Japan, country (2005 est. pop. 127,417,000), 145,833 sq mi (377,835 sq km), occupying an archipelago off the coast of E Asia. The capital is Tokyo , which, along with neighboring Yokohama , forms the world's most populous metropolitan region.
Japan proper has four main islands, which are (from north to south) Hokkaido, Honshu (the largest island, where the capital and most major cities are located), Shikoku, and Kyushu. There are also many smaller islands stretched in an arc between the Sea of Japan and the East China Sea and the Pacific proper. Honshu, Shikoku, and Kyushu enclose the Inland Sea. The general features of the four main islands are shapely mountains, sometimes snowcapped, the highest and most famous of which is sacred Mt. Fuji; short rushing rivers; forested slopes; irregular and lovely lakes; and small, rich plains. Mountains, many of them volcanoes, cover two thirds of Japan's surface, hampering transportation and limiting agriculture.
On the arable land, which is only 11% of Japan's total land area, the population density is among the highest in the world. The climate ranges from chilly humid continental to humid subtropical. Rainfall is abundant, and typhoons and earthquakes are frequent. (For a more detailed description of geography, see separate articles on the individual islands.) Mineral resources are meager, except for coal, which is an important source of industrial energy. The rapid streams supply plentiful hydroelectric power. Imported oil, however, is the major source of energy. One third of Japan's electricity comes from nuclear power. The rivers are generally unsuited for navigation (only two, the Ishikari and the Shinano, are over 200 mi/322 km long), and railroads and ships along the coast are the chief means of transportation. The Shinkansen "bullet train," the second-fastest train system in the world after France's TGV, was inaugurated in 1964 between Tokyo and Osaka and later extended.
Japan is an extremely homogeneous society with non-Japanese, mostly Koreans, making up less than 1% of the population. The Japanese people are primarily the descendants of various peoples who migrated from Asia in prehistoric times; the dominant strain is N Asian or Mongoloid, with some Malay and Indonesian admixture. One of the earliest groups, the Ainu, who still persist to some extent in Hokkaido, are physically somewhat similar to Caucasians.
Japan's principal religions are Shinto and Buddhism; most Japanese adhere to both faiths. While the development of Shinto was radically altered by the influence of Buddhism, which was brought from China in the 6th cent., Japanese varieties of Buddhism also developed in sects such as Jodo, Shingon, and Nichiren. Numerous sects, called the "new religions," formed after World War II and have attracted many members. One of these, the Soka Gakkai, a Buddhist sect, grew rapidly in the 1950s and 60s and became a strong social and political force. Less than 1% of the population are Christians. Confucianism has deeply affected Japanese thought and was part of the generally significant influence that Chinese culture wielded on the formation of Japanese civilization.
The Japanese educational system, established during the Allied occupation after World War II, is one of the most comprehensive and effective in the world. The two leading national universities are at Tokyo and Kyoto. The standard of living improved dramatically from the 1950s on, and the Japanese have the highest per capita income of all Asians (excluding the citizens of the major oil producers). Programs for social welfare and health insurance are fairly comprehensive. Since 1961, Japan has had a health-insurance system that covers all of its citizens. Major concerns confronting policy planners are the expected steady decline in the population during the 21st cent. (the population decreased for the first time in 2005) and the large and growing portion of the population that is elderly.
Japan's farming population has been declining steadily and was about 6% of the total population in the 1990s; agriculture accounted for only 2% of the GNP. Arable land is intensively cultivated; farmers use irrigation, terracing, and multiple cropping to coax rich crops from the overworked soil. Rice and other cereals are the main crops; some vegetables and industrial crops, such as mulberry trees (for feeding silkworms), are also grown, and livestock is raised. Fishing is highly developed, and the annual catch is one of the largest in the world. The decision by many nations to extend economic zones 200 mi (322 km) offshore has forced Japan to concentrate on more efficiently exploiting its own coastal and inland waters.
