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    Posted by arudou debito on February 5th, 2012

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    Hi Blog. Reader JD submits this as “Cliff Notes for Debito.org”. Quite so. It’s what we’ve been saying for a while now about Japan in decline (see for example here, here, and here). Only this time, we have something quantitative (and a major economic indicator) to demonstrate it: Japan’s first trade deficit in 31 years. Fareed Zakaria from CNN offers this crisp blog comment. Arudou Debito

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

    Zakaria: The end of an era for Japan
    By Fareed Zakaria, CNN, January 29, 2012
    http://globalpublicsquare.blogs.cnn.com/2012/01/29/zakaria-the-end-of-an-era-in-japan/?hpt=hp_c2

    Wherever you are in the world, you’ve probably used or coveted some Japanese product – a Honda four-wheeler; a Toyota Prius, a Sony, a Panasonic TV, a Nikon camera. Since the 1950s, Japan’s exports have flooded the world and fueled an economic miracle at home, making that country one of the wealthiest in the world. Well, this week marks a turning point – one of the world’s great export engines has run out of gas.

    What in the world is going on?

    For the first time in 31 years, Japan has recorded a trade deficit. In simple terms, that means Japan imported more than it exported last year. Now this is not that unusual for some rich countries: the U.S. has had a trade deficit since 1975, and yet we’ve grown. But the U.S. economy is not built on exports. Japan’s economic rise on the other hand, has been almost entirely powered by exports.

    So what has changed in Japan?

    The Japanese government would like to blame one-off events: Last year’s earthquake and tsunami crippled factories and shut down nuclear energy reactors. The offshoot of that was decreased economic output, plus they needed to import expensive oil from the Middle East. But natural disasters have only highlighted and accelerated existing trends in Japan: A decline in competitiveness and an ageing work force.

    China and other East Asian countries can now produce cheaper products and in greater quantities. Add to that a rising Yen, and Japan’s exporters have been at a disadvantage globally. Toyota’s chief perhaps said it best last year: “It doesn’t make sense to manufacture in Japan.”

    Then add to this Japan’s demographics. Between 1990 and 2007, Japan’s working population dropped from 86 to 83 million. At the same time, the number of Americans between the ages of 15 and 64 rose from 160 million to 200 million. In a global marketplace, this is a major handicap for Tokyo.

    Between 2001 and 2010, Japan’s economy grew at seven-tenths of one percent – less than half the pace of America’s. It was also well behind Europe. Contrast that with growth per person – or GDP per capita – and Japan actually outperforms America and the Euro Zone.

    So while Japan’s economy in aggregate has been hurt by this lack of workers, for the average Japanese worker income is still up and quality of life is still very high. That’s partly why the country has not felt the pressure to reform.

    Now it’s easy to extrapolate from the data that Japan’s low growth is not a failure of economic policy, but just a reflection of its demographics. But that’s too simple. In reality, Japan’s industry is becoming less competitive and even per capita incomes will start slowing down.

    Tokyo’s policymakers have failed its people – they could have opened up many of its closed sectors to competition, reformed its labor laws to make Japanese labor more attractive, cut pension benefits, and allowed more immigration. Its government could have put the country on a path to reduce its massive debt burden. Instead, we’re now entering an era where one of the great manufacturing nations of history faces a looming current account deficit. With its debt at 211% of its GDP, if the cost of its borrowing increases, Tokyo would face an even greater crisis: A default.

    Keeping a rich country competitive is very hard, especially in a democracy where interest groups keep asking for more – more benefits, more subsidies, more protections. They want to be shielded from competitive forces. It is happening in America, just as it happened in Japan. It’s easy to forget how powerful a growth engine Japan was in the 1960s, 70s, and 80s.

    But eventually, it was unable to change its ways, reform, and get less rigid. The result was decline.
    ENDS

    23 Responses to “CNN’s Zakaria: Japan’s economy “has run out of gas”: first trade deficit in 31 years shows J’s decline and “the end of an era””

    1. Johnny Says:

      The high yen doesn’t help, but with nuclear power plants around the country offline in the aftermath of Fukushima, Japan has had to import more oil and gas from overseas.

