became a particular problem, prompting an increased search for finance outside of Japan. This had the additional effect of increasing the role of foreign actors in Japan’s financial market and thereby further undoing the main bank system of finance that been central to the classic model of Japanese capitalism. In turn, the heightened role of foreign capital increased the frequency of foreign takeovers, which was exacerbated by the declining value of the yen (Uemura 2000; Schaede 2007). As a result, the foreign share of banking assets increased, especially in foreign exchange trading, private banking, loan syndication, and foreign currency deposits (Katz 2003, 186–87).

The 2000s witnessed the further disarticulation of Japan’s postwar financial regime, although the difficulties that this created—especially for SMEs unable to gain access to sufficient sources of funding—prompted a slight reversal of liberalization, as demonstrated by the 2002 instruction of the government of Prime Minister Junichiro Koizumi to banks to provide loans to firms facing such a problem...

Table of contents

• Acknowledgments
• List of Abbreviations
• Introduction
• 1. From Coordinated to Disorganized Capitalism in Japan
• 2. Organized Labor and Social Conflict in Japan
• 3. From Precarity to Contestation
• 4. Precarious Labor Power and Japan’s Neoliberalizing Firms
• 5. Precarious Labor and the Contestation of Policymaking in Japan
• 6. Japan’s Absent Mode of Regulation
• Conclusion
• Appendix
• Notes
• References
• Index