"Poor little Japan"

A declining Japan loses its once-hopeful champions
By Chico Harlan
Washington Post, 2012-10-27

For a powerful and valid rebuttal to this highly biased article, see the next post,
“Is the Washington Post Racist?” by Eamonn Fingleton.

As to the trade balance between Japan and the United States,
note that this Commerce Department report shows that
in 2010 the balance was $60 billion against the United States.]


Jesper Koll, an economist who’s lived in Japan for 26 years,
says it’s not easy for him to keep faith in a country
that’s shrinking, aging, stuck in protracted economic gloom
and losing fast ground to China as the region’s dominant power.

“I am the last Japan optimist,” Koll said in a recent speech in Tokyo.

Indeed, the once-common species has been virtually wiped out.
It was only two decades ago that Japan’s boosters —
mainly foreign diplomats and authors, economists and entrepreneurs —
touted the tiny nation as a global model
for how to attain prosperity and power.

But the group has turned gradually into non­believers,
with several of the last hold­outs losing faith only recently,
as Japan has failed to carry out meaningful reforms
after the March 2011 triple disaster.

[Let’s do a little reality check here.
Is Japan not prosperous?
It certainly is.
And its on-going trade surpluses (measured as current account surpluses)
give it great power,
as other nations, in particular the United States,
are highly dependent on Japan, along with China and other nations,
to continue to fund their on-going fiscal deficits
(for America, now in the fifth year of over a trillion dollars!).
Harlan asserts "reforms" are needed.
For what economic reason?]

The mass turnabout has helped launch an alternative —
and increasingly accepted — school of thought about Japan:
The country is not just in a prolonged slump but also in an inescapable decline.

There’s frequent evidence for that in economic data, and in the country’s destiny to become ever-smaller, doomed by demographics that will shrink the population from about 127 million today to 47 million in 2100, according to government data.

The current doom is a sharp reversal from several decades ago,
when Japanese companies bought up Columbia Pictures and Rockefeller Center,
and Americans argued whether Japan was to be feared or envied.

Like a separate but related group, known as “Japan bashers,”
the optimists were bullish about Japan’s future as an economic powerhouse.
But unlike the bashers,
who viewed Japan as a dangerous challenger to the United States,
the optimists saw Japan as a benevolent superpower —
rich but peaceful, with a diligence worth emulating.

Now, when Japan is discussed,
it’s instead for its unenviable fiscal problems —
debt, rising social security costs,
flagging trade with China because of an ongoing territorial dispute.

[Ah, but Japan's debt is owed mainly to its own citizens,
who have a savings rate far higher than the United States.]

China, not Japan, is mentioned in U.S. presidential debates
and described as the next threat to American supremacy.
Japan’s government has announced record quarterly trade deficits
while some of its iconic companies — Sony and Sharp —
have announced staggering losses.

By 2050,
Japan “will be the oldest society ever known,” with a median age of 52,
according to the recent book “Megachange,” published by the Economist magazine.
Even over the next decade,
Japan’s aging population will drag down the gross domestic product
by about 1 percent every year.
That will further strain Japan’s economy,
which in 2010 lost its status as the world’s second-largest,
a position now claimed by China.

“If you speak optimistically about Japan, nobody even believes it,” Koll said.
“They say, ‘Oh, in 600 years there will be 480 Japanese people left.
The Japanese are dying out and debt is piling up for future generations.’
Japan is an easy whipping boy.”

[That assumes Japan's current demographic trends continue.
But at any point Japanese women
(who by general agreement are the key decision-makers on the fertility rate)
could change that at any time, quite sharply,
and accelerate their production of their smart, talented children.]

Now a pessimist

Japan optimism became a mainstream movement
with the 1979 publication of “Japan As No. 1,”
an international bestseller that described
the way a country the size of Montana
had come to make cars as well as the Germans,
watches as well as the Swiss
and steel as well as the Americans —
in more efficient plants.
Japan’s people worked hard,
its government guided the economy,
and its streets were clean and crime-free.

