Quandry Over Japan Coverage

Bank of Japan's headquarters.

The New York Times has published its second-in-a-series of articles about Japan's economy and what the Americans have to learn from the bursting of its financial bubble nearly two decades ago: "U.S. Hears Echo of Japan's Woes."

It has taken almost two weeks for the Times to print the second in a series, which is unusual timing. Usually, series run on consecutive days or once a week on a given day. They also published this story on a Saturday, which in the mentality of the Times means a second-class day. They front-paged the story, as they did the first, but they seem to be downplaying the second story by waiting so long and then printing it on a Saturday.

Intriguingly, they dispatched veteran staffer Steve Lohr from New York to help write this story with Martin Fackler, the local-hire reporter who basically does as he is told by editors in New York. Lohr was once based in Tokyo and is a solid business and technology writer. By sending him to Tokyo, the Times apparently was responding to the insinuation that someone in New York with an ideological axe to grind told Fackler what to write and, lacking any power to push back, he wrote what he was told to write: that Japan faces "grim" conditions, which it does not, judging from my trip there this past summer, the most recent visit in 30 years of traveling to Japan. Japan is prosperous and sophisticated. It has problems, to be sure, but it is managing those problems arguably better than the United States is its own economic problems.

Here's where it gets intriguing: Fackler and Lohr quote Hiroshi Kato as saying that the "sins" of Japanese policy makers in the 1990s were large. Kato is one of the "old boys" who truly run Japan. Kato, whom I have met and interviewed, is one of the government's authorized "windows" to the outside world. These Old Boys have been magnifying any hint of economic difficulty in Japan to persuade the world that Japan should never again be a target of a concerted American policy response, as seemed possible in the late 1980s. Japan's windows are trained to say these things; it is their party line.

So far, the story is toeing the ideological line set by editors in New York, who are trying to use Japan as a lever to argue that the U.S. government should be engaged in a massive intervention into the U.S. economy to save it and should not worry about expanding the national deficit. Uber-economist Paul Krugman has been making that case in his op ed columns.

But in the final three paragraphs of the story, something happens. Lohr's voice becomes prominent. "The picture is not entirely bleak for the United States, where the constant drive to innovate can produce bursts of growth that few economists or anyone else can see coming," the article states. It mentions the personal computer industry, then the Internet and Web businesses, smart phones and mobile software. "That dynamism, economists note, is often wrenching," the article continues. "But it also means that investment dollars and people shift more rapidly to new opportunities. In Japan, though, such painful payroll cuts and corporate deaths were postponed for years."

The end of a story is where a Times reporter often breaks from the line imposed by editors to argue what he or she really feels. It is presumably Lohr who ends the story by quoting Ed Lincoln, a completely sensible analyst of U.S.-Japanese relations for decades. Lincoln says that the U.S. system of allowing rapid changes in its economy is better than the Japanese system, which favors stability. In other words, let the private sector's innovation carry the day. Don't rely on the federal government's intervention.

It appears that there is an ideological divide at the Times: some voices are trying to use Japan to argue that the U.S. government needs a massive intervention into the U.S. economy. That would represent a greatly expanded role for government, which is part of the Krugman liberal cause. But others such as Lohr believe that the answer to America's problems like in market-based innovations, particularly those featuring disruptive innovation.

I, of course, agree with Lohr and believe the answer to what ails America is the creation of new industries and new jobs. The federal government can play a role in that, but it cannot control it or seek to manage it. It's unfortunate that the Times is attempting to use Japan's experience in the 1990s as a means of influencing the debate in the United States, rather than facing up to the fact that Japan is a wealthy, successful nation.