In the late 19th cent. Japan was rapidly and thoroughly industrialized. Textiles were a leading item; vast quantities of light manufactures were also produced, and in the 1920s and 1930s heavy industries were greatly expanded, principally to support Japan's growing imperialistic ambitions. Japan's economy collapsed after the defeat in World War II, and its merchant marine, one of the world's largest in the 1930s, was almost totally destroyed. In the late 1950s, however, the nation reemerged as a major industrial power. By the 1970s it had become the most industrialized country in Asia and the second greatest economic power in the world after the United States.
Japanese industry is concentrated mainly in S Honshu and N Kyushu, with centers at Tokyo, Yokohama, Osaka , Kobe , and Nagoya . In the 1950s and 1960s textiles became less important in Japanese industry while the production of heavy machinery expanded. Japanese industry depends heavily on imported raw materials, which make up a large share of the country's imports. Japan receives all of its bauxite, phosphate, steel scrap, and iron ore from imports, as well as virtually all of its crude oil and copper ore. Manufactured goods make up the vast majority of the nation's exports. Japan became one of the world's leading producers of machinery, motor vehicles, ships, and steel, and by the 1980s it had become a leading exporter of high-technology goods, including electrical and electronic appliances. It has increasingly shifted some of its industries overseas through outsourcing and has made massive capital investments abroad, especially in the United States and the Pacific Rim. With the recession of 2001, the closing of manufacturing plants in Japan accelerated, as did the opening of plants abroad, particularly in China. Since the late 1960s its economy has been marked by a large trade surplus, with the United States and Europe accounting for more than half its exports. Japan has also become a global leader in financial services, with some of the world's largest banks, but for many years after the collapse of the stock and real estate markets in the early 1990s many of Japan's banks were burdened with high numbers of nonperforming loans.
Government and Politics
Government in Japan is based on the constitution of 1947, drafted by the Allied occupation authorities and approved by the Japanese diet. It declares that the emperor is the "symbol of the state" but that sovereignty rests with the people. Hirohito was emperor from 1926 until his death in 1989; he was succeeded by his son, Akihito.
Japan's national diet has sole legislative power. The diet is composed of the house of representatives, a body of 480 members elected for terms of four years, approximately three fifths of which are chosen by single-seat constituencies and the rest proportionally; and the house of councilors, having 252 members elected for terms of six years. Executive power is vested in a cabinet appointed and headed by the prime minister, who is elected by the diet and is usually the leader of the majority party in that body. A supreme court heads an independent judiciary.
Most political parties in Japan are small and do not have broad, mass memberships; their members are mainly professional politicians. Japan currently has more than 10,000 parties, most of them local and regional. The Liberal Democratic party (LDP) held the majority of seats in the diet from 1955, when the party was formed, to 1993, when an opposition coalition formed a government; however, it was back in power in 1996. Relatively conservative, the LDP has supported the alliance with the United States and the mutual security pacts between the two countries. The Social Democratic party (SDP, formerly the Socialist party), which has opposed the security treaties with the United States, was long the chief LDP rival; in 1994-99, however, the party formed a governing coalition with the LDP. Other significant parties tended to be somewhat fluid groupings in the 1990s; important ones currently include the Democratic party of Japan, which is now Japan's largest opposition party, and New Komeito.
Japan is divided into 47 prefectures, each governed by a popularly elected governor and unicameral legislature. Cities, towns, and villages elect their own mayors and assemblies.
Early History to the Ashikaga Shoguns
Japan's early history is lost in legend. The divine design of the empire—supposedly founded in 660 BC by the emperor Jimmu, a lineal descendant of the sun goddess and ancestor of the present emperor—was held as official dogma until 1945. Actually, reliable records date back only to about AD 400. In the first centuries of the Christian era the country was inhabited by numerous clans or tribal kingdoms ruled by priest-chiefs. Contacts with Korea were close, and bronze and iron implements were probably introduced by invaders from Korea around the 1st cent. By the 5th cent. the Yamato clan, whose original home was apparently in Kyushu, had settled in the vicinity of modern Kyoto and had established a loose control over the other clans of central and W Japan, laying the foundation of the Japanese state.
