By 1991 Japan was too consumed with internal problems to benefit from the economic and geopolitical opportunities that the Soviet collapse created.
In the mid-1980s, of course, Japan was at the top of its game. Its state-led capitalist model seemed the wave of the future and destined to leave all others—including laissez-faire capitalism, socialism, and all other -isms in the dust. Hollywood reflected US fears of Japan's rise by cranking out films about ruthless Japanese businessmen and gangsters, while a certain brash, young New York City real estate developer complained to Oprah Winfrey that Japan was “knocking the hell out of” American companies.
But by the end of 1991, Japan's miracle was quickly unraveling. Massive real estate and equity bubbles burst and dragged the country into crisis. The Soviet Union's demise offered Japan the chance to exert stronger economic and geopolitical leadership in the world, but Japan was forced to withdraw into itself, entering a period of stagnation that would become known as its “lost decade.”
A certain brash, young New York City real estate developer complained to Oprah Winfrey that Japan was “knocking the hell out of” American companies.
On a strategic level, Japan's continued reluctance to involve itself in security matters beyond its own borders, highlighted by its refusal to commit troops to the First Gulf War in 1990-91, further undermined its ability to shape a prominent new global role for itself.
Twenty-five years later, Prime Minister Shinzo Abe appears determined to prove to the world—and the Japanese—that the country is unwilling to go gently into that good night of secular decline. But whether Japan can escape the legacies of the past and overcome its demographic future to fly high again remains an open question.
And that young real estate developer who bashed Japan all those years ago is now president-elect of the United States.
Scott Seaman focuses on the economic and trade policies and foreign relations of Japan and South Korea. His sectoral expertise includes energy, insurance, and information technologies.