      I suspect this accounts for much of the reason behind the recorded deficit

    2. j_jobseeker Says:

      Last week on TV Asahi’s morning news show “Morning Bird”, they presented a section that talked about a new prediction that Japan’s population in the next 40-50 years will drop below 100 million people. With that sobering fact, what was discussed as ways to address issues of labor and pensions among other things? Have people work until their into their 70s! People are living longer, why not? They also touted France’s programs for encouraging people to have more children and measures to make it easier for women to be able to work while raising families (something so obvious to most NJ, but still an “thinking out-of-the-box” proposition here).
      At no time was the fact that the population count did not include foreigners nor were foreigners factored into discussions about how to increase the workforce and thus increase pension contributions. Instead, Japan would rather have its people work until they are too old to or die creating a labor society instead of one where people work while they are young and then enjoy their retirement.
      And I think it is interesting they would praise France’s programs (which successfully brought up the average birthrate) considering that such programs were funded through high taxes at a time the Japanese people can’t even bear the thought of raising the sales tax to 10%. Another case of wanting something for nothing—a prevailing attitude I am increasingly sensing among modern Japanese.

    3. Troy Says:

      The demographic comparison drives me up the wall.

      There’s too many people in Japan as it is. Under-employment, especially among women, is horrific.

      Why did America need 40 million more people when 15% of the workforce can’t find work as it is?

      Part of the reason the US has survived for 20 years as a major debtor nation is that first the Japanese and then the Chinese were aggressively “debtor financing” the US.

      They defended their weak currencies by lending the US its dollars to buy their stuff. The Japanese now own $1.1 and China is pushing $2T of US debt.

      “Cutting pension benefits” is not the way to Japanese prosperity. Fareed is just parroting a neoliberal catechism without understanding the particulars of Japan.

      The facts are brutal enough for Japan. With the current yen-yuan currency cross (12.1 yen to the kuai) the new minimum wage in Shenzhen — 1500rmb — will be 1.8万 in JPY.

      A month.

      How can Japanese labor compete with that? Why should Japan Inc. import guest workers when there’s millions of Chinese able to work for ¥100 an hour?

      For some reason that analysis is missing from Zakaria’s analysis.

      Japanese is the only foreign language I’m fluent in so I’ve got a personal investment in Japan’s future. I honestly don’t know who’s more screwed this century — Japan, the US, or Europe.

      Japan has massive debt problem but it’s nearly all owed to itself so in the end that will all zero out (Japanese who thought they had savings will find they did in fact not).

      A country that can feed, house, and hospital itself is a wealthy country. By this measure, Japan is not doing so bad, compared to everyone else. Japan doesn’t need more people to accomplish this, it needs to use the human resources it has more effectively.

      – “Japanese who thought they had savings will find they did in fact not.” Grand-scale thievery of a polity’s savings? That’s an odd GOJ policy proposal to apparently sing the praises of, especially given your personal (linguistic) investment in Japan (as opposed to people like me, who have more than two decades of nenkin investments in Japan).

      I’ll let other Readers take on your other catechisms.

    4. Charuzu Says:

      The point he makes:

      “Tokyo’s policymakers have failed its people – they could have opened up many of its closed sectors to competition, reformed its labor laws to make Japanese labor more attractive, cut pension benefits, and allowed more immigration.”

      is exactly to the point.

      Japan almost certainly has a future that will be less pleasant than its present.

      One should expect in areas for which emigration is possible, especially science and technology, that Japanese will emigrate ever more.

      A highly talented Japanese architect or chemist will fare better in the Netherlands than in Japan.

      Moreover, the need to maintain very low levels of immigration to Japan will likely result in more robust policing measures, as Japanese could not abide otherwise.

      A melancholic future awaits Japanese.

    5. Charuzu Says:

      Troy:

      The sentiment you express is commonly held in the Netherlands.

      However, when you say:

      “There’s too many people in Japan as it is. Under-employment, especially among women, is horrific.

      Why did America need 40 million more people when 15% of the workforce can’t find work as it is?”

      it fails to note that women in Japan are under-employed due to gender-based discrimination. That will not be changed by a worker shortage.

      Japan is deeply misogynistic in many ways in its economic life.

      Japanese labor force has many unemployed Japanese, and yet labour shortages for low skill tasks.

      However, labourers are not readily convertible.

      The unemployed Japanese female college graduate will not readily accept a position as a toiler cleaning hospital drains.

      Nor is that unexpected or surprising.

      Labourers generally seek positions for which they view themselves to be well suited, and avoid others, especially if the other positions are not thought of as being good positions.

    6. Jim Di Griz Says:

      @Debito,
      Ah, go on then, I will take the bait….