From the 6th to the 8th cent. the rapidly developing society gained much in the arts of civilization under the strong cultural influence of China, then flourishing in the splendor of the T'ang dynasty. Buddhism was introduced, and the Japanese upper classes assiduously studied Chinese language, literature, philosophy, art, science, and government, creating their own forms adapted from Chinese models. A partially successful attempt was made to set up a centralized, bureaucratic government like that of imperial China. The Yamato priest-chief assumed the dignity of an emperor, and an imposing capital city, modeled on the T'ang capital, was erected at Nara, to be succeeded by an equally imposing capital at Kyoto.
By the 9th cent., however, the powerful Fujiwara family had established a firm control over the imperial court. The Fujiwara influence and the power of the Buddhist priesthood undermined the authority of the imperial government. Provincial gentry—particularly the great clans who opposed the Fujiwara—evaded imperial taxes and grew strong. A feudal system developed. Civil warfare was almost continuous in the 12th cent.
The Minamoto family defeated their rivals, the Taira, and became masters of Japan. Their great leader, Yoritomo , took the title of shogun , established his capital at Kamakura, and set up a military dictatorship. For the next 700 years Japan was ruled by warriors. The old civil administration was not abolished, but gradually decayed, and the imperial court at Kyoto fell into obscurity. The Minamoto soon gave way to the Hojo, who managed the Kamakura administration as regents for puppet shoguns, much as the Fujiwara had controlled the imperial court.
In 1274 and again in 1281 the Mongols under Kublai Khan tried unsuccessfully to invade the country. In 1331 the emperor Daigo II attempted to restore imperial rule. He failed, but the revolt brought about the downfall of the Kamakura regime. The Ashikaga family took over the shogunate in 1338 and settled at Kyoto, but were unable to consolidate their power. The next 250 years were marked by civil wars, during which the feudal barons (the daimyo) and the Buddhist monasteries built up local domains and private armies. Nevertheless, in the midst of incessant wars there was a brisk development of manufacturing and trade, typified by the rise of Sakai (later Osaka) as a free city not subject to feudal control. This period saw the birth of a middle class. Extensive maritime commerce was carried on with the continent and with SE Asia; Japanese traders and pirates dominated East Asian waters until the arrival of the Europeans in the 16th cent.
The Tokugawa Shoguns and the Meiji Restoration
The first European contact with Japan was made by Portuguese sailors in 1542. A small trade with the West developed. Christianity was introduced by St. Francis Xavier, who reached Japan in 1549. In the late 16th cent. three warriors, Nobunaga, Hideyoshi , and Ieyasu , established military control over the whole country and succeeded one another in the dictatorship. Hideyoshi unsuccessfully invaded Korea in 1592 and 1596 in an effort to conquer China. After Hideyoshi's death, Ieyasu took the title of shogun, and his family ruled Japan for over 250 years. They set up at Yedo (later Tokyo) a centralized, efficient, but repressive system of feudal government. Stability and internal peace were secured, but social progress was stifled. Christianity was suppressed, and all intercourse with foreign countries was prohibited except for a Dutch trading post at Nagasaki.
Tokugawa society was rigidly divided into the daimyo, samurai, peasants, artisans, and merchants, in that order. The system was imbued with Confucian ideas of loyalty to superiors, and military virtues were cultivated by the ruling aristocracy. Oppression of the peasants led to many sporadic uprisings. Yet despite feudal restrictions, production and trade expanded, the use of money and credit increased, flourishing cities grew up, and the rising merchant class acquired great wealth and economic power. Japan was in fact moving toward a capitalist system.
