Take a round trip from Tokyo to Hong Kong and you get a sense of where the balance of power in Asia is headed before you even reach your hotel. Contrast the 90-minute plus grind out to Tokyo’s Narita international, 60 kilometres from the city centre and several decades away from the present, with the 24-minute rail ride into the sleek, 24-hour Hong Kong International.
Protected by its isolationist tendency from the worst of the financial crisis, Japan nonetheless faces a more insidious, slow-acting threat: irrelevance. Investment banks have been moving their centres of operations in Asia from Tokyo to Hong Kong and Singapore for the past decade. Lehman Brothers, perhaps the only remaining Wall Street name to run Asia from Japan, now appears to be joining the shift westwards. There was a 60% slump in IPO volumes on the Tokyo exchange last year, while new issuances prospered in China and India. Most worryingly, however, the sense of momentum behind the reforms of the Koizumi era has been replaced by one of stagnation, fragmentation, uncertainty. At the time of writing, the Bank of Japan remains leaderless when central banks are vital components in the fight against a global market collapse: political wrangling between the ruling LDP and the toothless opposition has left the BoJ in charge of a deputy for the time being.