“Japan has dealt more successfully with
more of the basic problems of post­industrial society
than any other country,”
wrote author Ezra Vogel, a sociologist at Harvard.

[I think to call Japan a "post-industrial society" is monumentally stupid --
cf. Fingleton's In Praise of Hard Industries for many examples,
not to mention the rafts of well-made high-tech Japanese products
so avidly sought by American upper-income consumers.
(Oh wait, Vogel is at Harvard. He's not stupid. Evidently just deceitful.).]

But Vogel, who has lived for several periods in Japan,
and has traveled here at least once a year since 1958,
says he, too, has become a pessimist.
Most Japanese still have a comfortable life, he says,
but the political system is “an absolute mess,”
juggling prime ministers almost every year.
The youngest generation, its expectations sapped by years of deflation,
“doesn’t have the excitement about doing things better.”
[I think many of America's young people
would be quite happy if that was the most serious of their problems.]

Even the promise of lifetime employment
and tight cooperation between government and corporations
has backfired,
leaving a bureaucracy-enforced status quo
that makes it hard for established companies to reform
and for smaller, more creative companies to emerge.
[Japan is still running a great trade surplus with the U.S.
How much reform is needed?]

“What I did not foresee is that the slowdown would be such a challenge —
that many of the things that worked so well on the way up . . .
would be so difficult on the way down,” Vogel said.

Vogel, still a professor emeritus at Harvard,
says he has switched his focus in the past five years to China.

A disturbing trend

For more than a decade after Vogel’s book was published,
his predictions seemed prescient.
Between 1980 and 1990, Japan’s national wealth nearly tripled.
Real estate prices in downtown Tokyo skyrocketed so high
that analysts said the land under the Imperial Palace
was worth more than the state of California.
Japanese companies bought up American landmarks,
and some policymakers feared Japan was challenging U.S. supremacy,
particularly by using protectionist trade policies
that blocked American products.

Vogel credited Japan’s success in part to
its willingness to study others.
He described a nation obsessed with overseas travel:
Students went to American universities,
national sports coaches studied the training programs in other countries,
trade ministry bureaucrats went on missions to Europe to hone policies.
Japan even had programs in five foreign languages
available on its national television networks.

But today, former Japan optimists see a disturbing trend.
Fewer Japanese, they say, want to interact with the rest of the world,
and undergraduate enrollment of Japanese students at U.S. universities
has fallen more than 50 percent since 2000.
The generation now entering Japan’s job market
is described by older workers here as risk-averse and unambitious,
with security and comfort their top priorities.

“They have just given up trying to be number one”
said Yoichi Funabashi, former editor in chief of the Asahi Shimbun newspaper
and chairman of the Rebuild Japan Initiative.
“People think you just cannot beat China, so don’t even try.
But that’s bad, because
if you don’t train yourself on the international scene,
you don’t . . . sharpen your edge.
And you become more inward-looking.
There’s a sense in Japan that we are unprepared
to be a tough, competitive player in this global world.”

[Again, Japan is still running those trade surpluses.]

Japan is famous among historians for its sudden transformations,
re-engaging with the world in the mid-19th century
after two centuries of isolation,
later moving toward the militarism that helped launch World War II.
After the mega-disaster last year,
Japanese hoped for another transformation,
with the reconstruction of a tsunami-battered region
prompting a broader political and economic overhaul.

But Japanese increasingly feel that hasn’t happened,
according to a recent Pew Research Center poll.
Just 39 percent now say that last year’s disaster has made Japan a stronger country,
compared with 58 percent in a similar survey taken right after the earthquake and tsunami.
(According to the same survey, released in June,
93 percent of the Japanese public
describe the current state of the economy as bad.)

Preference for self-criticism

Global sentiment has swung so far against Japan,
the last few optimists now relish the chance to make a case on Japan’s behalf.