By the middle of the 19th cent. the country was ripe for change. Most daimyo were in debt to the merchants, and discontent was rife among impoverished but ambitious samurai. The great clans of W Japan, notably Choshu and Satsuma, had long been impatient of Tokugawa control. In 1854 an American naval officer, Matthew C. Perry , forced the opening of trade with the West. Japan was compelled to admit foreign merchants and to sign unequal treaties. Attacks on foreigners were answered by the bombardment of Kagoshima and Shimonoseki. Threatened from within and without, the shogunate collapsed. In 1867 a conspiracy engineered by the western clans and imperial court nobles forced the shogun's resignation. After brief fighting, the boy emperor Meiji was "restored" to power in the Meiji restoration (1868), and the imperial capital was transferred from Kyoto to Tokyo.
Industrial and Military Expansion
Although the Meiji restoration was originally inspired by antiforeign sentiment, Japan's new rulers quickly realized the impossibility of expelling the foreigners. Instead they strove to strengthen Japan by adopting the techniques of Western civilization. Under the leadership of an exceptionally able group of statesmen (who were chiefly samurai of the western clans) Japan was rapidly transformed into a modern industrial state and a great military power.
Feudalism was abolished in 1871. The defeat of the Satsuma rebellion in 1877 marked the end of opposition to the new regime. Emissaries were sent abroad to study Western military science, industrial technology, and political institutions. The administration was reorganized on Western lines. An efficient modern army and navy were created, and military conscription was introduced. Industrial development was actively fostered by the state, working in close cooperation with the great merchant houses. A new currency and banking system were established. New law codes were enacted. Primary education was made compulsory.
In 1889 the emperor granted a constitution, modeled in part on that of Prussia. Supreme authority was vested in the emperor, who in practice was largely a figurehead controlled by the clan oligarchy. Subordinate organs of government included a privy council, a cabinet, and a diet consisting of a partially elected house of peers and a fully elected house of representatives. Universal manhood suffrage was not granted until 1925.
After the Meiji restoration nationalistic feeling ran high. The old myths of imperial and racial divinity, rediscovered by scholars in the Tokugawa period, were revived, and the sentiment of loyalty to the emperor was actively propagated by the new government. Feudal glorification of the warrior and belief in the unique virtues of Japan's "Imperial Way" combined with the expansive drives of modern industrialism to produce a vigorous imperialism. At first concerned with defending Japanese independence against the Western powers, Japan soon joined them in the competition for an Asian empire. By 1899, Japan cast off the shackles of extraterritoriality , which allowed foreign powers to exempt themselves from Japanese law, thus avoiding taxes and tariffs. It was not until 1911 that full tariff autonomy was gained.
The First Sino-Japanese War (1894-95) marked the real emergence of imperial Japan, with acquisition of Taiwan and the Pescadores and also of the Liao-tung peninsula in Manchuria, which the great powers forced it to relinquish. An alliance with Great Britain in 1902 increased Japanese prestige, which reached a peak as a result of the Russo-Japanese War in 1904-5. Unexpectedly the Japanese smashed the might of Russia with speed and efficiency. The treaty of Portsmouth (see Portsmouth, Treaty of ), ending the war, recognized Japan as a world power. A territorial foothold had been gained in Manchuria. In 1910, Japan was able to officially annex Korea, which they had controlled de facto since 1905. During World War I the Japanese secured the German interests in Shandong (later restored to China) and received the German-owned islands in the Pacific as mandates. In 1915, Japan presented the Twenty-one Demands designed to reduce China to a protectorate. The other world powers opposed those items that would have given Japan policy control in Chinese affairs, but China accepted the rest of the demands.
In 1918, Japan took the lead in Allied military intervention in Siberia, and Japanese troops remained there until 1922. These moves, together with an intensive program of naval armament, led to some friction with the United States, which was temporarily adjusted by the Washington Conference of 1921-22.
During the next decade the expansionist drive abated in Japan, and liberal and democratic forces gained ground. The power of the diet increased, party cabinets were formed, and despite police repression, labor and peasant unions attained some strength. Liberal and radical ideas became popular among students and intellectuals. Politics was dominated by big business, and businessmen were more interested in economic than in military expansion. Trade and industry, stimulated by World War I, continued to expand, though interrupted by the earthquake of 1923, which destroyed much of Tokyo and Yokohama. Agriculture, in contrast, remained depressed. Japan pursued a moderate policy toward China, relying chiefly on economic penetration and diplomacy to advance Japanese interests.
