There's a lot to admin about Japan, but this article is hackery at best and deceptive at worst.
The article is almost solely focused on Tokyo. Yes, Tokyo is still doing well. It's still one of the richest cities in the world. But Tokyo cannot be held up as "Japan", just as New York cannot be used as representative of the entire U.S.
Life expectancy in the U.S. has gone up by 4.43 years since 1980. All rich-world countries has seen a similar increase. [1]
Unemployment is lower in Japan because labor force participation rate is (much) lower. The popular is older, far fewer women choose to work, and many men have dropped out of the workforce (a similar phenomenon is happening in the recovery here). [2]
Cell phone supremacy? You mean the iPhone which is designed in California? [3]
He links to Shadowstats which is a conspiracy theorist website about understanding CPI. CPI is one of the most scrutinized measurements out there.
It also has wonderful quotes like: "The Japanese are dressed better than Americans. They have the latest cars, including Porsches, Audis, Mercedes-Benzes and all the finest models. I have never seen so many spoiled pets."
Americans do the same crazy stuff, but they do it in a way that looks unremarkable to other Americans.
That sentence made me wonder if the author had never been to California. Speaking as a Brit, that sentence could so easily apply to any non-American's perspective on people in that state (I've only really spent time in NY and CA, BTW, so I acknowledge that my perception of life in the US is just as skewed as the author's pereception of life in Japan, but in a sense that's exactly my point).
Let's look at one metric that supersedes all (in my opinion):
According to, Japan's unemployment rate has been no higher than 6% over the last 32 years (1980-2012).It's currently at 4.5%[1]
Compare that to the US, who's unemployment rate has been at worst 10% over the last 32 years (1980-2012). It's currently at 8.5%[2]
Why does this supersede most other stats? Because we simply need to keep people busy "doing things", otherwise (as you're seeing in the US) riots/protests break out, crime goes up (crime is largely a result of poverty), and people don't have the means to keep themselves healthy. What more do you need from a society? I understand people will say "but we need growth". I ask why? What is the end result of growth that makes societies "better"?
It reminds me of my first time visiting South Korea. While there I observed people who's job it was to wear a cute uniform and bow to cars entering the parking garage at the local department store, people hired by companies to stand in the aisles at the local supermarket holding packs of coffee or shampoo or whatever and dance to loud techno music (usually young women in short skirts and thigh high boots, bizarre to see families shopping for vegetables, fighting their way around scantily clad 20 year olds in the middle of a dance routine around the cabbage aisle), and other similar, "keep people busy" type jobs. I'd be highly surprised if these folks made more than $3-4/hr, not even remotely a living wage.
- checking on the numbers, the minimum wage in South Korea for 2011 was about $3.75. I'm guessing when I first went there in 2003, it was even lower.
- in 2006 I visited and remember having to make my way around a gauntlet of guys in doorman uniforms, who's job it was to bow to people entering the hotel, and another guy who's job it was to push the "up" button to request an elevator. That's it, that was his entire job. For eight hours a day, he stood outside of the elevators, waiting for guests, and pushed the only button to request an elevator (there was no down button the hotel I was staying in).
So yes, while the unemployment figures were pretty good, the actual "work" that people were doing was essentially meaningless.
I've never been to Japan, but I'd be highly surprised if there weren't similar analogues.
A general point to keep in mind here is that unemployment numbers are hard to compare. The best example is a country like India which has no social security net to speak of, so if you're unemployed and are not rich you will actually die of hunger. Which means that the unemployment rate is actually the percentage of people who can afford to stay unemployed. A less drastic comparison might be between unemployed people in Sweden and the US. I'd think that being unemployed in Sweden is lot better than being unemployed in the US because of the US's lack of a medical safety net.
Similar logic applies to your example of people doing "meaningless work". There are lots of those in India as well. I'm not going to judge whether these jobs are meaningless, but I'm pretty sure they produce a drastic improvement in quality of life for those who are employed in these jobs. Life as a greeter at a mall or a lift-operator is way better than life as a struggling farmer. And this doesn't even consider all the second-order benefits these people enjoy. Life in a big city means better education, more access to information, more opportunities, all of which almost certainly guarantee a much better life for their children.
This was a bit of a rambling post, but I guess the point I'm trying to make is that both comparing unemployment rates as well as comparing the types of employment on offer are too simplistic to make any useful judgments about an economy. I think some aggregate quality of life measure is what we really need to look at.
