Japan's inability to turn its economy around for the last two ‘lost’ decades continues to baffle us. With this book, Hatch provides insights into the surprising inertia in Japan's political economy that has resisted changes in the face of massive globalization challenges. In succinct terms, he argues ‘that Japanese bureaucratic and business elites avoided, or more precisely forestalled, change in the domestic political economy by regionalizing Japan's core networks of political and economic exchange’ (p. 4) by utilizing Japan's strong manufacturing position, particularly vis-à-vis Southeast Asia, in the 1990s. Hatch starts with the concept of ‘selective relationalism’, borrowed from economic sociology, to explain how Japan's economic elite actors from bureaucrats, business executives, management, and labor of large firms (p. 43) collectively guarded the post-war economic structure with ‘a desire to maintain the positional power they have come to enjoy’ (p. 250). As selective relationalism lived beyond its usefulness and prevented new innovation and changes from taking place by the 1980s, it was Japan's economic regionalization that prolonged the life of this system. By invoking the perspective of ‘the second image reversed’, which emphasizes how external factors influence the domestic environment, Hatch vividly traces how expanding regionalization of manufacturing industries into Southeast Asia perpetuated Japan's ancien régime.

With his refined and witty prose, Hatch weaves through developments of Japan's political economy on both domestic and regional stages. As Japan went through the economic catch-up, relationalism linked the state with industries through informal guidance and created networks among businesses through horizontal and vertical keiretsu (Chapters 2 and 4). Within the large firms, lifetime employment, seniority pay, and enterprise unions have become the foundation of social contract between management and labor (Chapter 4). These policy and business networks provided stability and predictability for Japan's economic growth and economic security during its post-war high growth era, but they then began to impair changes as the Japanese economy matured. How did the arrangement outlive its usefulness in the 1990s? Hatch employs a novel concept of ‘elite regionalization’. He explains that overseas production facilities established by Japanese manufacturing industries during the 1980s into the 1990s, with the support of the Japanese government, allowed these firms to keep supporting the selective reglationalism (Chapters 3 and 5). For example, many of the managerial and technical white-collar employees were sent to the firm subsidiaries in Asia to manage their operations, making it possible for the firms to avoid layoffs. The 1997 Asian Financial Crisis temporarily strengthened Japan's positional power over the region through Japan's financial assistance in support of the Japanese firms (p. 169–174).

The longevity of relational ties came at a high cost, however, as the Japanese political economic system became increasingly outmoded and unable to respond to signals outside its own network structures (p. 179). The costs came in forms of hollowing-out, growing income gap, sliding technological innovation, and underdeveloped entrepreneurship (Chapter 6). By the start of the new millennium, Japanese business began to lose against both the Western businesses that entered the region following the Asian Financial Crisis and China, whose economic rise became prominent in the 2000s (Chapter 7). As the ‘Asia's lead flying geese’ got grounded and the Japanese multinational corporations began to participate in a new international division of labor, Japan's relation-based political economy has finally encountered imminent transformation (Chapter 8).

This book sheds light on an important political economic force that supported the regional expansion of Japanese manufacturing industries into Asia, and provides a framework to explain the social dynamics behind Japan's seemingly irrational policy choices during its ‘lost decade’. This book, hence, makes a valuable contribution to the studies of contemporary Japanese economy and its foreign economic engagement. Nonetheless, Hatch's incredibly insightful argument would have benefited, in the face of prevalent ‘Japanese uniqueness’ bias, from more attention to the broader institutional context where the agents make choices.

With an agency-centric approach, he argues that ‘the cast’ of main players surrounding Japan's manufacturing industries acted to assure the continuation of this sticky selective relationalism. The first question here is how important and influential the arrangements in manufacturing industries have been to the rest of the Japanese political economy, particularly as he focuses on certain sectors such as automobiles and home electronics. Relatedly, to what extent have the broader structures and institutions developed in post-war Japan contributed to perpetuating the old Japanese system? Take lifetime employment, for example. Job security is the main concern of middle-aged white-collar workers, not only because they want to protect their positional power, but their surrounding institutions make it their only choice. With inadequate government support at times of unemployment, with home loans difficult to obtain without employment security, and woman's status as temporary workers, the ‘bread-and-butter earners’ had no recourse but to cling to their companies. Fully acknowledging the difficulty of disentangling the causality, it is nonetheless important to take into consideration how Japanese institutional deficiency has contributed to delay the changes the agents choose.

Finally, it will be useful to examine the alleged triumph of Japan's selective relationalism from the other side of the same coin and through comparative perspective. That is, given that the elites and the powerful always tend to dominate, why it is that Japanese new forces have failed to incite changes while the same forces in other countries managed to overcome information asymmetry and overturn their weak positional power. Here once again more attention to broader institutional factors is important. For Japan, lack of solid and substantive democracy under the long-time one-party rule, very conservative judicial system and single-minded educational pursuit toward secure white-collar jobs have all contributed to killing the challenges to selective relationalism before they even had their fighting chance. As we enter into the second decade of the new millennium, the jury is still out whether or not the series of crises would manage to dislodge Japan's entrenched system.