Militarism and War
The moderate stance regarding China as well as other foreign policies pursued by the government displeased more extreme militarist and nationalist elements developing in Japan, some of whom disliked capitalism and advocated state socialism. Chief among these groups were the Kwantung army in Manchuria, young army and navy officers, and various organizations such as the Amur River Society, which included many prominent men. Militarist propaganda was aided by the depression of 1929, which ruined Japan's silk trade. In 1931 the Kwantung army precipitated an incident at Shenyang (Mukden) and promptly overran all of Manchuria, which was detached from China and set up as the puppet state of Manchukuo. When the League of Nations criticized Japan's action, Japan withdrew from the organization.
During the 1930s the military party gradually extended its control over the government, brought about an increase in armaments, and reached a working agreement with the zaibatsu. Military extremists instigated the assassination of Prime Minister Inukai in 1932 and an attempted coup in 1936. At the same time Japan was experiencing a great export boom, due largely to currency depreciation. From 1932 to 1937, Japan engaged in gradual economic and political penetration of N China. In July, 1937, after an incident at Beijing, Japanese troops invaded the northern provinces. Chinese resistance led to full-scale though undeclared war. A puppet Chinese government was installed at Nanjing in 1940.
Meanwhile relations with the Soviet Union were tense and worsened after Japan and Germany joined together against the Soviet Union in the Anti-Comintern Pact of 1936. In 1938 and 1939 armed clashes took place on the Manchurian border. Japan then stepped up an armament program, extended state control over industry through the National Mobilization Act (1938), and intensified police repression of dissident elements. In 1940 all political parties were dissolved and were replaced by the state-sponsored Imperial Rule Assistance Association.
After World War II erupted (1939) in Europe, Japan signed a military alliance with Germany and Italy, sent troops to Indochina (1940), and announced the intention of creating a "Greater East Asia Co-Prosperity Sphere" under Japan's leadership. In Apr., 1941, a neutrality treaty with Russia was triumphantly concluded. In Oct., 1941, the militarists achieved complete control in Japan, when Gen. Hideki Tojo succeeded a civilian, Prince Fumimaro Konoye , as prime minister.
Unable to neutralize U.S. opposition to its actions in SE Asia, Japan opened hostilities against the United States and Great Britain on Dec. 7, 1941, by striking at Pearl Harbor, Singapore, and other Pacific possessions. The fortunes of war at first ran in favor of Japan, and by the end of 1942 the spread of Japanese military might over the Pacific to the doors of India and of Alaska was prodigious. Then the tide turned; territory was lost to the Allies island by island; warfare reached Japan itself with intensive bombing; and finally in 1945, following the explosion of atomic bombs by the United States over Hiroshima and Nagasaki, Japan surrendered on Aug. 14, the formal surrender being on the U.S. battleship Missouri in Tokyo Harbor on Sept. 2, 1945.
Surrender and Occupation
The Japanese surrender at the end of World War II was unconditional, but the terms for Allied treatment of the conquered power had been laid down at the Potsdam Conference . The empire was dissolved, and Japan was deprived of all territories it had seized by force. The Japanese Empire at its height had included the southern half of Sakhalin, the Kuril Islands, the Ryukyu Islands, Taiwan, the Pescadores, Korea, the Bonin Islands, the Kwantung protectorate in Manchuria, and the island groups held as mandates from the League of Nations (the Caroline Islands , Marshall Islands, and Mariana Islands. In the early years of the war, Japan had conquered vast new territories, including a large part of China, SE Asia, the Philippines, and the Dutch East Indies. With defeat, Japan was reduced to its size before the imperialist adventure began.