"I'm not going to judge whether these jobs are meaningless, but I'm pretty sure they produce a drastic improvement in quality of life for those who are employed in these jobs."
You're right of course, "meaningless" is probably too hard a harsh word choice. Looked at another way, dancing girls promoting powdered coffee mix probably moves a lot of coffee. And having a guy operate the elevator button made a 3-star hotel feel like a 4-star. In fact, one thing I notice every time I'm in Korea is that the level of customer service is generally very high simply because there's so many people working at places.
I was thinking of this the other day when I was in a Home Depot and couldn't find somebody to help me find a dryer vent for love or country. "If I was in Korea I'd have half a dozen employees showing me the aisle, and dancing girls promoting the product" I was left thinking.
In Australia, people don't like service-people. There's this weird pseudo-independence thing, where we'd like to believe that we haven't oppressed any workers to get our cup of coffee. It's not a problem if the coffee was grown by plantation slaves, and made by a Philippino guest-worker on an exploitive H1B1 equivalent visa, but the waitress had better be quick, efficient, and get out of our way so we don't feel sorry for her. If it's a waiter, he'd better be even quicker, because we detest seeing men do degrading work even more.
So all the marketing is depersonalised. Cafes might have lavish interiors which were extremely labor-intensive to build, but the work is all done behind closed doors. People will pay lots of money for seamless advertising and marketing, so you can't see that a real human being had to put the sign together.
It's kind of strange.
I'm sure service people hate their jobs, and do kind of meaningless stuff, but no less than the rest of us.
Having worked in retail and service jobs, I can tell you that a generous fraction of Australian consumers rely on the lowly checkout chick / salesman / service assistant / phone operator etc as someone to prop up their self-worth through condescension.
Reminds me of store self-checkout scanning machines. A lot of the time, they aren't actually faster than waiting in one of the staffed checkout queues—especially if they have a queue themselves, as customers operating the machines are inevitably less experienced at it than the cashiers are at operating the POS.
But people still prefer them. Why? I think it's a social anxiety thing. You don't want to think that you're wasting someone's time on your goods—showing them what you've bought, having them fuss over each item and acknowledge that you bought that—when you could instead check yourself out in relative anonymity. You don't have to make any small-talk, or even take out your headphones if you don't want to. It's really about eliminating the "friction" of the social norms involved with the manual checkout process as much as it is about automating anything.
I've heard of the ridiculously low wages in South-Korea. For example 7-elevens etc are staffed by students doing part-time work for a pittance. It's unfortunate, but what can you do.
In Japan, you'll see retirement-age men working silly pretend-jobs, like guarding a hole in the sidewalk and telling passersby to avoid it, as if the fence wasn't enough.
It's actually worse than that. Most students don't get part time work (most people I know here never worked before finishing their post-grad university). When you see someone young in a 7-11 they are probably stuck there. Education has such a huge social force behind it and every job is very competitive so you get people with masters degrees working sales jobs. For the folk who never did well enough to get into university they are often stuck in minimum wage jobs for life. No safety net means most people rely on their children to retire, if you were infertile or your children died you are probably going to be sorting garbage when you are 80 in -10°C temperatures. I stopped to talk to this old woman on the street yesterday, she's one of millions in her situation.
South Korea takes capitalism pretty seriously. Competition is real here and failure is ultimate. Japan still has a fairly decent safety net with their pension schemes. South Korea, however, does not and relies on children to deliver for their parents. When children don't (because they are poor, they died, they abandon their parents) it all falls apart and the government doesn't step in (which provides a pretty strong incentive to succeed).
Because we simply need to keep people busy "doing things"
I suppose we could employ people to dig holes and pay them for the job of digging holes for no purpose. That's not productive or is a good use of their time, unless it is spent digging useful holes. That's because we have a million other things that people could do help and help out. All we need to do is figure out how to employ people.
I ask why? What is the end result of growth that makes societies "better"?
Less time spent on farming, manufacturing, servicing, and generally working. More time for leisure and family, increased well being, increased lifespan(more is always better), supposedly.
However, we're not good at figuring out what we want in life and thus not spend time on leisure, family, hobbies, and things that are fun. Instead, we seeks certain job because they're prestigious, buy things merely for status symbol effect, and so on.