Although Japan is commonly thought to be a “Detroit-like zone”
with little chance for economic growth,
former Sony chief executive Nobuyuki Idei said in an interview,
the country still has a chance to prosper
if it can tap into Asia’s booming economies as a trade partner or investor.
Tokyo-based venture capitalist Yoshito Hori said that
Japan’s many strengths are often overlooked,
because Japanese prefer self-criticism to self-promotion.

“The value of Japan is, even when we do something good, we rarely say it,”
Hori said.

“When the Chinese achieve something, they say,
‘We have done this.’ ”
Japanese must learn to do the same, Hori said,
“otherwise, we will lose our position globally.”

That’s partly why Koll, a ­JPMorgan Japan manager,
decided this summer to give a TED talk —
the common name for a series of pop-education ­speeches —
in which he described his reasons for being the last optimist.

Japan has the world’s most competent financial regulator,
Koll said, and a per capita GDP several times that of China.
Real estate prices are back down to 1981 levels —
“wealth destruction has been tremendous,” he said —
Japan has weathered this
while still retaining its social cohesion and relative quality of life,
with an unemployment rate of just 4.2 percent.

But Koll also admitted in his speech that being bullish on Japan
is tantamount to saying Elvis is still alive.

“Things have changed,” he said.
“When I first got here,
I had conversations with people who said,
‘Oh, you’re so lucky to speak Japanese,
because we’ll all be working for the Japanese soon.’
You know, those are the things they’re saying about China now.”

Is the Washington Post Racist?
by Eamonn Fingleton
http://www.forbes.com/sites/eamonnfingleton, 2012-11-05

[The emphasis is added.]

Is the Washington Post racist?
I ask the question in all seriousness.

Yes, I know that, at a conscious level,
the paper strives to do its best.
And, to its credit,
it has certainly been in the vanguard of efforts to make up for
the terrible disabilities once visited on American minorities.

But what about the paper’s subconscious?
Perhaps I shouldn’t attempt Freudian analysis here but
the question is prompted by
the paper’s constant misrepresentations
of the Japanese economy.

It is not an exaggeration to suggest that
the paper displays an almost pathological disdain for
the Japanese people’s economic achievements.

The Japanese invented the East Asian economic system,
which is now throughout East Asia
driving the largest industrial revolution in history.

And still to this day the Japanese version stands unchallenged as
the most sophisticated and effective
in its avowed aim of building national wealth.
This hits you between the eyes the moment you land in Japan:
as anyone who has been to the country in recent years can testify,
the Japanese have now leapt well ahead of the United States
in both living standards and national infrastructure.
And that is just the beginning of an amazing story
utterly at odds with
the myth of Japan’s so-called “lost decades.”

Yet the Post,
even more than the rest of the Western press,
seems to take an oafish delight
in portraying Japan as a basket case.
Here, for instance,
is a comment the other day
by the paper’s new Tokyo correspondent Chico Harlan:
“The current doom is a sharp reversal from several decades ago,
when Japanese companies bought up Columbia Pictures and Rockefeller Center.”

In citing the Columbia Pictures and Rockefeller Center purchases,
the Post is talking about a pattern of huge Japanese capital exports
which first became noticeable in the 1980s.
So that pattern has now undergone a “reversal”?
Actually, no.
The Post is hallucinating.
The truth is not only that
Japan has NOT suffered any diminution in its capital exports
but it has actually expanded them dramatically
during the so-called “lost decades.”
So much so that, as of the end of 2011,
Japan’s net external assets had reached more than $3.5 trillion,
up from a mere $293 billion at the end of 1989.
The fact is that Japan’s capital exports in the 1990s alone –
the first of the “lost decades” –
ran more than double the 1980s rate.
In the second “lost decade” (the ten years to 2009),
they ran even higher at more three times the 1980s rate.
Even in the wake of last year’s terrible earthquake,
Japan has been building its overseas assets
at a rate that would have seemed unbelievable in the 1980s.

