Expert on Japan's Economy Returns Unharmed but Worried

Southern Methodist U.

March 17, 2011

William Tsutsui, dean of the College of Humanities and Sciences at Southern Methodist University, was in Tokyo with a delegation of Japanese-American leaders when the earthquake struck. He studies modern Japanese business and economic history.

Q. What was the earthquake like?

A. We were in a bus that had just pulled up in front of a hotel in central Tokyo. The bus started to move, and we all thought it was a mechanical difficulty of some sort. But then we noticed waves of people running, and the shaking continued. And we knew it was an earthquake, and a big one. What really brought it home was to look at the skyscrapers all around us, which were swaying quite violently as the earth shook. Most earthquakes in Japan are strangely relaxing. They aren't jolting earthquakes—they're swaying earthquakes. If you're in bed and you get the usual Japanese earthquake, it's actually sort of relaxing—it's kind of like getting a massage. I tell you, this was nothing like getting a massage. This was very different, a very scary experience.

Q. The coverage of the disaster has focused on the physical and human cost. But what about the toll on the third-largest economy in the world?

A. The longer Japanese businesses remain offline, the more international consumers are going to be looking elsewhere, like South Korea, China, and Taiwan, to source their products. While the Japanese do have technological advantages in some sectors, there are many cases in which other producers are going to step right in and take those markets. Unless the Japanese economy can come back online quite quickly, this is going to have significant, long-term repercussions. One thing that draws everyone together is having predictable energy to draw on. There's damage to the electrical grid, and it's very difficult to get gasoline. If that continues beyond the next few weeks, it's going to have a profound impact on Japan's international competitiveness.

Q. Does the Japanese economy's softness before the quake affect resiliency?

A. Given the fact that the Japanese economy has been in a prolonged recession for 20 years, there are two ways one can read this crisis. One can be that this is really going to be a death blow, almost the straw that broke the camel's back of the Japanese economy. The more optimistic view is that this will provide the kind of impetus to really jolt the economy awake. Of course, the big question is, where's that money going to come from? The Japanese government has maxed out all its credit cards right now. It's one of the most highly leveraged governments in the world. If the government raises funds to repair northern Japan by taxing the rest of Japan, we're going to be in the same situation we've been in for the past two decades, and there's not going to be a whole lot of progress.

Q. What can, or should, the government do?

A. Japan has had a revolving door of prime ministers for most of the past 20 years. There has not been a firm hand on the rudder of state. I would like to think this is a moment for the competing political parties—who are not that far apart ideologically but have been behaving in a very divisive fashion—to come together around a reconstruction agenda and really provide some direction for the country.

Q. What is it like to watch events from back in Texas?

A. I've visited just about every year for the past 20 years. I'm relieved to have come home, but I also feel so helpless being so far away from the events that are unfolding. None of us know how this is going to turn out at this point, and I think we're all hoping for the best. But I can't help thinking, this is a huge turning point, and the Japan that we knew and the Japan of the future might not look too much like one another. I'm increasingly worried that the Japan that I've known and loved might not be there the next time I want to go.