Cleaning up all that plastic crap that litters the planet, walking around in shady areas and watching out for each other. Basically all healthcare facilities I've seen were either understaffed or just barely above that, too.
> However, we're not good at figuring out what we want in life and thus not spend time on leisure, family, hobbies, and things that are fun. Instead, we seeks certain job because they're prestigious, buy things merely for status symbol effect, and so on.
Doesn't that just mean that "what we want in life" is status?
> people don't have the means to keep themselves healthy.
Isn't that true only for US. Is employment also dysfunctionally tied to health insurance as it is in US?
> What is the end result of growth that makes societies "better"?
It depends who you ask. If you ask owners of large corporations they will look as GDP for a metric of how great a country is going. Doesn't matter if life expectancy is terrible, infant mortality, crime and corruption are high, no middle class, people living in shanty towns as long as GDP is booming the country is considered a success.
If you ask people what is makes a country good, they wouldn't care much about GDP, they would point to healthcare, crime, lack of corruption.
Unfortunately the news and the reports you get in the traditional media don't talk about that. All those analysts,"experts" and economists only care about the metric that large corporation care about. How many time have you seen on the news about "the average rate of depression in Argentina has gone up?". Not much right. But you might hear about how GDP is suffering.
>> people don't have the means to keep themselves healthy.
> Isn't that true only for US. Is employment also dysfunctionally tied to health insurance as it is in US?
Diet, stress, mood, motivation, and physical activity all have impacts on health, and all are affected by employment status. Doctors and medications, while undoubtedly important, aren't the whole picture. Most people are healthier without doctors but with a good diet, a decent amount of physical exercise, and a motivated, happy life than they would be with doctors but without all the other things.
But also once someone loses their job, diet, stress, mood & motivation would go down the hill. So the chance of getting sick and needing a doctor would go up, which, interestingly enough is when Americans get denied access to health care.
They eventually end up in emergency care and then declare bankruptcy because of the cost (therefore me using the "dysfunctional" label for it).
But the point was that it is hard to compare the two countries simply on unemployment just because more ties into it. Being unemployed in Japan and breaking a leg is not as terrible as being unemployed in US an breaking a leg. Does it mean Americans are more likely to be stuck working in shitty jobs, afraid to quit and move because they don't want to expose their families to the risk of having no insurance? I don't know. I suspect it plays a role.
I'm just saying that it's one of many factors, and I'm skeptical about overstating its importance because topical political issues are almost always overstated in importance. If we didn't spend a good chunk of the last four years, as a country, angrily arguing about socialized medicine, then socialized medicine would likely not be the first thing to pop in your mind as the most important factor. It's probably just as important that Japanese people eat a healthier diet and are less alienated from their families than Americans, but I wouldn't even claim any certainty there.
Not for me. Medicine has been in my mind ever since I made the mistake of going to the emergency room with a terrible cold when I was here as a student. I ended up paying $400 for 1 pill of codeine, waiting 2 hours and be seen by some intern. $400 in 1995 for a student who makes $6.50 in a university library part time -- is fucked up. I don't care how it is justified and explained. And that is just my experience. There are a lot worse. So I would have been railing about it anyway whether we had the debate or now. I have been mentioning that for years.
> What is the end result of growth that makes societies "better"?
How about the fact that, when we do well, we are a bit more likely to spend that 1% of our resources on new technology, and get stuff that we later take for granted, like flying through the air, curing nasty diseases, and having immense computing power at our fingertips that can reach any nook and cranny of the Earth within milliseconds.
Seriously, full employment is a threat not a promise. Who wants to really work? For what?
Mandatory vacations, 6 months per year, 5 hour work day. Then we can have full employment.
As said in another comment, growth is required to spend more time with family, leisure and to do things that we really want. Well thats not the case, since no matter how much growth there is and how much an economy increases, leisure time, vacations and do what you want does not increase. Working more only produces growth so that a few people on this planet can do what they want, while all the others are still required to work more.
However, you seldom hear anyone criticize work today, all the theories and economieswant people to work more. Why not work less? Why not work at all? How come that all the effeciency and growth still make people work? Isnt the mother of all invention necessity, to not do something mundane and boring while we could be playing and having sex or dancing.
Did humans always work since they began calling themselves human? 200 000 years ago, or any modern hunter gatherer society knew of work. Work is unnecessary for life. It is in fact harmful.