      @Troy
      Where to start? First, the Japanese don’t care about your lingual investment in their country, nor any other investment that you care to make, ‘This is Japan!’, haven’t you heard that before?

      Second, reducing the state pension would make perfect sense!
      67% of ALL income tax is needed just to pay the interest on the J-Gov borrowing so far! This borrowing was not made to build bridges to no-where and other white elephant construction projects, it was borrowed to pay for the cost of the J-Gov bonds sold to make the money for current pension payments! You don’t need to be a genius to see that that can’t continue.

      The number of workers is falling, and the amount of money they are saving is dropping, so the chances of those younger Japanese people buying J-Gov bonds the way their parents used to is virtually nil. What happens then?

      N.B. SH*T HITTING THE FAN INDICATOR #1; unsold bonds after J-Gov auction (based on potential buyers realising that the J-Gov will never be able to buy them back.

      INDICATOR #2; Interest on J-Gov bonds remains around the 1% mark or less. This is great for the government: it is borrowing the peoples money for virtually nothing! BUT when there are unsold J-Gov bonds, or the threat thereof, will the J-Gov increase the interest rates offered on them, in order to attract foreign investors to make up for lack of Japanese who have the savings to buy? If they do, then the J-Gov will also have to sell even more bonds to cover the cost of buying back the bonds that were already sold (but haven’t matured yet), and will be back at square one: not enough cash to buy back bonds.

      INDICATOR #3; unsold bonds OR inability to buy back bonds when they mature, OR increase in interest offered on bonds will be seen and understood by the economic community as being a sovereign debt crisis. Demand for the yen will plummet, as dealers off-load, and the value of the yen will collapse.

      This is good for the J-Gov! Suddenly the suprer weak yen means that every Toyota (for example) sold abroad brings in MUCH more taxable yen! A J-Gov bond bought (for the sake of argument) ten years before the collapse at a cost of (again, for the sake of argument) 100,000 Yen will still need to be bought back, but with the J-Gov now awash in cheap tax yen, it will have plenty of cash to buy back bonds!
      Of course, the return on the investment, and the investment itself, wouldn’t be worth the paper it was printed on by then. I don’t think many Japanese looking forward to their retirement after years of investing in J-Bonds will be impressed to find that all they get back is something as valuable (and as useful) as decorated toilet paper.

      Next, as I am continually pointing out to Debito, all the smart japanese are leaving while they can. What’s the J population of Hawaii, Shanghai, Bangkok, or Singapore these days? The J-Gov won’t tell you (only releasing data for number of NJ invaders!) but the Japanese with the skills and know how are taking off. The now shafted Panasonic is even thinking about moving it’s HQ function to Singaore in order to avoid Japan’s corporate tax rate of almost 50%. What’s going to happen when all the big J-companies leave to pay tax somewhere else?

      Conclusion? Buy USD or GBP while they are still cheap against the JPY, because you won’t have time to act when the crash starts. Oh, and don’t make any long term commitments. When it all goes wrong, I don’t think the Japanese are going to take a long hard, soul-searching look at themselves, do you? No, some popularist politician will say that it’s all the fault of external factors and those dirty ‘gaijin’ not playing fair.

    7. Troy Says:

      Grand-scale thievery of a polity’s savings?

      Yes. Your nenkin is simply what the GOJ failed to tax to pay for all the spending it did, ~1970-now. They gave you a tax cut and called it savings.

      It could have printed that money (more than it did) to pay for that spending, but that would have caused massive inflation that would have also wiped out your cash savings.

      Kasumigaseki took your savings and spent it into the economy on all kinds of stuff.

      http://www.gfmag.com/tools/global-database/economic-data/10403-total-debt-to-gdp.html#axzz1jqdAMTjd

      This is a debt that your generation of Japanese ran up and that the following generation is not going to be able to bear!

      So what does Japan do, going forward?

      http://www.nationmaster.com/country/ja/Age_distribution

      shows how when the baby boom gave Japan’s last gasp of productivity in the 1980s and 1990s it had to support 15M old people and 30M young people.

      Now the baby boom echo has to support 35M+ old people and 20M young.

      It simply cannot pay back 230% of GDP the government has run up.

      Well it could, but government would have to get a lot smarter about who and what it taxes.

      But Japan is also fantastically wealthy (at least looking at its major urbanized areas) — not all of that money spent was wasted (unlike say the US’s $15T national debt, which is at this point notionally all the money we’ve wasted on wars 1965-now).

