Financial Crises, Japan's State Regime Shift, and Tokyo's Urban Policy

Abstract

The 2008 global financial crisis, a major crisis in the history of capitalist development, has called for drastic state activism and market regulation and may lead to state regime shift in many parts of the world. Relying upon John Maynard Keynes's crisis theory, that slumps were always possible in a market system left to itself, and that there was therefore a continuous role for government in ensuring that they did not happen, I look at the case of Japan's state regime shift which two previous financial crises have enabled. I argue that the 1989 crisis catalyzed Japan's developmental state's transition to a new direction and the 2008 global crisis continued to push ongoing shift further. I focus on state and Tokyo's urban policies which played a pivotal role in state regime shift, and assess why state and urban policies have failed to resolve Japan's contribution to global imbalances and avoidance of further crises. I conclude that state and urban policy analysis in the past few decades cannot be dissociated from financial crises, and that Japan's state regime shift is a crisis outcome rooted in Japan's political economy—one of many variations of market economies in the postcrisis multilateral global order.