The reason why they want employees to work more is because they have skills and experience related to their job and they'll get more productive work done if you just get them to work 8 hours a day instead of going through the cost of hiring someone new for 4 hours a day. Each employee has a fixed cost in recruitment, training, management, turnover, per person costs and more that doesn't go away.
without doing work, you die. if you're alone, quite literally, as you would starve to death.
modern man is disconnect from nature and questions work. modern man is also very surprised when nature strikes back. a simple camping trip can suddenly become a life and death situation.
we live in a world of massive division of labor. hence questions like yours. money is abstract. so go on try living our there for a while, produce your own food and drink. effing hard work i tell you. a full time job.
The Bushmen were some of the last people on earth to live as hunter-gatherers, in largely the same way that all humans did before we fucked everything up with civilization and technology. They lived very communal lives, but they didn't work anywhere close to 40 hours a week, and spent most of the day chatting and making music. They seemed pretty happy until the civilizations around them came in and ruined their culture.
That's also completely controlled by where you live. There are a few places on Earth naturally abundant enough(and with climate friendly enough) to support a population with less than 40 hours per week per person, but I'd bet most of the planet doesn't fall into that category.
Absolutely--some humans were forced into civilization by the poverty of their surrounding environment. Instead of adapting to suit their environment, they had to adapt their environment to suit them. But in almost every measurable sense, life in civilization was far more impoverished than the lives of hunter-gatherers. The only reason it won out is because it led to an immense consolidation of power--but it was centuries if not millennia until the typical member of a civilization had a quality of life comparable to that of a bushman, and even then it's an open question who's really happier.
We can do it more or less anywhere, it's just a question of population density. A tribe that needs a few hundred square miles of tundra could live as well off of a few dozen acres of tropical forest.
Here's a bit of trivia for you-- the most "abundant" place on the planet, the place once home to the highest density of exclusively foraging peoples, is the area now known as Northern California.
>We can do it more or less anywhere, it's just a question of population density. A tribe that needs a few hundred square miles of tundra could live as well off of a few dozen acres of tropical forest.
Yes, it's definitely doable--I'm not arguing with history. I'm arguing with this
>they didn't work anywhere close to 40 hours a week, and spent most of the day chatting and making music
A tribe that lives in the tundra is going to have to devote a substantial portion of their time to preparing for winter.
Which isn't going to allow them the vast leisure time enjoyed by African bushmen living close to the equator.
Africa is a huge continent. It has almost every climate and environment available on earth.
The other thing Africa has is a collection of populations who have lived in their respective parts of Africa for millennia. So while the environment the Bushmen lived in may have been relatively friendly to them, it wouldn't be so friendly to a Kenyan or Egyptian, or a Serb, or a Cherokee.
It is very abundant and has a very friendly climate relative to a great deal of the planet.
By friendly climate, I don't mean pleasant 72 degrees year round. I mean you don't have to spend all summer chopping wood, and preserving food so you can survive through the winter, which is a vast swath of the planet.
Wikipedia suggests the Bushmen need to store nuts for the winter, and during early spring the only available food is game (all the plants are dead). But great point about not having to deal with snow.
People didnt live alone in the woods, so thats a straw man argument there.
Going about it to live together as a commune in the nature, that is success. Just cant be done today, as civilized people would be right there behind and kill them all/take their food/poison them and so on, just as is being done to hunters and gatherer communities who are left today.
People can live together and strive without working, when you consider hunting and foraging/gardening to be a game, and hunting is not considered work even by civilized people, it is something "recreational". Hunting or gathering food is usually done around 2 hours per day at most, depending on season and so on. Its just a fun life, the kind of life humans where made to live. Our bodies are not adapted to working at all. Our bodies and minds break down when working, even in nice office environments without much physical labor.
We all have our reasons for working. In some cases I'd much rather be at work than say sit on a beach. I'd get bored after endless days of sitting on a beach right?
I think this conversation could easily go into the "whats the meaning of life" topic, so let's try not to go there. My overall point is more so this, what's so evil/bad about the the so-called lost era in Japan?
growth is required to spend more time with family, leisure and to do things that we really want.
And yet Americans spend more hours at "work" than most other countries. How has our growth shown that?
"I think this conversation could easily go into the "whats the meaning of life" topic, so let's try not to go there."