      Going forward, Japan has to focus on simply meeting its core needs — feeding, housing, and caring for its young, old, and sick. To do this it has to create more wealth than it consumes, which it can do, even if it does continue to offshore its productive plant to China.

    8. Jim Di Griz Says:

      @Charuzu #5
      I like your point about under-representation of women in the work force. And, too be honest, how many of them want to return to work, having brought up their (statistcal) only child, and return to endless photocopying, tea making, being forced to act ‘cute’, harrassment, humiliation, long hours, boring dead-end jobs, and general degredation that J-women are afforded in the workplace? J-women are under-represented precisely because many of them see marriage and motherhood as an escape from salaryman hell!

    9. Troy Says:

      This is good for the J-Gov! Suddenly the super weak yen means that every Toyota (for example) sold abroad brings in MUCH more taxable yen!

      yes, the yen being in at ~75 is a very important point of analysis. It being so strong incents Japan Inc to further offshore production to China and SE Asia. It also gives Japan access to the world’s oil at 50% off what it would be paying @ Y150. And, as you say, Japan would have fewer options if the yen were at 250, like it was in 1985.

      A lot of Japan — powerful people — benefit from the strong yen. Most wage-earners also potentially benefit too thanks to the lower cost of imports, but people in mfg competing with cheap-labor countries are the ones who suffer directly.

      In the short-run it makes no sense for Japan to manufacture anything when they can pay Chinese in Shenzhen ¥800 A DAY to do the work (there are obvious long-run strategic reasons to keep the work in Japan, but I won’t get into that here).

      I don’t think Japan is going to have a problem with the natives fleeing — Japanese are pretty parochial if not chauvinistic about Japanese culture TYVM.

      Japan owes its massive debt to itself, which at a somewhat metaphysical level means this debt really doesn’t exist, for money and debt are abstractions, what actually matters is WEALTH, and wealth at its most elemental is not money or credit — wealth is the state of being well, of having one’s needs and wants met.

      We extend the meaning of ‘wealth’ to refer to the goods and services that provide this utility, and we further extend it to refer to the money that governments print and we use to quantify the value of these goods and services.

      But we’ve become bamboozled by our own words! Just piling up debt as Japan has done ~1990 to now is not in fact saving wealth for the future!

      As I said previously, what matters is the wealth accretion, whether Japan can continue to collectively create more HARD wealth than it consumes.

      http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

      shows how the economies that generally have their act together — Denmark, Sweden, Norway, Finland, Austria, Germany, Netherlands — have taxation in the 40-50% range.

      Japan is 28%. It was great being a low-tax paradise, but that comes at a great cost down the road as the debts mount and the accumulated interest begins to compound.

      For the baby boom of Japan to skate through life with low taxes and then sock the following generations with the 200%+ bill has been corruption at the highest (and widest) levels — everyone over the age of 25 is complicit in this.

      The stupid thing is that these low taxes are largely why Japanese real estate is so insane, since land value sucks up all the household surplus everywhere demand for land exceeds its supply (eg. ~80% of Japan).

      I don’t wish to minimize Japan’s problems — the imbalances are immense and the politics of the thing are all screwed up. But looking from very far away, I’d rather have Japan’s problems than the US’s (or China’s for that matter).

      Japan did very well for itself 1950-1990. This very success corrupted the society to the core, unfortunately, another form of the “victory disease” of early 1942 that was popularly talked about in postwar memoirs.

      To fix things this century is going to require honoring wealth-creators and taxing the wealth-takers. This is going to be difficult, since the wealth-takers still generally control things.

    10. Charuzu Says:

      Troy:

      You say:

      “The stupid thing is that these low taxes are largely why Japanese real estate is so insane, since land value sucks up all the household surplus everywhere demand for land exceeds its supply (eg. ~80% of Japan). ”

      One useful discussion of the issue is at:

      http://www.jstor.org/pss/2138448

      Taxes play a role, but so do many other factors in determining Tokyo and Japanese land prices.

      Land use regulations also play a role, as does demand, and land utilisation.

      Japan could take policy decisions to lower significantly its real estate pricing, however various politically powerful groups such as farmers would clearly object.

    11. ML Says:

      Talking about nenkin?
      check this:
      http://www.gpif.go.jp/operation/foundation/portfolio.html

      nenkin fund put 70% on their own bond?
      it doesn’t look like well diversified.
      I can’t stop thinking that nenkin is just one kind trick to cover the tax.
      So, they charge lower tax in order to avoid people piss off, and then force nenkin fund put most of the money on their own bond in order to cover the insufficient tax….

