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  • WSJ: Abenomics’ Missing “Third Arrow: The absence of immigration reform from Abenomics bespeaks a deeper problem”

    Posted by Dr. ARUDOU, Debito on July 30th, 2013

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    As I will be discussing in my next Japan Times column due out next week, one of the things that the LDP has been good at during this election cycle has been controlling the agenda.  By diverting attention away from contentious constitutional reform by talking about economic reform (or at least the promise of it), Abe and Co. have used imagery of loosing “three arrows” (monetary easing and fiscal stimulus, then eventually structural reforms).  The Economist (London) on June 15 wondered if “Abenomics” had “failed before it even properly began“.

    As Debito.org and others have been saying for years now, you can’t have sustained growth without a healthy and energetic workforce, especially as society ages, pensioners crowd out taxpayers, and public works continue to fill in the gaps and crowd out entrepreneurship.  And if you want youth, energy, and entrepreneurialism, you cannot beat immigration and the Can-Do Make-Do Spirit of the Immigrant.

    But the strong xenophobic tendencies of the LDP and the dominant fringes within the ruling side of Japan’s politics have made this currently politically untenable.  And here’s the Wall Street Journal giving us their take on why a serious immigration policy should have been one of the GOJ’s “arrows”.  Arudou Debito

    //////////////////////////////////////////////

    Mr. Abe’s Missing Arrow
    The absence of immigration reform from Abenomics bespeaks a deeper problem.
    By JOSEPH STERNBERG
    Tokyo
    WSJ BUSINESS ASIA June 26, 2013
    http://online.wsj.com/article/SB10001424127887324637504578568613127577972.html

    If there’s one reform that’s symbolic of Prime Minister Shinzo Abe’s eponymous program to rejuvenate the Japanese economy, it’s immigration.

    By importing new consumers and workers, immigration is crucial to stimulating domestic capital investment by companies. By expanding the taxpaying population base, it improves the government’s fiscal position. Immigration will facilitate foreign direct investment, boosting productivity.

    All of that makes immigration reform precisely the kind of bold and deep change Mr. Abe promises. But the thing that makes immigration reform most emblematic of Abenomics is that despite its importance to Japan’s future, it is almost entirely absent from the agenda.

    No one should underestimate the economic damage done by the country’s demographic emergency. Deaths have outnumbered births since 2005, and now that the inflow of expatriates is slowing, the net population has contracted for two years in a row. The age distribution skews ever older. As of 2010, Japan already had the lowest proportions of its population in the 0-14 years and working-age 15-64 years brackets of any developed economy, at 13.2% and 63.8% respectively. By 2050, those age cohorts will have shrunk further, to 9.7% and 51.5%, according to Statistics Bureau estimates.

    Fewer people means fewer consumers. This is one of several interconnected explanations for why Japanese companies are so reluctant to invest at home. It also means fewer workers. One implication is that unless Japan could radically increase productivity per worker—by as much as 3% or 4% per year, an unusual level for a fully developed economy—it will be impossible to deliver the sustained 2% GDP growth Mr. Abe has promised.

    IMAGE: Softbank Corp President—and third-generation immigrant— Masayoshi Son.

    Yet Abenomics only hints at these realities, never quite facing them head-on. Mr. Abe’s emphasis on boosting the embarrassingly low female labor force participation rate is an acknowledgment that Japan needs more workers. But that is only a temporary measure in light of inexorable demographic change, which policy makers seem to forget affects women as much as men.

    Japan needs as many as 10 million immigrants by 2050 to offset natural population decline, according to Hidenori Sakanaka of the Japan Immigration Policy Institute. Many of Mr. Abe’s other goals ultimately depend on immigration. For instance, unanswered in Mr. Abe’s plan to open thousands of new child-care centers so that mothers can return to their careers is the question of who will staff them. Immigrants are the most plausible solution.

    Abenomics is not entirely silent on immigration. Mr. Abe proposes revising the points system used to evaluate the visa applications of high-skilled immigrants to make it easier for them to enter, and also to reduce to three years from five the amount of time a foreigner must live in Japan before qualifying for permanent residency.