The country was demilitarized, and steps were taken to bring forth "a peacefully inclined and responsible government." Industry was to be adequate for peacetime needs, but war-potential industries were forbidden. Until these conditions were fulfilled Japan was to be under Allied military occupation. The occupation began immediately under the command of Gen. Douglas MacArthur . A Far Eastern Commission, representing 11 Allied nations and an Allied council in Tokyo, was to supervise general policy. The commission, however, suffered from the rising tension between the USSR and the Western nations and did not function effectively, leaving the U.S. occupation forces in virtual control.
The occupation force controlled Japan through the existing machinery of Japanese government. A new constitution was adopted in 1946 and went into effect in 1947; the emperor publicly disclaimed his divinity. The general conservative trend in politics was tempered by the elections of 1947, which made the Social Democratic party headed by Tetsu Katayama the dominant force in a two-party coalition government. In 1948 the Social Democrats slipped to a secondary position in the coalition, and in 1949 they lost power completely when the conservatives took full charge under Shigeru Yoshida.
Many of the militarist leaders and generals were tried as war criminals and in 1948 many were convicted and executed, and an attempt was made to break up the zaibatsu. Economic revival proceeded slowly with much unemployment and a low level of production, which improved only gradually. In 1949, however, MacArthur loosened the bonds of military government, and many responsibilities were restored to local authorities. At San Francisco in Sept., 1951, a peace treaty was signed between Japan and most of its opponents in World War II. India and Burma (Myanmar) refused to attend the conference, and the USSR, Czechoslovakia, and Poland refused to sign the treaty. It nevertheless went into effect on Apr. 28, 1952, and Japan again assumed full sovereignty.
The elections in 1952 kept the conservative Liberal party and Premier Shigeru Yoshida in power. In Nov., 1954, the Japan Democratic party was founded. This new group attacked governmental corruption and advocated stable relations with the USSR and Communist China. In Dec., 1954, Yoshida resigned, and Ichiro Hatoyama , leader of the opposition, succeeded him. The Liberal and Japan Democratic parties merged in 1955 to become the Liberal Democratic party (LDP). Hatoyama resigned because of illness in 1956 and was succeeded by Tanzan Ishibashi of the LDP. Ishibashi was also forced to resign because of illness and was followed by fellow party member Nobusuke Kishi in 1957.
In the 1950s Japan signed peace treaties with Taiwan, India, Burma (Myanmar), the Philippines, and Indonesia. Reparations agreements were concluded with Burma (Myanmar), the Philippines, Indonesia, and South Vietnam, with reparations to be paid in the form of goods and services to stimulate Asian economic development. In 1951, Japan signed a security treaty with the United States, providing for U.S. defense of Japan against external attack and allowing the United States to station troops in the country. New security treaties with the United States were negotiated in 1960 and 1970. Many Japanese felt that military ties with the United States would draw them into another war. Student groups and labor unions, often led by Communists, demonstrated during the 1950s and 1960s against military alliances and nuclear testing.
Prime Minister Kishi was forced to resign in 1960 following the diet's acceptance, under pressure, of the U.S.-Japanese security treaty. He was succeeded by Hayato Ikeda , also of the LDP. Ikeda led his party to two resounding victories in 1960 and 1963. He resigned in 1964 because of illness and was replaced by Eisaku Sato , also of the LDP. Sato overcame strong opposition to his policies and managed to keep himself and his party in firm control of the government throughout the 1960s.
Opposition to the government because of its U.S. ties abated somewhat in the early 1970s when the United States agreed to relinquish its control of the Ryukyu Islands, including Okinawa, which had come under U.S. administration after World War II. All of the Ryukyus formally reverted to Japanese control in 1972. In that same year, Sato resigned and was succeeded by Kakuei Tanaka, also a Liberal Democrat. For his efforts in opposing the development of nuclear weapons in Japan, Sato was awarded the Nobel Peace Prize in 1974. Later that year, Tanaka resigned and was replaced as prime minister by Takeo Miki, another Liberal Democrat. Miki, who became embroiled in a scandal over his personal finances, was replaced by Takeo Fukuda. Though Fukuda was considered to be an expert in economic policy, he had difficulty in combating the economic downturn of the late 1970s. He was replaced by Masayoshi Ohira, who died in office in 1980 and was replaced by Zenko Suzuki.