      Strong yen help those who are retired,but hurts the young.
      Weak yen may help the young to get job, but hurt those who already retired.
      The conflict in Japan is not between foreigners and resident.
      Its between the old and the young.

    12. Troy Says:

      Land use regulations also play a role, as does demand, and land utilisation.

      One thing that struck me about Tokyo land-use is that the general lack of zoning means the ‘highest and best use’ of any sizable property is multifamily of some sort, which inflates land values overall.

      But reading Stone I see they disagree with that. I’ll have to read more.

      I don’t know about Hokkaido, but parcel prices in Tokyo are still astronomical.

      http://goo.gl/UgESs is just a random sample of what I consider a median market of the Tokyo area (Naka Meguro).

      This is a 6000′ lot, nothing out of the ordinary for a US suburb. $8 million!

      There’s an immense disconnect between Japan’s dire prospect and the sky-high land valuations. I guess land prices are sticky all the way down, but still.

    13. Jim Di Griz Says:

      @Troy,
      You can’t say that the debt doesn’t exist just because it is domestically owned. That is zero comfort to the people who will lose their life savings. Everything else you talk about is fantasy.
      Japan is the Titanic. It has hit the iceberg, and the damage is done. What we are experiencing now is (metaphorically) the three hours or so that it took to actually sink. But it will sink. There is no magic cure. AND the band still plays on.

    14. John (Yokohama) Says:

      @Troy

      “A country that can feed, house, and hospital itself is a wealthy country.”

      Just ignore the obvious like the homeless people living in blue shacks by the Tamagawa river (on the Kawasaki side of course), the hungry gladly accepting handouts from the odd charity willing to “upset” the neighborhood…, and the people rejected from multiple hospital emergency facilities…

      Relativity is often the domain of spin.

    15. Piglet Says:

      Savings rate in Japan has been continuously decreasing for the last decade, and reached the same level than in US. Older generations are caching in on their savings for retirement and younger generations cannot afford to save as much as they did 30 years ago.
      Unless GOJ has a magic trick or China starts buying train loads of Japanese debt, some kind of debt crisis is inevitable within the next 30 years.

    16. Troy Says:

      Strong yen help those who are retired,but hurts the young.

      A strong currency helps everyone whose job can’t be sent to China (or Korea, Thailand, India, Vietnam, Philippines, the US, etc).

      You can’t say that the debt doesn’t exist just because it is domestically owned. That is zero comfort to the people who will lose their life savings.

      Japanese gov’t debt has risen from ¥360T in 1997 to ¥1Q now.

      Who is going to bear this 700 trillion yen burden that resulted from the fiscal intervention?

      That is 1500万 per household, $200,000.

      Should the people who ran up this massive debt 1997-now just retire off into the sunset and not have to pay it back?

      Where did this money go? If we can answer that question we can find who’s going to pay it back I guess.

      But there’s talk of doubling the income tax and/or tripling the consumption tax.

      So you can keep your life savings but the following generation has to have double the tax burden that you did.

      Awesome!

      (That will probably slaughter rents and home prices in Japan. Maybe not a bad thing, unless you own a house.)

      Or the PTB could just dump one quadrillion of new yen into the economy to settle this debt via the printing press.

      That would probably add another zero to prices (and incomes). Great if you own your house, not so good if you rent.

      Just ignore the obvious like the homeless people living in blue shacks

      Point taken. Japan is far away from Norway, Sweden, and Germany wrt social goods.

      The curious thing about depopulation though is that these marginal people will become less marginal. Well, not these people perhaps but future people like them.

      Japan needs to get its act together creating new hard wealth here at home. Not manufacturing that can be done in Guangzhou for 1/10th the labor cost, but putting people to work making Japanese life more efficient and enjoyable.

      – “Should the people who ran up this massive debt 1997-now just retire off into the sunset and not have to pay it back?” Are you including yourself, with all of your linguistic contributions to Japan, in this group (which were for the most part bureaucrat policymakers, public works, administrators, ODA, and porkbarrel politicians)? If not, a little sympathy and less blame for us long-suffering taxpayers, please.

    17. Troy Says:

      Are you including yourself, with all of your linguistic contributions to Japan, in this group

      I could, since in the 1990s I paid into the national pension scheme for several years (maybe $4000 in total I’d guess).

