Based on Hegemonic Stability Theory, this essay examines the limits of U.S. hegemony and argues that Japan must reemerge as a global financial, technological, and civilizational leader. By mobilizing private assets, revitalizing capital markets, and pursuing national interest without hesitation, Japan is called to fulfill a 170-year historical mission as a world champion.
Hegemonic Stability Theory
July 17, 2010
For details, refer to “Hegemonic Stability Theory.”

◎ What Is Hegemonic Stability Theory
Hegemonic Stability Theory was proposed by the economist Charles Kindleberger and later established by Robert Gilpin.
For the world to remain stable and economically developed under the hegemony of a single nation, the following conditions are required.

1. One nation must possess overwhelming political and economic power, that is, hegemony.
   That hegemonic nation must understand the free market and seek to construct an international system to realize it.
   That other nations are able to enjoy benefits within the international system built by the hegemonic power.

◎ A Hegemonic Power Is Sustained Not by “Domination” but by “Provision of Benefits”
The international community does not become stable simply because a single nation monopolizes overwhelming hegemony.
What is important is whether the hegemonic nation can build and maintain an international system that provides benefits to other countries.
As long as this system is beneficial to all nations, non-hegemonic states can conduct smooth economic activity without having to build their own international system.
Judging from the above conditions, it is indeed true that the present United States is a genuine hegemonic power.
Twenty-five years ago, I continued to ponder why hegemonic states exist in the world.

◎ The Turntable of Civilization and Japan’s Turn
During the eight days I stayed in Rome for personal business and looked at the world from there, I realized that half of the world is still poor and cannot even afford food.
That is why a ferociously prosperous nation is necessary.
And in that way, money somehow flows even to Africa.
Looking at history from ancient times, I realized that civilization moved from Italy to Portugal and Spain, to France, to Britain, to the United States, and then to the United States and Japan.
That is what the turntable of civilization is.

◎ Fifty Years of U.S. Hegemonic Fatigue and Japan’s Latent Position
Thirty years ago, the United States became a hegemonic power and developed serious strain in only fifty years.
The inevitable consequence of a mass-consumption economy, born from its role of elevating poorer countries, was the expansion of fiscal deficits, and the danger that the world itself would fall into crisis.
A free nation that could stand alongside and prosper with the United States was needed — and that nation could be none other than Japan.
At that time, we were creating a civilization unprecedented in human history: one without rigid class, ideology, or religion.
If the United States is assumed to be a Christian nation, this came at the cost of four million lives in the final stage of the war.
It is no exaggeration to say that, in essence, Japan has been a nation without rigid class, ideology, or religion throughout its recorded history.
Now I think as follows.
Fifty years after hegemony shifted from Britain to the United States, the world’s population had doubled to 6.5 billion.
The United States alone can no longer save the world, and even now it is crying out in distress.
Europe, Japan, China — expand domestic demand.
Yet last year, people in Japan’s stock market commented that from now on “Japan will turn away from the United States and rely on China.”
This is the tragedy of having failed to realize that the turntable of civilization had already come to Japan more than thirty years ago.
It is also the grave responsibility of the mass media, which, without recognizing the truth, wielded a foolish sense of justice and created Japan’s lost twenty years.
It is customary that a hegemonic nation lasts two hundred years.
It is absurd to say that Japan’s era is already over.
Japan must continue to prosper for the next 170 years as a super-economic power that stands alongside or complements the United States.
Japan, whose Constitution renounces military force except for self-defense, can leave military power to the United States and continue to prosper economically.
This is, at this point, a view expressed with irony.