In 1982, the more outspoken Yasuhiro Nakasone took office. He argued for an increase in Japan's defensive capability, extended his second term by an extra year, and appointed his own successor, Noboru Takeshita. The terms of both Takeshita and his replacement, Sosuke Uno, were cut short by influence-peddling and other scandals that shook the LDP and caused a public outcry for governmental reform. In the general election of 1989, the LDP lost in the upper house of the parliament for the first time in 35 years; nonetheless, LDP president Toshiki Kaifu became prime minister later that year. He drew much criticism for pledging $9 million to the United States for military operations in the Persian Gulf, and in 1991 he was succeeded as prime minister by Kiichi Miyazawa.
After the LDP split over the issue of political reforms in 1993, the Miyazawa government fell. None of Japan's political parties managed to win a majority in the subsequent elections. An opposition coalition formed a government and Morihiro Hosokawa became prime minister. Hosokawa resigned in 1994 and was succeeded by fellow coalition member Tsutomi Hata , who resigned after just two months in office. In June, 1994, Tomiichi Murayama was named prime minister of an unlikely coalition of Socialists (now the Social Democrats) and Liberal Democrats, thus becoming the nation's first Socialist leader since 1948.
During 1995, Japan was shaken by two major disasters. The worst earthquake in Japan in more than 70 years struck the Kobe region on Jan. 17, killing more than 6,000 people. On Mar. 20, lethal nerve gas was released through plastic bags left in the Tokyo subway system by members of the Aum Shinrikyo religious group; 12 people were killed, and about 5,000 others suffered ill effects.
Murayama resigned as prime minister early in 1996 and was succeeded by LDP leader Ryutaro Hashimoto . In 1997, Japan suffered a major economic crisis resulting from the failure of stock brokerage firms and banks. The financial industry was rocked by scandals, leading to a number of prosecutions and, in early 1998, the resignation of the finance minister and the governor of the Bank of Japan, the nation's central bank. Although Prime Minister Hashimoto announced a program of tax cuts and spending to spur the economy, Japan slipped into its deepest recession since the end of World War II. The country's bad debt was estimated at near $1 trillion when Keizo Obuchi was elected head of the LDP and succeeded Hashimoto as prime minister in mid-1998. In Oct., 1998, the parliament approved legislation to allow the government to nationalize failing banks and to commit more than $500 billion to rescue the nation's banking system. By the time Japan's economy began to revive somewhat in 1999, the government had spent more than $1 trillion in a series of economic stimulus packages that included numerous public works projects.
In Jan., 1999, the LDP agreed to form a coalition government with the Liberal party, and the New Komeito party later joined the coalition. The Liberals withdrew from the government in Apr., 2000. Shortly afterward, Obuchi was incapacitated by a severe stroke and was replaced as prime minister by Yoshiro Mori , secretary-general of the LDP. lower-house elections the LDP-led coalition lost seats, but it retained control of the house and Mori remained prime minister. A series of political blunders undermined Mori, who was replaced by Junichiro Koizumi , an insurgent supported by the LDP rank and file, in Apr., 2001; the same month the New Conservative party joined the governing coalition. An LDP victory in upper-house elections in July, which the party had earlier been expected to lose, was regarded by Koizumi as a mandate for his government. Reform was resisted, however, by entrenched government bureaucrats as well as by LDP factions that would be affected by it, and Koizumi's government has tended to avoid difficult choices and largely has continued the status quo.
Despite that mandate and his initial popularity, Koizumi had difficulty passing more than superficial economic reforms, as powerful and entrenched bureaucratic and LDP interests resisted change. The stagnant economy, hindered by a domestic deflationary spiral that began in the early 1990s and by contraction overseas, experienced its fourth recession in 10 years in 2001. In November unemployment reached 5.5%, a postwar high. In part because of already high levels of government debt, Koizumi's government adopted a 2002 budget that reduced expenditures, instead of increasing spending to stimulate the economy. The economy improved beginning in 2002, but the government continued to fail to make any significant economic reforms. Also in 2002, Koizumi made a landmark visit to North Korea, which led to an agreement to establish diplomatic relations between Japan and North Korea.