      I wouldn’t mind returning (or even retiring) to Japan, which is why I care so much about this topic and wish to understand what’s going to happen to Japan — I don’t want to jump from the frying pan into the fire like I did in 1992, LOL.

      If not, a little sympathy and less blame for us long-suffering taxpayers, please.

      That’s just it, though. The Japanese taxpayer has been given an easy ride since 1990:

      http://i.imgur.com/yJzMg.png

      shows the widening gap between revenue and expenses since 1990.

      Do you think the taxpayers of the nordic countries enjoy the 40-50% rates they’ve been paying?

      The idiocy of the Japanese technocrats extends to prior to that — when they cut tax rates by a third and interest rates in half right when the baby boom was hitting their mid-late 30s and needing new housing for their families (remember “それでも家を買いました?”) — the resulting boom in land values was entirely predictable.

      Japan’s core economic sin was probably allowing its housing sector to go insane in the late 1980s. Japan did relatively well for itself, 1950-1985, then collectively blew themselves up 1985-1989 with mass bubble speculation in stocks and real estate.

      The 1990s were about dealing with the aftermath of that colossal misinvestment. Looking back on it now, I think the 2004-2006 economic reprieve for Japan was a sympathetic boom from the US’s own housing bubble (which stimulated US demand for Japan-sourced stuff like DSLRs, cars, etc).

      Now we’re getting into the aftermath of the aftermath, when the non-solutions from the technocrats have made the imbalances worse.

      The question still remains what is really necessary for Japan to get its affairs in order, and, for me at least, whether Japan has a less difficult row to hoe than the US.

      The current account situation for Japan is not particularly unfavorable. They own $1T+ of US Treasury debt, and all things being equal it’s better to own somebody’s debt that have somebody else own yours.

      People say Japan needs to open the doors to guest workers, but I say Japan has plenty of people that need work, and at any rate it doesn’t make any sense to staff light manufacturing in Japan for ¥1500 or more when the Chinese labor rate is ¥100. Even if the yuan doubles to 3, the yen drops back to 150, and real wages double in China — that labor rate will still only be ¥800/hr, less than what Mos Burger is paying.

      Japan’s baby boom is actually tiny compared to the US’s — we have EIGHTY million people, born 1946-1964, that we’ve made trillions of unfunded promises to (and undertaxed almost as bad as Japan).

      It is true that there will be a lot more old people per working age people in Japan. But this is not necessarily an unbearable burden. Old people generally have everything they need besides their basic food and health care requirements.

      One point I’ve tried to make here is that it’s very difficult to actually “save” for the future, ie. put aside actual wealth to consume later. Buying productive assets is one strategy, but an entire nation cannot actually trade assets among themselves and come out any wealthier. Japan has pursued the neocolonialist course of securing ownership of foreign productive assets, and they’ve been doing pretty good at that, excepting their various mistakes of the 1980s.

      Which gets back to my original point. If Japan can grow enough food to feed itself, maintain the housing stock to house itself (and keep the lights on and the 灯油 tank filled), pay the nurses and teachers enough to take care of the young, old, and infirm, you guys will be doing OK, regardless of how much debt you owe to each other.

      The US, on the other hand, is running a $600B/yr trade deficit — we cannot actually pay our way in the world. Like I said above, I think I’d rather try to solve Japan’s problems than the US’s.

      – Sorry to pick up on one point all the time, but here goes: “In the 1990s I paid into the national pension scheme for several years (maybe $4000 in total I’d guess). I wouldn’t mind returning (or even retiring) to Japan…” I don’t think you have any skin in the game, or much ability to claim some kind of valuable contribution to the Japanese system, since as of this writing it takes 300 months (yes, 25 years) of contributions MINIMUM before you even QUALIFY for nenkin — which means you probably will never be able to retire in Japan and receive those benefits. For someone who seems to be on the ball with all sorts of statistics, that one seems to have evaded you. And it shows with how obnoxious your attitude has been in posts passim towards the Japanese public, on one hand acting as though the average person deserves his or her plight (the probable rip-off of their life savings in the form of nenkin), while on the other hand dismissing the problem because the GOJ’s debt is apparently mostly domestic (I’m not particularly convinced by your assertions that Japan is all that better off because of it). I repeat, you are not in any position to be so nasty towards us taxpayers, nor be so dismissive of the looming crisis that faces all aging developed societies in some form.

