[William Pesek] Viral video says it all about Japan’s economy

If a poll were taken to pick the most reviled man in Japan, Ryu Matsumoto would win hands down. 

Until Tuesday, he had Japan’s second-most important job: reconstruction minister. Four months after the earthquake and tsunami, no issue looms larger than how Japan rebuilds, boosts growth and reassesses its nuclear industry. 

On July 3, a week into the job, Matsumoto headed north to check the devastation. There, he rebuked Miyagi Governor Yoshihiro Murai for being a few moments late for a meeting. If anyone deserves some slack, it’s a leader in a region where civilization was almost wiped out. The local infrastructure is the world’s biggest junk heap, and 22,000 people are dead or missing.

Matsumoto wasn’t having any of it. He refused to shake the governor’s hand and dressed him down publically, jabbing his finger provocatively and waving his arms. What’s more, Matsumoto said it was up to the young governor to lead his own rebuilding effort, not Matsumoto. In top-down Japan? Really?

Once the video went viral on YouTube, Matsumoto was forced to resign. This was instantly seen as a setback for Prime Minister Naoto Kan. That’s hardly the case. The imperious and arrogant Matsumoto would have been a pathetic steward of Japan’s revival. The country is lucky to have disposed of him so quickly.

What makes this affair worth exploring is that it perfectly encapsulates so much of what’s wrong with Japan’s political system and why the economic outlook seems gloomier by the day.

Japan is a nation of obsessively polite people. Harmony, or “wa,” is favored over confrontation. In the days after the earthquake, Kan was derided for acting too “Western.” He publically took on the incompetents running Tokyo Electric Power Co., demanding faster action and greater transparency as radiation clouds drifted toward Tokyo. As he rolled up his sleeves and became an active manager, the press howled that he lacked respect for the Japanese way of doing things.

That’s why many were aghast at Matsumoto’s boorish behavior. The breach of etiquette might have been acceptable had he proposed solutions. But offering an overburdened official nothing but a berating veered into counterproductive territory.

Governors in Japan’s northeast Tohoku need a number. How much will Tokyo provide to fix ports, roads, bridges, telecommunications, schools, hospitals, airports, train stations, seawalls and houses? Until local leaders get a figure, nothing much will happen and investors will be even more in the dark on Japan’s outlook. Tokyo, instead, is obsessed with political infighting.

There was an expectation in the days after the disaster that it would lead to change. Observers have said for a decade or more that only a crisis would drive the course correction the aging, risk-averse and highly indebted nation needs. The hope was that the earthquake would compel leaders to find new sources of growth, rely less on nuclear power and rediscover the entrepreneurial verve that gave us the Walkman and some of the world’s most reliable cars.

I’m having deep doubts. The bullish case for change is eloquently spelled out in a new book, “Reimagining Japan,” in which McKinsey & Co. asked more than 80 global leaders and experts to consider a Japanese renaissance. History does indeed show Japan’s amazing capacity to regroup and surprise the naysayers.

And then I look at the discourse in Tokyo, which suggests it’s business as usual. Anyone who thinks otherwise should consider two movements in Tokyo: the self-defeating drive to change prime ministers and the clout of the nuclear-industrial complex, Japan’s answer to the U.S.’s military-industrial complex.

Kan’s response to Japan’s worst crisis since World War II hasn’t been state of the art. But to say he’s been a worse leader than the five before him requires a selective reading of the past. His predecessors tended to stick around for a year and then step aside for the next guy to repeat the cycle of mediocrity. Four of them hailed from the Liberal Democratic Party that created the system that enabled Tepco to fudge safety reports and put the nation and its 127 million people at risk.

Yet Japan’s docile media is dutifully spinning the Kan-must-go tale 24/7. One reason the establishment fears Kan so much is that he wants to wrest power from the government bureaucrats who seem to exist just to thwart progress. Kan also is a threat to Japan’s powerful nuclear industry, as evidenced by his call in May to close other nuclear power plants like the one in Hamaoka, 125 miles (200 kilometers) southwest of Tokyo.

Tepco is held in contempt in Japan because of its mishandling of the nuclear accident and the protection it received through its incestuous ties with bureaucrats. Now, it’s trying to rally the rest of the industry to support nuclear power, defying growing public opposition to atomic energy after the worst radiation release in 25 years.

I’m sorry, but the only thing Tepco should be allowed to lead is a march toward bankruptcy. The only public role Matsumoto should ever be allowed to play is as an example of how not to lead. And the only thing economists eyeing Japan can do is scratch their heads at the lack of urgency in Tokyo. 

By William Pesek 

William Pesek is a Bloomberg View columnist. The opinions expressed are his own. ― Ed.

(Bloomberg)