Yes, exactly. What we do with our time here is quite important to discuss, and this is usually the entrance to idologies and political parties. I wish we could talk about that more. Do you really want to work 30+ years of your life, then retire hopefully with a small amount of money (if its not "eaten" by the economy), while the top dogs do whatever they want whenever they want?
It would be nice with a more balanced approach to work. Not work for work, but work for play. Free will and all that, work if you will, but I highly doubt most workers today would choose thier situation if they could.
The unemployment rate in Japan is low, but the (arguably more important) labor force participation rate has been dropping a lot lately: http://i.imgur.com/WJiUx.jpg
Of course, a big explanation for the lower labor force participation rate is the aging population.
> What is the end result of growth that makes societies "better"?
The need for constant economic growth is just a side effect of how a capitalist economy works. That's why they all go into deep shit when growth slows down too much or stops. Nothing good or bad per so about it, in my opinion (although the improvement of productivity has obviously some positive effects).
It's a necessary condition for a functioning capitalist economy. I can go into more details if you want, but the fact that the key economic indicator is GDP growth and that all economies go into turmoil when growth approaches 0 should tell you that this goes beyond the opinion of a bunch of people. It's an emerging effect of the rules of capitalism.
Especially interesting since Bank of Japan doesn't seem to have dual mandate to guarantee both maximum employment and price stability, unlike Federal Reserve.
The overall point of the editorial might be right, but some of the metrics that it mentions are random or problematic. The number of high-rise buildings constructed? That says more about how little buildable land Japan has than it says about the strength of the Japanese economy.
The article also mentions electricity "output" (a.k.a. consumption), which has grown faster in Japan than in the US. The article spins it as an indicator of the strength of the Japanese economy, but you could just as easily describe it as a success story about US conservation efforts.
And some of it is just strange. Michelin ratings as a measure of the strength of an economy? Cultural factors matter as much as economic strength, there.
Japan might actually be doing better than people in the US think, but this article isn't a good argument for that position.
> And some of it is just strange. Michelin ratings as a measure of the strength of an economy? Cultural factors matter as much as economic strength, there.
I was in a theater on the 4th to watch _Nausicaa_, and one of the previews was for a documentary about some sushi chef. Breathlessly it mentioned that he was the first Japanese restaurant to receive 3 Michelin stars.
I was a little astonished. 'Yes, I know 3 Michelin stars is very hard to get, but this must've been in the last 20 or 30 years - how could Michelin have deprived Japan of any 3-star rankings for so long after WWII? Their restaurants are not unusually better these days than they were over the last century or two.'
The obvious answer is that Michelin didn't have any real presence but began ramping up relatively recently (perhaps during the bubble). So it wouldn't be surprising if the coverage continued to increase despite whatever the true trend of Japanese restaurant quality is (up or down).
The movie is called Jiro Dreams of Sushi. My recollection is that Jiro's tiny restaurant was the first Sushi restaurant to receive 3 stars, and it received them in the first year it was visited by reviewers.
The movie itself is a stunning testament to the power of doing something narrow and deep extraordinarily well. I cannot recommend it enough.
I have been following Fingleton, the author of this article for quite a while. His main thesis that "Japan's lost decade is an illusion" has not changed much over the years. In fact, he was among the group "Japan bashers" in the 90s, and their main argument was that Japan's Ministry of Finance (MOF) was intentionally trying to paint a grim image of Japan to gain advantage in trade negotiations. This argument holds little water these days: it is next to impossible to hide information about the true state of a country when access to information is so easy thanks to the Internet.
Fingleton also claims that Japanese are early adopters in technology, which is only partly true. Japanese, in general, prefer to excel in something by using manual skills and they take great pride in that. They resort to technology only when manual skill is not enough. Making good cars require industrial robots so they have plenty of them, but in other parts of the industry, adoption of advanced technology can be quite limited. In other words, Japanese companies often find themselves at local maximums as compared to their American counterparts. Just look at the current state of Japan's once great electronics companies: Sony, Panasonic, Sanyo, NEC, Hitachi, etc. Only Canon seems to be doing fine these days.
This argument holds little water these days: it is next to impossible to hide information about the true state of a country when access to information is so easy thanks to the Internet.
It's actually quite easy:
Step 1: recognize that gathering macroeconomic statistics is really hard. One example: if people previously spent $3 on salsa, but now they spend $5 on guacamole, what is the inflation rate for mexican dips?