    18. Dosanko Says:

      Thanks, Debito. Interesting article and a nice counterpoint to Eamonn Fingleton’s Op-Ed in the NYTimes last month: http://www.nytimes.com/2012/01/08/opinion/sunday/the-true-story-of-japans-economic-success.html?_r=1&scp=1&sq=eamon%20japan&st=cse

    19. Mumei Says:

      @Debito

      > I don’t think you have any skin in the game, or much ability to claim some kind of valuable contribution to the Japanese system, since as of this writing it takes 300 months (yes, 25 years) of contributions MINIMUM before you even QUALIFY for nenkin — which means you probably will never be able to retire in Japan and receive those benefits.

      Sorry to butt in. I do not know where Troy is residing, but if it is one of the countries that Japan has signed a 社会保障協定 agreement with (Australia, Belgium, Canada, Czech Republic, France, Germany, Ireland, Netherlands, South Korea, Spain, UK, or US), then he has a strong chance of actually doing this. Even if, as you say, he does have “any skin in the game”, he could work a number of years outside of Japan, retire to Japan, and transfer those credits to Japan, add in the four years from before, and have Japan pay his nenkin as long as he meets the requirements. And even if he does not retire in Japan, those same four years could be transferred back to his country for local nenkin with a different set of requirements. Hoofin is the expert on this.

      And if the 25 years is a problem, karakin would also be an option to shorten that, but he would need to naturalize first.

      – Quite so. Thanks for the correction. I have to admit that the attitude of bashing the public (essentially insinuating they deserve to be ripped off) for the excesses of the elites was having me see red. Especially since I have a LOT of skin in the game. Apologies.

    20. Troy Says:

      I repeat, you are not in any position to be so nasty towards us taxpayers

      You’re trying to personalize this for some reason, to make me a bad guy, callous about the massive screw job coming to people forced to buy JGBs for the past 20 years. Well, I had nothing to do with that.

      If I were installed Dictator of Japan I’d tax the everloving crap out of every rent-seeking bastard in Japan, hitting the Mori brothers, the gambling kingpins, and the consumer loan shark CEOs with massive tax bills. I’d further gradually institute a land value tax on the upper two quintiles of land (by site value). Every time I try to calculate the total unimproved land value of just Tokyo’s 23-ku alone, my mind boggles. There’s simply a colossal tax base sitting there almost completely untapped, and it’s rather frustrating to see this while my favorite foreign country continue to bury itself in bogus economics and its population remains either corrupted or ignorant of the best fix for this mess.

      while on the other hand dismissing the problem because the GOJ’s debt is apparently mostly domestic

      That’s the key thing though. Japan is not Greece. Or even the US for that matter. Tomorrow before lunch some BOJ factotum could type a 1 followed by 15 zeros on a draft to the MOF and there would no longer be a sovereign debt issue for Japan to face, and nobody but the renters of Japan would be particularly harmed by the wave (inferno?) of inflation this would set into motion.

      nor be so dismissive of the looming crisis that faces all aging developed societies in some form

      There are reasons to believe Japan is better situated than most. Its total defense bill is $50B/yr, a rounding error for the US’s.

      Its per-capita health cost is ~$3000, almost 1/3 the US’s. This is important, since Japan’s per-capita cost is already where US (or Canada for that matter) could only hope to be after a decade or two of brutal fights with the medical industry monopoly.

      Its major cities are generally wonderfully dense and conducive to mass-transit.

      It also holds $1T of US Treasury debt, giving it a dollar flow of ~$30B/yr if it just took the coupon. To put that in perspective, $30B/yr could hire 160,000 Filipina nurses (@ $5hr to be remitted home) and still leave $27B/yr, enough to buy 1/6th of Japan’s annual oil demand (@ $100/bbl).

      Japan Inc. also enjoys positive cash flow on its foreign operations. Maybe not $5B/mo anymore, but Japan is no slouch in this department.

      Nenkin may or may not turn out to be a “scam” for you, but unwinding this investment you’ve been forced to make is going to screw somebody, the somebody who has to pay you back, since I don’t see anything actually useful having been acquired with your original contributions.

      The way things are going, if you want your money it’s going to have to come from everyone 30-45 years younger than you — and they aren’t going to have any great surplus to cover that for you. You’re a Gen Xer like me, between the baby booms, so when you get ready to retire in 2025 you’ll have 15+ years of Echo-boomers behind you struggling to pay the pensions and health care of the 15+ years of surviving Boomers (their parents) ahead of you.