◎ Why Did Japan Fall into Two Decades of Stagnation
Why did Japan experience such a great stagnation over the past twenty years.
To put it severely, it was because the mass media and politics remained at the mental age of thirteen.
Exposed daily to innovation and competition, Japan’s corporations have honed world-class technologies across multiple fields and command large global market shares.
With diligence, meticulousness, and a high level of education, Japan became an industrial nation possessing the world’s largest private assets of 1,500 trillion yen.
Yet the money generated by this society and market was not returned to the market but stagnated in excess of 500 trillion yen in postal savings as a mass of petty egoism that valued compound interest higher than productive investment.
Omitted.
It is no exaggeration to say that the money was not returned to the market at all.
Japan mocks itself for having created mobile phones that are too advanced and thus technologically “Galápagos-like.”
China, however, is a national-scale Galápagos, and by exploiting its population of 1.3 billion and pursuing a weak-currency policy as a state, dismissing globalization entirely, it has now become the world’s so-called savior.
Japan should do the same.
Even now Japan must make use of its world-leading private assets of 1,000 to 1,500 trillion yen.
Money generated by society — the fruit of diligent and excellent workers who supported Japan as an industrial nation — must be returned to society.
The true underlying cause of Japan’s great stagnation over the past thirty years lies in the fact that a capitalist nation continued to despise the stock market, which is the very foundation of capitalism.
That is precisely why Japan was taken advantage of.
Among my classmates, not a single one went into the securities industry.
People sneered at stockbrokers and dismissed stocks entirely.
Meanwhile, the top graduates of Harvard in the United States go to Goldman Sachs and later become Secretaries of the Treasury.
The reason the yen becomes a safe-haven currency and rises in times of crisis is that more than 95 percent of Japan’s government bonds are financed by these private assets — a structure almost unparalleled in the world.

◎ One Percent of Private Assets Will Restore Japan as a Global Financial Power
If only 1 percent of private assets — 10 trillion yen — is directed into the stock market, Japan will instantly become a gigantic market standing alongside the United States and a global financial superpower.
Profits from stock trading should be taxed at zero percent, provided that they are accompanied by receipts proving that they were spent on consumption.
Omitted.
American asset holders invest two-thirds of their wealth in stocks, thereby returning money to society and expanding their economy further, whereas the vast majority of Japanese asset holders do not.
Omitted.
That 70 percent of the stock market, the very core of capitalism, is held by foreign capital is tantamount to national takeover.
If a mere 1 percent, or 10 trillion yen, of private assets moves, the foreign share will immediately fall into the twenty-percent range.
For economic stability and safety under the banner of globalization, that level is sufficient.
I believe that greed lurks behind the word “global.”
Foreign investors currently hold about 88 trillion yen in Japanese stocks, roughly 45 percent of the total.
If 10 percent of private assets — 100 trillion yen — is guided into the acquisition of shares in Japan’s excellent large corporations and companies that dominate global markets across various sectors, domestic ownership will rise to 296 trillion yen.
If dividends are made tax-free, as has long been done in Singapore, deflation would end instantly.
Limited to cases accompanied by receipts proving consumption.
Since the average dividend of listed companies is around 2 percent annually, a huge sum of 5.92 trillion yen would flow into consumption, expanding domestic demand and GDP.
If taxes on stock trading are likewise reduced close to zero under the same conditions, the amount of money flowing into consumption will become even more enormous.
If 1 percent of private assets moves daily through market transactions and 10 percent goes into the acquisition of shares in Japan’s excellent corporations, it is natural that the world will move while watching the Tokyo and New York stock exchanges.
If a weak yen is in Japan’s national interest, then the state should boldly pursue a weak-yen policy.
Almost all countries in the world act with their national interests as the top priority, so Japan need not hold back.
When enormous sums of money flow into consumption, domestic demand will expand immensely, and world-class products and luxury goods that captivate the Japanese aesthetic sense will be consumed on an entirely different scale.
Japan should decide its own path for itself.
As a nation possessing the world’s largest financial market and the most advanced technologies across many fields, Japan should, in the true sense, remain a global Galápagos as an island nation.
For the next 170 years, Japan should enjoy its status as a world champion standing alongside the United States.
That is the role of the nation upon which the turntable of civilization has landed, and inevitably it will become the savior of the world.
The policy advocated by Yoshiaki Ono, namely consumption-tax increases, will unfortunately not restore Japan.

