JAPAN
25 September 2024
Reflections of a leading Japanese economist
The memoirs of Kumiharu Shigehara, Japan’s most prominent modern economist, offer valuable insights and lessons on economic policy development in the postwar period.
International book stores regularly stock memoirs of leading Anglo-Saxon economists and political leaders. Regrettably, one can only rarely find such books written by their Japanese counterparts. This is a great pity because Japan’s postwar economic and political history is a truly fascinating story, with many lessons for the world of today.
Japan became Asia’s first miracle economy and mature democracy. It rose quickly from the ashes of war to become the world’s second largest economy by the late 1960s, and seemed to be even threatening the leadership position of the US by the 1980s. But following a financial crisis and the onset of an ageing population in the 1990s, Japan’s economy has experienced relative stagnation for about three decades.
It was thus with great interest that I read the recently published memoirs of Kumiharu Shigehara, the most prominent Japanese economist of the postwar period. Shigehara had a remarkable career, which is encapsulated in the title of his memoirs, “The Bank of Japan, the OECD and Beyond: Reflections from a lifetime’s work”. He started his career at the Bank of Japan in 1962 where he rose to the position of Chief Economist. Overlapping his Bank of Japan career were four services at the OECD, starting in 1970, and culminating is his appointment as Deputy Secretary-General, from which he retired in 1999.
Shigehara’s book offers a survey of economics issues that he dealt with through his career at the Bank of Japan and the OECD. But two of the most interesting chapters are the Introduction and the Prologue where he shares his early life story, and in particular the tragic loss of his father at the end of World War 2.
All countries bear various scars of history, and through these sections of the book, we glean some of the deep scars that Japan and the Japanese people lived with through the early postwar period, and which shaped its relations with the rest of the world. This theme is highly relevant to today’s world where many former colonies and war-torn countries are digesting their own scars of history at the same time as they are rapidly emerging in the world economy. Western leaders of the “rules-based world order” ignore these issues at their peril.
One of the most interesting aspects of Shigehara’s book is his discussion of major issues in postwar economic development and management. In particular, he offers much detailed insights into the Bretton Woods System and the associated “Nixon shock”, thankfully without detailed mathematical models. In my mind, Shigehara confirms the views of Lord Robert Skidelsky and Dr. Ha-Joon Chang that economists can often learn more from historical analysis than from mathematics. Indeed, Shigehara’s book is a wonderful work of modern economic history.
One of the historical episodes in modern economic development on which Shigehara offers valuable insights is the “Plaza Accord” through which the US applied pressure on Japan to facilitate the appreciation of the yen exchange rate and correct Japan’s trade imbalance with the US. This will be of great interest to Chinese economists and political scientists, many of whom see this episode as an attempt by the US to contain Japan’s rise and its position as a potential rival, something which China sought to avoid at the time of its large trade surpluses with the US.
Shigehara makes many insightful points on the role and limits of “multilateral surveillance”. This is the process by which members of organisations like the OECD or the IMF monitor, analyse and critique each other's policies, having regard to the interdependence between their economies, as well as the lessons that can be shared. Shigehara raises many questions about the practical effectiveness of such surveillance which has not been an effective tool in preventing financial crises, as many have hoped.
Other interesting chapters for this reader, who spent 14 years teaching at Tokyo’s Sophia University, were those concerning Japan’s economic management of its financial crisis, current account surplus, public debt, monetary policy and financial markets, ageing population, “Japan bashing”, deflation and weak productivity growth.
Japan was once considered by many to be an outlier and a curiosity. But in reality Japan has often been a leader in confronting many such issues. In particular, low fertility and ageing populations, high public debt and weak productivity growth now afflict many countries today, notably China. But there is one area where Japan has been more successful than most countries, and that is maintaining social cohesion and stability in a world of rapid change, and avoiding the peril of populism.
Shigehara’s reflections on these and many other international financial issues, as well as his many post-retirement commentaries, will be of great interest to those of us who lived and worked through the postwar period (I was a member of Shigehara’s team for several years at the OECD). Moreover, it is a “must-read” for policymakers from the many other countries which are confronting similar issues today.
But this reader also hopes that Shigehara’s book will also be a source of inspiration to young Japanese who might be contemplating a career in international economics policymaking. Too many young Japanese have an inward focus in their lives, and seem to have little interest in an international career, despite the rich experiences offered by such a career. Moreover, as Shigehara’s book highlights, the world of multilateral cooperation has much to gain from the participation of talented Japanese.