    Both of these would be useful changes, but don’t represent the bigger conceptual leap Japan needs to make. Tokyo can’t afford human resources “winner picking” any more than it can afford to continue the industrial winner picking of yore. Since immigration imports entrepreneurial talent, immigrants also will be vital to achieving the productivity growth Japan needs.

    Successful entrepreneurs, like successful business ideas, pop up where and when a bureaucrat least expects them. Masayoshi Son, founder of SoftBank and one of Japan’s most successful living entrepreneurs, is the grandson of otherwise unremarkable pig-farming illegal immigrants from Korea. Japan needs to cast as wide a net as possible for more families like that.

    ***
    The problem, of course, is that immigration will be hugely disruptive to Japan’s way of life, which is undeniably comfortable. Per capita GDP, especially when adjusted for falling prices, is healthy, thank you very much, despite anemic growth in the economy overall. Unemployment is low, even if an inefficient labor market and low productivity suppress wages. Crime is practically unheard of.

    The social stability Japanese prize is not noticeable in high-immigration developed economies such as the U.S. or Western Europe. Hearing a foreigner from a place where Latin American drug cartels are active or unassimilated Muslim immigrants burn cars in the suburbs argue for more immigration, the Japanese not unreasonably say, “You must be kidding.” In theory, Japan may have no alternative to immigration if it wants to return to sustained growth. In reality, you’re asking people to upend their society in pursuit of an abstract economic goal.

    Investors have lately panned Abenomics, rightly, for its lack of daring. Optimists hope this is a political calculation that a month before a major election is no time to introduce bold reforms, and that more and better is on the way later. But reflection on the immigration problem raises a different prospect. Any meaningful reform will be deeply disruptive—whether in terms of new immigrants let in, small farms consolidated and old farmers retired, new businesses started and old firms bankrupted. In all the hubbub about Abenomics, everyone forgot to ask whether Japan really wants the upheaval needed to restart growth. Unless and until Japanese are willing to tolerate such changes, Abenomics will be more wish than reality.

    Mr. Sternberg edits the Business Asia column.
    ENDS

    17 Responses to “WSJ: Abenomics’ Missing “Third Arrow: The absence of immigration reform from Abenomics bespeaks a deeper problem””

    1. Daniel Feit Says:

      He loses me in that second-to-last paragraph where he implies that racial and cultural diversity lead to crime and violence. Immigration means change, yes, but that change is not chaos.

    2. Markus Says:

      “Crime is practically unheard of”? Even the Japanese of recent themselves are reluctant to misrepresent their country this ruthlessly. I’m not sure what to make about the rest of the article if he makes huge gaffes like this.

    3. Bob Says:

      I have mixed feelings about changes to the immigration system here and don’t think the Wall Street Journal is in any position to criticize a foreign state for its immigration policy by comparison to what they have in the states. Japan’s immigration system is already pretty good if you are well educated and have a job lined up or are married to a local, either way, way easier than the US system is for similarly situated people (lottery system, endless delays in excess of a year nowadays, might as well just give up and move to a civilized country). I think the key policy issue in Japan is what happens after the immigrants Japan wants actually immigrate to Japan and look for an apartment or an onsen, not the immigration policy. The idea of the Wall Street Journal in the US, who effectively ban skilled immigration, chiding Japan for its immigration policy is laughable to me and suggests that they author may be under the misconception that we still have things in Japan such as the Bakufu, Sakoku, and samurai roaming the streets etc. I think even Abenomics is light years ahead of, say, US immigration policy, which seems to be counterproductive from a per capita GDP standpoint.

    4. Jim Di Griz Says:

      Saw this today.

      http://www.japantoday.com/category/kuchikomi/view/yokohamas-thriving-multi-ethnic-urban-community

      Apparently, a ghetto suburb of Yokohama that all the young Japanese have left, is now being populated by (gasp!) ‘gaijin’! it’s ok though, because a Japanese visitor can find all manner of exotic food and ‘culture’ to enjoy.

      I especially despaired at this part;
      ‘A young Cambodian man (sic) was born (sic) in Icho.’ But get this! He speaks ‘fluent Japanese’.
      Wow! Imagine that? Born in Japan, and speaking fluent Japanese. Well I never!