◎ The 170-Year Prosperity of Japan
It is far better to complete the allotted time of splendor in the historical order of two hundred years and then play Japan’s own “Europa” of melancholy, rather than face decline in a miserable and foolish state.
To lament and despair is 170 years too early.
It is out of the question to accept the surge of murders caused by poverty born of foolish stagnation.
Japan need not concern itself with the affairs of other nations.
The recent global financial crisis has already proven that capitalism is not correct in one hundred percent of its form.
It is also obvious that the value of our lives or of major corporations does not fluctuate daily.
As another kind of world-leading nation different from the United States, the shares of excellent companies should not fall but rise continuously, and fall only when business performance deteriorates and dividends disappear, at which time management should be dismissed immediately.
Even in such cases, if the decline is due to unavoidable circumstances such as a Western-origin financial crisis, we should fully exercise one of the Japanese national traits and endure together without selling off stocks.
No one would object to creating such a form of capitalism in the world.
For the next 170 years, Japan should reign in glory as a global Galápagos with no need to hold back from anyone.
It should rule as a nation of the highest intelligence and freedom in the world.
Within the prosperity of a champion nation, children will be born in abundance.
That is why two hundred years of prosperity is possible.
Japan should grow until it reaches a population equivalent to that of the United States — roughly double today’s size — at which point there will be no need to read America’s expressions.
At the very least, Japan must become a consumption superpower equal to the United States.
There is naturally ample living space throughout Japan.
We will be able to bid farewell to the words depopulation and regional decline.
Give birth, raise children.
This is a nation overflowing with beautiful seas, green forests, and mountain ranges.
Thanks to the monsoon climate, our country is among the most beautiful in the world, rich in seasonal change.
There is absolutely no need to concentrate solely in cities like Tokyo and Osaka.
By eating delicious and safe agricultural products and freshly caught seafood, swimming in the sea, running across fields, gazing at mountain peaks, and pursuing one’s primordial lover while speaking of love, a nation will emerge.
For the next 170 years, this island nation will become the Peach Blossom Spring dreamed of by ancient Chinese philosophers.
That is our true role.
I can vividly see the world’s admiration gathering toward such a Japan.
There will be no need to proclaim a tourism-based nation, for people from all over the world will naturally gather here.
Especially the young and the excellent.
For the world’s richest and most beautiful Peach Blossom Spring for both young and old will have come into being.
The present culture and mass media of mental age thirteen will vanish instantly.
Profound music that truly resonates will be born to lead the world, and films rivaling Hollywood will be created.
This will be the Japan of the next 170 years — a nation in which each individual is the protagonist, a king, the Emperor, and the head of state.
For this, there were the firebombings, Hiroshima, and Nagasaki.
Four million lives, more than half of them young and beautiful like you, were not lost in vain.
They died for us, for our present, so that this nation might become the world’s richest, most beautiful, and most capable of celebrating the highest freedom and intelligence.
They did not die so that we might lose our lives again for empty formalities or rituals, repeat foolish mistakes, or live only for our own egoism or our own families.
They died so that this beautiful nation might become a champion of freedom and intelligence.
The only way we can repay them is by achieving the greatest glory in the world and showing the world why Japan prospers.
Finally.
Japan will become a global financial superpower standing alongside the United States, a nation of massive stock-market capitalization, and a world-leading technological power, and will continue to prosper until the turntable of civilization passes from Japan to some future nation.
It will not pass to today’s China.
The turntable of civilization does not rotate by economic prosperity alone.
It rotates only to a nation that has created both true freedom and the highest intelligence.
As long as China remains a communist dictatorship, the turntable of civilization will not rotate to it.
As long as India fails to overcome the caste system, it will not rotate there.
I personally anticipate that the next rotation may come to Brazil, where the only issue is the disparity between rich and poor.
Until the moment when the baton is passed to the next nation, Japan should continue to prosper for the next 170 years.