Japan goes gaga for Gillard as Australia shows solidarity one year on.

A year on from the after the earth quake and tsunami natural disasters that engulfed Japan it is important to recall that two prominent foreigners went to Japan soon after to show solidarity.

Global pop sensation Lady gaga went to Japan for 10 days. Say what you like about Lady gaga and the current mass culture of celebrity, in Japanese eyes ‘ Gagamania’ was  great for morale after such a torrid time in Japan which has experienced the biggest  devastation in 60 years.

However, another foreign figure was also went to Japan in a gesture that was appreciated by the Japanese people. Australian Prime Minister Julia Gillard, also visited Japan and spent a lot of time visiting the affected areas and comforting the victims who have had their lives shattered. Julia Gillard was the first foreign Prime Minister to set foot on Japanese soil post-earthquake and her decision to come so quickly after the disaster was considered to be a great gesture to the Japanese people by a friend.

As Chris Rees, Senior Trade Commissioner in Osaka said: “We put together a function for Prime Minister Gillard and the Japanese government. It wasn’t a usual diplomatic function. It wasn’t about trade or education, or announcing a n iron ore or a gas deal. It was simply to show Japan that they are not alone at their hour of need and that Australia cared. It was also important for Australia’s diplomatic troops led by Ambassador Murray McLean in Tokyo, to have something to work towards after counselling trauma victims amongst the expatriate and local community. Julia Gillard’s initiative to come to Japan brought us together and enabled us to help Japan cope with the crisis. It was an important gesture and served an important practical purpose.”

In fact, the Japanese mourning period is important culturally. As a local observer Tomoko Ichikawa noted: “The Japanese are a very spiritual people. It’s part of our Buddhist philosophy. There’s 49 days of mourning, then memorial services on the 100^th day, 3^rd year, 7^th, 13^th and even the 39^th year.” But what are the economic implications of these important rituals. According to Tomoko Ichikawa, this is causing some confusion. “It’s important to mourn and to care, but for the victims but should you save or should you spend? There is sort of a view in Japan now that ‘life is more precious than shopping’ but if we don’t spend that could hurt Japan even more.”

Tomoko Ichikawa is right. There is a fear that Japan could create what the famous British economist John Maynard Keynes called “the paradox of thrift”, where a decision by one individual to not spend, if done collectively could reduce demand and harm the whole economy.

Chris Rees agrees that there has been a variety of reactions across the country. “Some mayors cancelled concerts and fireworks in solidarity with the affected areas of the country, whilst others thought it was their public duty to spend to help rebuild the country.”

Tomoko Ichikawa who works in creative industries in Tokyo,  now thinks this is changing, at least in the Japanese capital. At first, people stopped going to concerts, and felt they couldn’t celebrate whilst other suffered. Whilst now they think getting life back to normal may be more of a help than a hindrance.”

Other implications affecting the domestic economy concern energy and infrastructure. As Tomoko Ichikawa explains: “Public transport is the life line of Japan and everyone expected reduced capacity and anticipated energy shortages. But they haven’t happened in Tokyo, at least so far.”

Another response to the disaster has been a change in mindset about Japan’s global engagement. According to Chris Rees, “the disaster has forced Japanese corporates to re-think their long term strategies to partially de-couple from the domestic economy, especially when major companies like Panasonic only manage 25 per cent of their total sales off shore. This is providing potential opportunities for Australia, particularly in developing global human capital capability.” Rees points to a number of Australian education institutions such as the University of New South Wales (UNSW) and the University of Southern Queensland (USQ)  who have been help re-tool Japanese workforces to adjust to a more globally orientated business environment.

As Rees explains: “Building discrete critical functions out of Tokyo and out of Japan is an important strategic realignment for Japan after the impact of the disasters on domestic capability.”

So in short, the incidents last year, as tragic as they are in human terms, could bring a new wave of globalisation for Japan in which Australia will have an important role to play. We’ve already seen that in terms of Japanese investment with the new PwC report showing Japanese households increasing foreign holdings, with Australia being the second most popular foreign destination after the US. And embracing Lady Gaga is ok if it is symbolic of Japan’s willingness to go global to spread risk and build solidarity at home after the worst disaster to impact its economy and society in 60 years. And that’s why it was so significant that Julia Gillard went quickly to Japan to show that Australia is not just an important economic  partner but is also a true friend of Japan.

*Tim Harcourt is the J.W.Nevile Fellow in Economics at the Australian School of Business, UNSW, Sydney and author of The Airport Economist: www.timharcourt.com