      There is no pot of money that’s going to be found to fund these pensions. And even if there were, that wouldn’t matter since current consumption has to come out of current production anyway. What is the price of gasoline going to be in 15 years? Twice what it is now if we’re lucky? Those costs are going to come out of Japan’s surplus that is supposed to fund your nenkin.

      Will the Japan of 2025 be able to support the retirements of the ~30M aged 65+?

      This graph: http://i.imgur.com/R0PJn.jpg is a pretty good picture of the evolving situation this century, and shows that in 2025 there will be 10M less working-age peeps compared to today.

      If Japan’s finances are so screwed up now, how are they going to be put in order in just juu-su few years?

      It was the politicians that YOU elected this past decade that have run up much of the debt. How is it fair to sock people now in junior high school with the bill?
      They didn’t screw Japan up, you did. Well, to be fair you didn’t have the franchise in the late 1980s when the critical technocrat mistakes were made, or the 1990s when the mistakes were compounded by continued corruption. But you have in fact had the franchise for almost HALF this time.

      As for Fingleton, you can Spike Japan’s take on it (and my loooong comment stream, too) here:

      http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fingleton/

    21. Loverilakkuma Says:

      >>If Japan can grow enough food to feed itself, maintain the housing stock to house itself (and keep the lights on and the 灯油 tank filled), pay the nurses and teachers enough to take care of the young, old, and infirm, you guys will be doing OK, regardless of how much debt you owe to each other.

      Wonder have you ever thought how much taxes the GOJ will need to raise additionally from their proposal (8% in 2014 and 10% in 2016), in order to secure the public funds to bail out the corporations, fix the declining labor force, and stimulate the local/national economy. If you think this involves non-Japanese only, you have no idea what you are talking about.

    22. Troy Says:

      Wonder have you ever thought how much taxes the GOJ will need to raise additionally from their proposal

      Taxing labor to bail out the the speculators is the neoliberal way.

      “Stimulate” is such a feel-good but obfuscatory term.

      Japan doesn’t need to stimulate anything. It needs to ensure that it collectively can provide the goods and services ALL of its population requires this century.

      The technocrats know how many people are going to be around in 5, 10, and 20 years from now, and where they’re going to be. They need ensure there is the capital (hospital beds, care facilities, transportation services, medical goods) and skilled labor force (care givers) present to serve the critical needs of the people as Japan becomes a gerontocracy.

      Some people would call this socialism. Perhaps it is. But this is as serious as WW2 was for Japan, and Japan has got to get its act together.

      Same thing with the US. We’re now sliding down the same damn slipway Japan did, 1990-2000. People say the GPIF is the largest pension fund, but the Social Security Trust Fund is 60% larger — and it’s 100% invested in US Treasury debt.

      If the PTB either cut benefits to avoid redeeming this holding, or, worse, raise taxes on current FICA payees to cash this holding, the System will managed to steal over $2.5T from the working class, 1990 – 2009 (when the SSTF was being built up from FICA overpayments).

      Part of the subtheme of my comments here is that things probably won’t be bad if the nation can pitch together and ‘share the wealth’ so to speak. Japan is a fantastically wealthy country, and America is even more so, even though our massive consumption footprint is impoverishing us.

      I think Japan is in a better position to do this reform and rethinking than the US — politically, socially, mentally, and culturally. But I suspect things are going to have to get a lot worse before they get any better.

      – Point of order: We understand that you are knowledgable about the subject. But stop showing off with the acronyms, already. Kindly use lay language when talking about this kind of subject on a human-rights blog.

    23. Loverilakkuma Says:

      > things probably won’t be bad if the nation can pitch together and ‘share the wealth’ so to speak.

      Easier said than done. Regarding the history of GOJ ministry’s habits of ‘share-hoarding’(i.e., pork-barrel, wasteful public projects), it s ordinary mid-income class Japanese family who will likely to suffer the bleeding. And they’re not gonna curtail the income of national public bureaus as much as ordinary Japanese family. I don’t expect any single politician or lawmaker in the Diet–who will behave like Huey Long of 21st century. Japan is no Louisiana in the 1920s. I don’t see anyone who has the decent political characters, foresights, and gumption—like the King Fish.

      Who wants to dismantle Kasumigaseki , Marunouchi, or Roppongi Hills, anyway? Wanna call the wrecking crews?

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