      It gets better;
      “About 90% of our foreign students were born in Japan,” says the local school principle with misplaced pride. In any normal G8 country, they wouldn’t be ‘foreign’.

    5. Bitter Valley Says:

      @Jim
      Yes, it’s pathetic, isn’t it.
      But don’t worry, the Cambodian man isn’t really Japanese and never will be. Don’t be fooled by his language ability.

    6. john k Says:

      #4JDG

      “..Life in this suburban housing tract may portend a future in which Japanese and foreigners coexist..”

      A slight admission that Japan is currently anything but!

    7. Welp Says:

      @#3 Bob:
      “Japan’s immigration system is already pretty good if you are well educated and have a job lined up or are married to a local, either way, way easier than the US system is for similarly situated people (lottery system, endless delays in excess of a year nowadays, might as well just give up and move to a civilized country).”
      You’re getting your facts mixed up about the American immigration system, but let me speak specifically to spousal immigration since I have personal experience: it only took 8 months from start to finish, doing everything myself, to get my wife not only a spouse visa in America, but permanent residency, before she even arrived. In fact, I’m not even sure if it’s possible to emigrate to America as a spouse without getting permanent residency – the K- series, for example, are specifically designed to get fiancees (and others) into the country while waiting for change of status to permanent residence, and the IR- and CR- series include permanent residency already as they are “immigrant visas” – the actual visa itself includes a note stating it functions as a temporary I-551 (“green card”) until the actual I-551 arrives in the mail post-arrival. There is also no wait on visas for spouses, unmarried children under 21, orphans adopted abroad, parents of US citizens who are at least 21 years old, or fiancees of US citizens.

      Unlike Japan, there is no need to enter on a separate spouse (dependent) visa and then wait an arbitrary period of time before applying for (and possibly being denied) permanent residency, as there is with Japan.

      One can have a lot of issues with the American immigration system, but the ease of bringing immediate relatives into the country is certainly not one of them, and I would be genuinely surprised if it was this easy to get permanent residency in Japan (it’s not).

    8. Charles Says:

      @Bob

      I agree that the US immigration system is broken, but then, so is Japan’s. They’re just broken in different ways.

      The US immigration system is nepotism-based and/or based on random luck (the Green Card Lottery). It also has long backlogs and long processing times. That’s definitely broken.

      The Japanese system, on the other hand, is race-based. Nikkeijin get superior visas from the start and are on a fast-track to permanent residency, based strictly on their ancestry/bloodline. They get Long Term Residence status (longer period of validity and also much freer in what activities they can engage in), based simply on their bloodline (not language ability or credentials). How exactly this is allowable when Japan has signed the UN CERD (Convention on the Elimination of All Forms of Racial Discrimination), I’m not sure, since the CERD (which I have read) definitely prohibits it.

      For those foreigners who do not have Japanese blood, or who are not married to a Japanese person, it takes TEN CONTINUOUS YEARS to even get to the point of being able to apply for permanent residency (eijuuken). I realize that the “Points System,” at least in theory, takes this down to five years, but at present, the Points System is so incredibly difficult to pass (70 points required, with an MD [Medical Degree] worth only 20 points), only a little over 400 people have qualified for it in the past year! It is far, far out of reach of even most of the elite foreign professionals. This means that most foreigners have to resort to the slow, ten-year track, and wait a minimum of ten years to get PR, assuming they are able to stay in Japan ten continuous years (if they take a break and go home for a year, the clock resets). I know that an American green card can be had in much less time than that.

      Now, don’t get me wrong. I’m not a Japan basher. Despite its immigration system that is race-based and has super long wait times for PR, I acknowledge that Japan’s immigration system has several strong suits, as well:
      - No quotas on professional work visas (Specialist in Humanities/International Services, Instructor, Engineer, etc.), at least not that I’m aware of
      - Relatively fast processing times
      - The ability to change jobs with up to a 90-day window between jobs (certain other nearby Asian countries tie the worker to his/her employer, and if fired or if he/she quits, the visa is lost almost immediately)
      - Few arbitrary restrictions on foreigners using the Internet. In a certain other Asian country, all Web services are required by law to ask for a Citizen Registration Number. Foreigners don’t have these, obviously. Consequently, foreigners are mostly shut out of message boards, e-commerce sites, games, etc. in that country. This might not have been a big deal in 1983 or 1993, but in 2013, it is severely debilitating to be shut out of most local Internet services. Thank goodness Japan doesn’t do this…
      - Although Nikkeijin get somewhat preferential visa status, at least immigration doesn’t hand them instant permanent residency right off the plane…the way that a certain nearby Asian country does to people with its oh-so-superior bloodline.
      - Once one gets permanent residency, it can be maintained even while living outside of Japan for years at a time (just remember the reentry permits and to visit Japan once every three years). This is less restrictive than the green card, in which it is expected that the immigrant live in America most of the time or risk losing the green card.