Step 2: come up with a catchy title for a statistic, and make sure reporters know all about it. E.g., "the burrito index, which measures how much good mexican food costs."
Step 3: tweak the definition of the statistic until you get the result you want.
Want more inflation? All mexican dips are equal, so inflation is up 66%. Want less inflation? Guacamole is 2x better than salsa, hence dips have actually dropped in price 17%.
Actually, substitution is used in the CPI basket of goods. Fresh fish can be replaced by canned tuna, for instance.
More amusing is the application of "hedonics." This is perhaps best explained by an example. Consider that the cost of gasoline went up when certain additives were made required by the government. This cost is not fully reflected in the CPI, because there is a "hedonic thrill" associated with the perceived improved environmental friendliness (or similar nonsense) of the new required formulation of gasoline. Basically, the new gas should make you "feel better" about using it, so there is an improvement of quality that offsets the full increase in cost. Does this make sense given that fresh fish can be replaced by canned tuna? No...
Substition and hedonics are very useful for keeping the CPI from rising, which has a number of benefits for the government, as various welfare payments and wage structures are based off of it.
Substitution is not very useful for keeping CPI down. We substitute from steak to spam, then from spam to cat food, and then there is nothing more to do. It's a trick you can only do once.
Substitution does, however, keep CPI stable, and rightly so. My food bill hasn't changed much in spite of the recent peanut butter price spike - I just substitute other goods for peanut butter.
I understand what you are saying, but you've just shown how versatile substitution is. If wheat spikes they can substitute oats for the time being. If chocolate spikes they can substitute sugar candy. However, I think that when a non-economist thinks of the CPI, what they are considering is if they can maintain the same quality of life over a period of time for the same amount of money.
As you say, this does keep the CPI stable, but I think that the way an economist experiences the CPI is different from the way the average consumer does. For the consumer who has a relatively predictable pattern of food purchases, the response is "Wow, why does it cost so much more for me to buy the same stuff this year than last year?" They experience price inflation and their economic decisions are affected by it, but the CPI remains the same.
If we want to talk about how the consumers weather pricing changes, then substitution doesn't reallyconvey their experience. Yes, the average person will say, "let me get something else instead of peanut butter," but the CPI doesn't account for the "anhedonic pain" of substitution, to poke fun at their own terminology.
...the CPI doesn't account for the "anhedonic pain" of substitution, to poke fun at their own terminology.
Yes it does, or at least it attempts to. The hedonic penalties are exactly the hedonic benefits with a minus sign.
If guacamole is 2x as good as salsa, then if the price of guacamole doubles from $5 to $10 and consumers switch to $3 salsa, then mexican dips have increased in price 17%.
Look, I'm not saying a good job is done. In fact, I've argued many times that inflation is wildly overstated. I'm just saying that the hedonic adjustments and substitution adjustments are necessary if you want to have any sort of CPI-like measurement.
Of course, it's also the case that CPI doesn't actually measure inflation. To get a real inflation measure, you'd need to measure the price of a fixed basket of goods. But then no statistic like CPI would even be possible, since inflation would no longer be a rate - Inflation(1970, 2012) would not be equal to Inflation(1970, 1990) x Inflation(1990, 2012).
One of the most important lessons that we have learned from the past years is that you cannot look at a country's standard of living in isolation. You also have to look at the debt levels to see if it is sustainable in the long run. Japan has the highest government debt-to-gdp ratio in the world: http://en.wikipedia.org/wiki/List_of_sovereign_states_by_pub... (higher than Greece!). I suspect that they have a huge hangover coming their way.
If I citizen of a country buys that country's bonds then a portion of their interest is collected back as capital gains. Thus the country actually pays (interest rate * (1- capital gains rate) - inflation rate). So because the overwhelming majority of Japan's debt is owned by it's own citizens and it's in it's own currency they can easily drive their loan servicing costs below zero at fairly modest inflation rates. They can also achieve the same effect by slightly bumping the capital gains tax which is currently set at 15%.
Great arguments! I still don't think that paying 50% of your tax revenues in interest rate is sustainable (especially not when the interest rates are as low as they already are). However, your point about capital gains combined with high level of domestic creditors certainly changes the math.
People where buying billions of dollars of short term treasury bonds with a negative interest rate recently, because they are safer than mattress's. However, I was talking about real costs after inflation ex: Inflation = 2%, government bond's yield 2.5% capital gains = 25%, mattress yield = 0%. (1 + .025 * .75)/1.02 = 99.88% vs (1/1.02) = 98.04%
The only number the government does not control is the interest rate they need to pay.