Part of the reason you don’t hear more about this is that
the pattern of Japan’s asset buying has changed.
Whereas Japan in the 1980s made
some famously visible purchases of private sector U.S. assets,
latterly it has been concentrating almost entirely on
quietly investing in U.S. Treasury bonds and other foreign government securities.
Basically Japan is acting as a financial Atlas
propping up various foreign governments.
Without massive support from Japan
both the U.S. dollar and the British pound would long since have been vaporized.
Japan has been doing Trojan work also
shoring up the International Monetary Fund
in the latter’s efforts to bail out the bankrupt governments of the EU fringe.
As I have already pointed out at this site,
Japan in April was by far the largest non-European contributor
to an emergency fund to rescue the euro (with a contribution of $60 billion).

Underlying this trend is another fact that the Post,
in what can only be considered a manic effort to deny Japan’s achievements,
consistently sweeps under the carpet:
Japan’s trade surpluses have continued to burgeon.
It is worth remembering that
Japan was labeled an economic “juggernaut” in the 1980s
largely because of its success in racking up ever larger trade surpluses.
But it has done even better in succeeding decades.
Measured by the current account,
which is the widest and most meaningful yardstick of a nation’s trade
(it screens out the transfer pricing
that increasingly renders visible trade figures meaningless),
its surpluses in the 1980s totaled $418 billion;
in the 1990s $994 billion
and in the decade to 2009 fully $1,485 billion.
In 2010, the last year before the earthquake,
the current account reached $204 billion,
more than three times the 1989 figure of $63 billion.

Even in 2011 –
in the face of an earthquake which both severely depressed export output
and entailed huge emergency imports of oil –
Japan’s current account surplus totaled $119 billion.

At an industry level all this is evident in
the performance particularly of
Japan’s producers’ goods industries.
some areas of the consumer electronics industry are not doing so well
but even the Japanese can’t win them all
(when I arrived in Japan in the mid 1980s the once-mighty steel corporations
were undergoing the same sort of strains now being visited on Sharp and Sony).
But even in an industry as mature as cars,
the Japanese have been doing remarkably well.
In the teeth of the earthquake, Toyota, for instance,
boasted sales last year of $259.5 billion,
more than three times its 1989 total of $84.1 billion.
Nissan meanwhile clocked $119.0 billion, also more than triple 1989.
Similarly the rest of the Japanese auto industry
has gone from strength to strength.
The same cannot be said for Detroit.
Ford Motor’s sales last year totaled $133.3 billion,
up a mere 44 percent on $92.4 billion in 1989.
General Motors’s sales were $150.3 billion,
up just 24 percent on $121.1 billion in 1989.
Not only have the Detroit companies retreated
in the face of Japanese advances in the American domestic market
but their European subsidiaries have also long been ceding share,
as have such European players as
Peugeot-Citroen, Volvo, Jaguar, and, of course, Renault.

In attempting to justify the absurd contention that Japan is facing “doom,”
the best the Post can do is
cite the Japanese people’s aging demographics.
This is a problem?
If so, it is one that many other nations would love to have.
After all, the “problem” stems largely from rising life expectancy.
Japanese citizens now live nearly five years longer than Americans,
whereas as recently as the late 1940s
their life expectancy was thirteen years shorter.
It is an epic demographic transformation and means, of course,
that there are a lot more old people around.
Would Japan be a more “successful” place
if its elderly citizens were being deep-sixed
at the speedier rates of mortality characteristic of the United States?
It seems the Post thinks so.

[While I agree with most everything else Mr. Fingleton says in this essay,
I strongly disagree with the assumptions of the next-to-last sentence above.
The figures, which are certainly well-known (e.g.),
in my opinion show that
America is spending far too much on the health care of its senior citizens.
Whether that money is being wisely spent, I sincerely doubt.
But the solution is not to keep spending more money on senior citizens.
Rather it is too sharply reduce
the overall amount being spent on their health care,
but to figure out a way to spend it more wisely.
But of course all this is tangential to the main points of the essay,
which concern Japan, not the United States.]

