The World

During my week in Japan I kept being asked – “what are your impressions?” So here they are, my top four impressions of Japan.

1. Policymakers and economists have been seriously freaked out by the Greek crisis. I lost count of the number of conversations in which Greece came up within the first five minutes. The reason for Japan’s concern is obvious. Japan’s gross debt-to-GDP ratio is even higher than that of Greece. If we are now entering a period of sovereign debt crises, then Japan is clearly vulnerable. Or is it? There were some analysts who argued that the Japanese situation is quite different from that of Greece, largely because 95% of the country’s debt is owned by the Japanese themselves, so the country is much less vulnerable to a sudden withdrawal of foreign confidence. Others suggested that the Japanese government is gradually soaking up the country’s accumulated savings and so a crisis will hit quite soon. I’ve no idea who’s right – but here is an admirable summary of the debate by the FT’s Mure Dickie.

Second impression: Japan is in an incredible depression. By this, I don’t mean an economic depression – actually the economy is growing again. This is more of a psychological problem. Almost every analysis I heard of the country’s economic and political situation was unremittingly grim. Some of these analyses were delivered with a smile, others with a grimace. But the only person I heard with anything positive to say was the chairman of Komatsu, whose business is going very well – particularly in China. At one point, I stopped a Japanese economist in mid-flow and asked if he could think of anything positive to say about his country. I was greeted with a very long silence.

Third impression: The Japanese establishment, by which I mean the civil service and big business, absolutely despise the Hatoyama government. I hadn’t really realised how profound the implications are of the new government’s determination to put politicians – not civil servants – in charge of policymaking. If the DPJ government really break open the “iron triangle” of politics, big business and civil service, they will change the way that Japan has been governed for the last fifty years. Unsurprisingly, lots of people are very upset by that.

Point four: Japan’s foreign policy is in flux. That will be the subject of my column tomorrow.

And a final point. Nomura have a fantastic art collection. I spotted two Monets and a Modigliani in the boardroom.