      However, despite those strong suits, there are still significant broken parts of the Japanese immigration system. Race-based visa issuance that places bloodline over credentials/language ability and an extremely long wait to PR are the two main faults, in my opinion. I realize that the US system, with its nepotism, randomness, quotas, and long processing times is quite broken as well. Both countries ought to clean up their immigration systems to be fairer.

    9. Paul Says:

      @Bob

      I read the Wall Street Journal (Asia edition) regularly, and they frequently run editorials blasting the American immigration system saying essentially the same thing they did about Japan – America needs to loosen up their restrictions, let people in as well as try to keep the college students who study in the US but then return to their home country in order to see the US economy grow and innovation flourish. Whether you agree with this policy or not, their message is consistent.

      Here is a recent example:

      http://online.wsj.com/article/SB10001424127887323368704578595733476062490.html

      quote: “History proves without question that the best way to reduce illegal immigration is by opening more paths for legal immigrants to meet U.S. labor demand. Border security alone won’t work. Almost all Republicans in the House insist they support legal immigration. It’s time to prove that with some votes.”

    10. Mumei Says:

      @Charles

      > I realize that the “Points System,” at least in theory, takes this down to five years, but at present, the Points System is so incredibly difficult to pass (70 points required, with an MD [Medical Degree] worth only 20 points), only a little over 400 people have qualified for it in the past year! It is far, far out of reach of even most of the elite foreign professionals.

      And even for those who do quality, it is something to stay clear of. I do not consider myself elite–far from it–but I do qualify for it with 85 points. However, I am not included in the above 400 people because I chose not to apply. As I wrote in another thread, after consulting with immigrations I was told about two major drawbacks for those who switch to the point system: 1) the 5 year clock RESETS to zero; hence, the time one has already invested here is not counted towards the 5 years, and 2) changes in employment become more difficult as immigrations must verify and validate any changes to ensure that they to not violate the visa terms; this is not the case for regular working visas.

      By the way, I read in 日経新聞 last month a new plan to allow permanent residency within 3 years. If all goes well, it may be another option come next year. However, I fully expect the count down clock to reset for this plan as well.

      3年滞在で永住権 政府が新制度検討、技術者ら優遇
      http://www.nikkei.com/article/DGXNASFS0901F_Z00C13A7MM8000/

      政府は成長戦略の一環として優れた能力を持つ外国人を呼び込むため、経営者や技術者を対象にした新しい永住権の創設を検討する。日本に3年間滞在すれば申請でき、通常の永住権では認められない配偶者の就労や親、家政婦の帯同が可能になる。専門性の高い外国人が長期滞在しやすい環境を整え、外資系の誘致や日本の研究開発力の向上につなげる。

      秋までに結論を出し、来年の通常国会にも出入国管理法の改正案を提出する。

    11. DR Says:

      Plus ça change…after all there are only two kinds of people in this world: Japanese and everyone else! The ship of state, like the Exxon Valdez has just had the “Full Steam Ahead!” order radioed down from the bridge to the engine room. Damn the rocks! Although clearly visible on the sonar. To hell with them! We’re lost, but we’re making great time! Banzai!

    12. mumeikun Says:

      Charles, you got me interested: what is/are this/these “certain nearby Asian country/ies” you are talking about?

    13. dude Says:

      Bob –
      I take issue with the basis of your argument. Three points:
      1) The Wall Street Journal is not the U.S. Government. According to this way of thinking, a Japanese magazine cannot critique PETA because the GOJ sanctions whaling? Or similar nonsense.