Of course, a low Japanese birth rate has also contributed.
But – in an overpopulated world – what is wrong that?
For some reason the Post seems to have failed to notice that
generally around the world
the richer and more educated a woman is,
the fewer children she is likely to have.
The correlation is notably illustrated in
the Forbes list of the world’s fifty most powerful women:
the top five —
Angela Merkel, Hillary Clinton, Dilma Rousseff, Melinda Gates, and Jill Abramson –
have a grand total of seven children.
In common with their peers elsewhere in the richest nations,
many Japanese women choose to have just one or two children.
It is a luxury they can afford.
To put it bluntly, unlike women in the developing world,
Japanese women no longer need look to a large family of children
for their economic security in old age.
They have plenty of savings.

In any case as a matter of top national policy,
the Japanese government has long actively sought to rein in the birthrate.
This is part of
a highly interventionist tradition of population control going back centuries.
As far back as the eighteenth century,
the Shoguns set an overall limit of 30 million on the nation’s population
and used sometimes draconian means to curb family sizes.
Then when Japan embarked on building an overseas empire in the late nineteenth century,
the policy was reversed.
With the government eager to populate
the nation’s ever-growing overseas possessions,
it encouraged families as large as nine or ten children.
The policy changed again after World War II
with the passing of the Eugenic Protection Acts of 1948 and 1949.
Shorn of its empire,
Japan suffered near-famine conditions in the first years after World War II.
Policymakers concluded that
the nation was grossly overpopulated and that
in the interests of food security
the birth rate had to be drastically cut.
This was in essence the forerunner of the one-child policy
that has become such a controversial aspect of Chinese policy in recent decades.
The difference is that in Japan’s case
the rationale for cutting the population was even greater.
After all, as is apparent from the CIA Factbook (available online),
Japan’s ratio of arable land per capita has long been one of the world’s lowest.

Let’s be fair.
The Post has some excuse for its negative view.
The fact is that
this view has long been encouraged by top Japanese leaders.
Working through
numberless surrogates in the American Japan-watching community,
they have projected an image of acute distress for two decades.
To say the least
such surrogates never mention
Japan’s booming capital exports or
Japanese exporters global dominance in producers’ goods.

Why keep the nation’s strengths under a bushel?
It is part of a counterintuitive approach to trade diplomacy.
Those of us with a long memory remember that
in an opinion poll in the “juggernaut Japan” era,
fully 58 percent of Americans said that
Japan’s rising strength was a greater threat to the United States
than the Soviet Union.
Up to that point the Japanese establishment had pursued a policy of
presenting the Japanese system as American capitalism on steroids.
Since then top leaders have discovered that
portraying the country as somehow sickly and almost farcically dysfunctional
is a much more effective way of restraining protectionist pressures abroad.
In the last few years, as the euro has weakened,
they have taken the program to new extremes
in an attempt to discourage hot money flowing into the yen
(they are concerned in particular that
the Germans now enjoy a currency edge in cars and producers’ goods).

None of this is surprising.
Japanese leaders after all have long pursued
an active program of shaping American opinion
to the advantage of Japanese trade policy.
What is surprising is that a paper of the caliber of the Washington Post
cannot see through the endless baloney about “malaise”
and dig out the facts for a change.

[Let me point out the obvious (which Mr. Fingleton seems to be to polite to observe):
Of course the Post can do what he suggested.
But they will not.
Now let me move into the subjective realm of
estimating the motivation for that refusal.
Ask yourself this question:
What ethnic group benefits from
an economy tilted toward health care, finance, and education
and away from manufacturing?
Surely it cannot be inappropriate just to ask a question, can it?]

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