Readers will be surprised to learn that Shigehara was so admired by his first secretary, Paula Simonin, that she wrote a poem dedicated to him on the occasion of his departure in 1974. Regrettably, however, Shigehara’s book is also tinged with a sense of missed opportunities and sadness. Reading through the reflections on his career, one can only regret that such a talented individual was never appointed Governor of the Bank of Japan or Secretary-General of the OECD. But as Shigehara explains, politics play an inordinate role in decisions on such appointments.
Japan became Asia’s first miracle economy and mature democracy. It rose quickly from the ashes of war to become the world’s second largest economy by the late 1960s, and seemed to be even threatening the leadership position of the US by the 1980s. But following a financial crisis and the onset of an ageing population in the 1990s, Japan’s economy has experienced relative stagnation for about three decades.
It was thus with great interest that I read the recently published memoirs of Kumiharu Shigehara, the most prominent Japanese economist of the postwar period. Shigehara had a remarkable career, which is encapsulated in the title of his memoirs, “The Bank of Japan, the OECD and Beyond: Reflections from a lifetime’s work”. He started his career at the Bank of Japan in 1962 where he rose to the position of Chief Economist. Overlapping his Bank of Japan career were four services at the OECD, starting in 1970, and culminating is his appointment as Deputy Secretary-General, from which he retired in 1999.
Shigehara’s book offers a survey of economics issues that he dealt with through his career at the Bank of Japan and the OECD. But two of the most interesting chapters are the Introduction and the Prologue where he shares his early life story, and in particular the tragic loss of his father at the end of World War 2.
All countries bear various scars of history, and through these sections of the book, we glean some of the deep scars that Japan and the Japanese people lived with through the early postwar period, and which shaped its relations with the rest of the world. This theme is highly relevant to today’s world where many former colonies and war-torn countries are digesting their own scars of history at the same time as they are rapidly emerging in the world economy. Western leaders of the “rules-based world order” ignore these issues at their peril.
One of the most interesting aspects of Shigehara’s book is his discussion of major issues in postwar economic development and management. In particular, he offers much detailed insights into the Bretton Woods System and the associated “Nixon shock”, thankfully without detailed mathematical models. In my mind, Shigehara confirms the views of Lord Robert Skidelsky and Dr. Ha-Joon Chang that economists can often learn more from historical analysis than from mathematics. Indeed, Shigehara’s book is a wonderful work of modern economic history.
One of the historical episodes in modern economic development on which Shigehara offers valuable insights is the “Plaza Accord” through which the US applied pressure on Japan to facilitate the appreciation of the yen exchange rate and correct Japan’s trade imbalance with the US. This will be of great interest to Chinese economists and political scientists, many of whom see this episode as an attempt by the US to contain Japan’s rise and its position as a potential rival, something which China sought to avoid at the time of its large trade surpluses with the US.
Shigehara makes many insightful points on the role and limits of “multilateral surveillance”. This is the process by which members of organisations like the OECD or the IMF monitor, analyse and critique each other's policies, having regard to the interdependence between their economies, as well as the lessons that can be shared. Shigehara raises many questions about the practical effectiveness of such surveillance which has not been an effective tool in preventing financial crises, as many have hoped.
Other interesting chapters for this reader, who spent 14 years teaching at Tokyo’s Sophia University, were those concerning Japan’s economic management of its financial crisis, current account surplus, public debt, monetary policy and financial markets, ageing population, “Japan bashing”, deflation and weak productivity growth.
Japan was once considered by many to be an outlier and a curiosity. But in reality Japan has often been a leader in confronting many such issues. In particular, low fertility and ageing populations, high public debt and weak productivity growth now afflict many countries today, notably China. But there is one area where Japan has been more successful than most countries, and that is maintaining social cohesion and stability in a world of rapid change, and avoiding the peril of populism.
Shigehara’s reflections on these and many other international financial issues, as well as his many post-retirement commentaries, will be of great interest to those of us who lived and worked through the postwar period (I was a member of Shigehara’s team for several years at the OECD). Moreover, it is a “must-read” for policymakers from the many other countries which are confronting similar issues today.
But this reader also hopes that Shigehara’s book will also be a source of inspiration to young Japanese who might be contemplating a career in international economics policymaking. Too many young Japanese have an inward focus in their lives, and seem to have little interest in an international career, despite the rich experiences offered by such a career. Moreover, as Shigehara’s book highlights, the world of multilateral cooperation has much to gain from the participation of talented Japanese.
Readers will be surprised to learn that Shigehara was so admired by his first secretary, Paula Simonin, that she wrote a poem dedicated to him on the occasion of his departure in 1974. Regrettably, however, Shigehara’s book is also tinged with a sense of missed opportunities and sadness. Reading through the reflections on his career, one can only regret that such a talented individual was never appointed Governor of the Bank of Japan or Secretary-General of the OECD. But as Shigehara explains, politics play an inordinate role in decisions on such appointments.