Elections in 2003 resulted in large gains for the opposition Democratic party, but the LDP-led coalition retained a significant majority in parliament. Following the election, the New Conservatives merged with the LDP. The LDP and New Komeito party largely held onto their majority in the July, 2004, upper house elections, but the opposition Democratic party made solid gains at the expense of smaller parties.
In 2005, Koizumi sought to win passage of a plan to privatize Japan Post, which includes Japan's largest savings and insurance systems in addition to the postal system, but failed to win support for it in the upper house when a sizable number of LDP members voted against it. Calling a snap lower-house election, Koizumi gained (Sept., 2005) a huge victory in which the LDP took 60% of the seats, and the following month secured passage of legislation to privatize Japan Post over the decade beginning in 2007.
Postwar International Relations
As the world's second largest economy, Japan has struggled to define its international role. Its postwar foreign policy was aimed at the maintenance and expansion of foreign markets, and the United States became its chief ally and trade partner. In the early 1970s, however, U.S.-Japanese relations became strained after the United States pressured Japan to revalue the yen, and again when it began talks with Communist China without prior consultation with Japan. Partly in response, the Tanaka government established (1972) diplomatic relations with Communist China and announced plans for negotiation of a peace treaty. Relations also became strained with South Korea and Taiwan. Japan did not sign a peace treaty with the USSR because of a dispute over territory in the Kuril Islands formerly held by Japan but occupied by the USSR after the war. The two countries did, however, sign (1956) a peace declaration and establish fishing and trading agreements.
Beginning in late 1973, when Arab nations initiated a cutback in oil exports, Japan faced a grave economic situation that threatened to reduce power and industrial production. In addition, a high annual inflation rate (19% in 1973), a price freeze, and the instability of the yen on the international money markets slowed Japan's economy; in the late 1970s, however, the continued growth of foreign markets brought Japan out of its slump.
In the 1980s many Japanese firms invested heavily in other countries, and Japan had a surplus with virtually every nation with which it traded. The high level of government involvement in banking and industry led many other countries to accuse Japan of protectionism. The United States in particular sought to reduce its huge trade deficit with Japan. Japan also had to deal with growing economic competition within its own region from such countries as South Korea, Taiwan, and (beginning in the 1990s) China. Japan's emphasis on exports also caused it to neglect its domestic markets.
In addition to these economic pressures, great political pressure was put on Japan to assume a larger role in world affairs. Although its constitution forbids the maintenance of armed forces, Japan has a sizable military capability for defensive warfare. The United States has increasingly pressed Japan to assume a larger share of responsibility for the defense of its region. The first Persian Gulf War caused great dissension in Japan. The government, which felt tremendous pressure to contribute to the UN effort in accordance with its economic power, also had to address the decidedly antimilitaristic bias of the Japanese people. By 2003, however, concern over North Korea's pursuit of nuclear weapons and missiles and over China's growing power led to the removal of some legal restrictions on the government's ability to respond militarily to an attack, and the Liberal Democrats proposed amending the constitution's limits on its defense forces. Late in 2004 relations with North Korea became especially strained when Japan suspended food aid to it after the remains it returned to Japan of a woman who had been kidnapped by Korea turned out to be not hers.
Relations with South Korea and China soured in the spring of 2005. Both nations were upset by school history textbooks that minimized aspects of Japan's role in World War II. In addition, South Koreans objected to the reassertion of Japanese claims to the Liancourt Rocks , which Korea occupies, while Chinese demonstrated against a plan that called for giving Japan a permanent seat on the UN Security Council and both nations contested the ownership of an exclusive economic zone in the East China Sea. The annual visit (Oct., 2005) of the prime minister to the Tokyo shrine honoring Japan's war dead also strained relations with South Korea and China.