      2) You are questioning the messenger’s right to criticize. I consider myself open minded, so I look at their content. Is their analysis/critique valid? Are they correct? You are looking at who they are – this is a slippery slope. According to you, more important than their analysis is their pedigree – do they have the “right” to speak out? This is just wrong. We should encourage fact-based criticism. We all benefit from an open exchange of ideas.

      3) In your reference to “…Bakufu, Sakoku, and samurai roaming the streets etc. I think even Abenomics is light years ahead of, say, US immigration policy, ” you are conflating multiple unrelated issues, while attempting to mock and belittle the author. The WSJ dared to write about Japan, so the author thinks that travel to & from Japan (sakoku) is still in effect? Really?

    14. Jim Di Griz Says:

      Ha ha!
      Loving this!

      Summary; ‘You’re SO LUCKY to be discriminated against in Japan! It should ‘open your eyes’ to discrimination in your home country’.

      http://www.japantimes.co.jp/community/2013/08/16/our-lives/what-being-a-minority-allows-us-to-see/#.Ug868xwSFMt

      Which would be valid, except that I DID support anti-discrimination groups in my own country, so I don’t need to suddenly have the wool lifted from over my eyes, and the argument that ‘other countries are racist too!’ is pretty lame.
      Ultimately, is the upshot of her logic is that having ‘learned by proxy’ of the racism in our home counties, that when we return, we will work for change in that society? What if Japan IS your home country now (maybe you have a family)? Shouldn’t it be equally valid to work for change in Japan? Or do we have to go and fix the US and UK (or wherever you grew up) first?

      Bad social science really.

    15. Loverilakkuma Says:

      @Jim Di Griz(#14)

      I know you want to tease her with some sarcasm, but her argument is pretty fair. It’s all about the attitudes of people that make this country better or worse.

    16. Baudrillard Says:

      Abe painted as a fool with ineffectual policies, by the Wall Street Journal May 13, page 4, reading between the lines. I quote “Japan posted its smallest current account surplus on record…as structural changes in the economy undermine PM Shinzo Abe’s efforts to achieve growth through exports”.

      “When Mr Abe came to power 17 months ago, he introduced an inflation target and called for aggressive monetary easing. That helped weaken the Yen’s export crippling strength. But to his surprise, exports have yet to catch fire.”

      “So far the weaker yen has merely made imports more expensive at a time when the nation is more reliant on fossil fuel from other countries”

      “BNP Paribas predict Japan will record an annual current account deficit next year” “The recent deterioration in Japan’s trade balance…as a result of slower exports and stronger imports, points to the possibility that the day of reckoning may come sooner than later”

      BUT TO HIS SURPRISE. So it was like “Eh?? Nani sore. Bikkuri shita. Taihen desu ne”.

      But this just shows that Abe is living and dreaming in the 80s. People dont buy Japanese as much as they used to. His policies have had the exact OPPOSITE effect desired.

      I d say this is one massive FAIL.

      All they have done is make Japan even more expensive as “Japanese are embracing imported items much more than before”, said Takashi Shiono of Credit Suisse” (hang on, shouldnt he be prosecuted under the new Secrecy Law? That seems a bit disloyal….)

      So to summarize, Abe’s policy has had the exact opposite effect. He was “surprised” (by reality), things got even more expensive but with a weak yen (Wow, I bet that attracts 2000 elite expats) and Japanese people continue to buy imports.

      Well, with a dodgy home food source due to radiation fears, you would buy imports, wouldnt you? This is not unlike all the Chinese (oh, the irony) who flock to Hong Kong to buy “real”, safe food, especially baby milk.

      I hope the Japanese vote Abe out next time. They voted him in for economic improvement but all they really got was nationalist jingoism.

    17. Jim di Griz Says:

      @ Baudrillard #16

      I’ll go out on a limb and propose that Abe knew this would happen all along. It’s all part of his plan to get the reactors back on, and associated kick-backs flowing again ‘those oil and gas imports are killing my economic recovery!’ he’ll cry.

      Also, the weakening economy will also serve to increase the general populations anxiety about ‘japanese greatness’, and will engender more support for Abe’s constitutional reform, I’d guess.

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