The Growing Comprehension Gap That Isolates Japan

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The Bank of Japan did exactly what it said it would do: nothing. Yet traders were stunned.

The market churn after the Jan. 18 decision to keep policy unchanged, something expected by almost every economist surveyed, might seem a little odd. Blindsided in December by Governor Haruhiko Kuroda’s yield-curve control tweak, some observers had begun talking themselves into believing that not just further adjustments were possible, but that he was set to wholesale dismantle his decade-long easing program.

Some of this was wishful thinking; others were hoping to force the BOJ’s hand. Nonetheless, Kuroda seemed bemused, as were many domestic observers puzzled by expectations that the central bank would not just tweak, but soon shift to a full-on tightening just as its inflation target comes tantalizingly within reach, and crucially before wages have a chance to lock that change in.

Kuroda has muddied the waters with his conflicting statements. While other central banks have taken great pains to signal the direction of future policy, the BOJ prefers to keep markets guessing — painting a target on its own back as speculation and misinterpretation fill the void. It doesn’t even publish an English-language transcript of the governor’s post-decision briefing, where he drops much of his policy hints.

But even if it did, would people listen? Along with a general disinterest in the BOJ when it’s not roiling markets, Tokyo’s declining importance as a financial center — it dropped to 16th in the most recent Global Financial Centers index, below Seoul, Sydney and Shenzhen — means the central bank is less closely watched than its global importance might merit. While watchers of the US Federal Reserve closely study comments from each member of the board of governors, how many could even name the other members of the BOJ’s monetary policy committee, much less their positions on future tightening?

It exemplifies a broader communication gap between Japan and western observers, even at a time when the country’s geopolitical importance is rising. Exacerbated by the pandemic, the country seems increasingly distant.

It’s not just finance. Despite the weak yen and Tokyo’s charms, many international newsrooms have reduced their presence over the years. Most that abandoned the country in the early ’90s, after the bursting of the bubble, never came back. The New York Times’s recent decision to snub Tokyo and relocate its Hong Kong digital news operations to Seoul typified this trend.

All of this contributes to what might be described as a growing global ignorance of the world’s third-largest economy — even when it would be beneficial. Japan was among the first countries outside China to encounter the coronavirus in 2020, when the Diamond Princess cruise ship landed on its shores. That helped scientists to learn about the airborne nature of the virus, something the US wouldn’t recognize for months. They concluded elimination was impossible, shifting to containing cases instead, while avoiding lockdowns. “The rest of the world could have understood the virus as Japanese officials did,” the Columbia University professor Zeynep Tufekci wrote in a 2022 article outlining steps the US and others could have taken to save millions of lives. Unlike Sweden’s outspoken scientists, Tokyo’s rarely pushed their case; the text-dense communication style of the country’s bureaucrats doesn’t travel well. Announcements of crucial public information, such as vaccination schedules, were opaque and frustrating.

The bureaucracy here doesn’t help. Consider the 2018 arrest of Carlos Ghosn, when foreign journalists were shut out by prosecutors, unable even to confirm reports of his detainment, much less the case against him. While authorities left foreign outlets in the dark, Ghosn’s PR machine defined the narrative as an unfairly done-by foreigner singled out by an ungrateful country. This had real-world consequences, as international pressure led to Ghosn later being granted bail, even as prosecutors rightly feared him to be an escape risk.

Despite today’s technology, the language barrier seems to be growing. One survey of English proficiency ranked Japan 80th of 112 countries, below Bangladesh and Nepal. Even before the pandemic, the number of Japanese studying abroad was dropping, sliding 30% by 2018 from a 2004 peak. Those learning Japanese in North America have also plateaued, even as Mandarin students doubled in the two years to 2017.

If you don’t speak the language, things are even worse. China watchers enjoy dozens of books about the world’s second-largest economy. But outside of textbooks, these days little is written in English about the political or business spheres of the third largest. This isn’t simply academic — perhaps Tim Cook wouldn’t be scrambling to diversify Apple Inc.’s China-dependent supply chain if more had learnt lessons from the Japanese firms burned by their earlier push into China, or if the country’s China hawks had been better able to push their case in the 2000s. There are few businessmen left to share their tales, with the likes of Kazuo Inamori and Sony Group Corp. co-founder Akio Morita having passed on, while a generation has yet to emerge to succeed Masayoshi Son and Rakuten Group Corp.’s Hiroshi Mikitani.

Technologies like DeepL Translator do an incredible job of translating texts between languages. But they can’t yet interpret culture and nuance, especially when we’re talking about the subtle nods of central bankers, or the uncertainty of the early days of Covid. They can’t point you in the direction of things you should read.

Japan certainly benefits from this isolation — it has drawn little rebuke on issues such as its ongoing dependence on Russian gas. But everyone would be served by closer understanding of a country at the forefront of demographic changes others will soon encounter.