They have a uniquely high level of internal debtors, the government bonds were bought by Japanese people much more so than other citizens buying their countries' bonds. I didn't understand why this made a difference though.
It does make a difference in that Japan could finance the public debt entirely by itself. The country has a trade account surplus, it's not them being indebted to others, but others are indebted to them.
That makes it unattractive for speculators to bet against the country. Countries like China or Germany are in a similar position.
They have had a historically high internal savings rate that allowed this. One thing to keep an eye on is their terrible demographics. I believe Japanese citizens as well as the largest institutional buyers (Japan Post etc) have just recently become net sellers of JGBs as they move towards liquidation to fund retirements.
Japan currently funds more than half of their gov't via borrowing, with the demographic shift and the internal demand for JGB turning towards net negative, they will increasingly rely on external buyers of their debt. I believe China has been a buyer of late.
What has worked for Japan historically may not work so well going forward.
I've read that most of this money came from retiree savings, which are rapidly running out. Furthermore, the younger generation doesn't have such savings, yet alone the population, to keep such a thing going.
In a sense, this system of internal borrowing in a hidden tax. While it of course is not mandated, it's required in order to keep things going smoothly.
Japanese debt is Yen denominated and, if they want, they can extinguish it by printing money. This option is not available to Greece/Italy/Spain/Portugal/Ireland.
But by printing money they'd wipe out (or at least reduce) the real value of their peoples' savings - basically all those bonds the Japanese people bought. The consequences would be borne by their own people, not some foreign banks. This may be politically unpalatable.
You can pursue an economic policy that creates high levels of inflation without necessarily triggering hyperinflation. The goal of course would be to gradually inflate away the value of the debt, not to pay it all back immediately.
Wouldn't that wipe out the very same people who invested in Japan? There are a lot of regular Japanese people who hold Japanese debt. Wiping it out via inflation is equivalent to wiping out the wealth of regular Japanese people to save the Japanese government.
Words do not exist to explain errors in this article. The world's most populous island improved internet infrastructure? Wow! Life expectancy increased, just like in every other OECD nation? Wow!
The appreciation of the yen is a result of the deflationary pressure that crippled the Japanese economy from 1995-2005.
He links to shadowstats, a known internet cook hangout. It's like linking to a global-warming denial site.
"Japan leapfrogged the United States in the space of a few years in the late 1990s and it has stayed ahead ever since, with consumers moving exceptionally rapidly to ever more advanced devices."
On what planet does the author live? The smartphone was invented here and the US leads the world in smartphone adoption. The Japanese are still texting on 9-keys.
In 2005 my friend had a Japanese phone which had high speed Internet, video calling, and an ssh client among other things.
The US had the Razr.
Don't change history, smartphones were widely popular in Japan well before anywhere else in the world. The iPhone was just the first usable smartphone for the rest of us.
I think this "lost decade" talk is mostly a matter of perspective, Japan is the nation in the world that, of any I can think of, could most afford to "lose a decade". An older population, a shrinking population, and a very high savings rate means that deflation was not as hard on its economy as it would be on an economy like the United States. In the US and many other economies inflation helps consumers with their debt, population growth requires that the overall GDP grow significantly to keep pace, and a younger population means many young people need meaningful work to sustain themselves while an older population can live on savings and supplement with poorly-paid employment to hobble through to retirement.
Some of the arguments may also be unfair:
The author breaks down GDP on a per capita basis to make the argument that Japan might have grown faster than the United States since 1989 - but Japan is 2 decades our from their financial collapse and the US only some 4 years after a similar event.
Unemployment in Japan has always been much lower than the US, so comparing them now as some sort of evidence regarding a "lost decade" is not meaningful.
It may also be that, since the population is shrinking, the life-expectancy gains are more of a collection of a dividend from past public health improvements than any reflection of recent health care system improvements. (I.e. all those old people living longer from better care in the past vs. relatively younger people dying from other causes to lower the average.)
I think a major factor determining your opinion on Japan's "lost decade(s)" is how you view inflation. Those who stand to benefit from more (stealth) inflation (politicians / bankers with access to the fed discount window / those with highly mortgaged real-estate) will see those decades as truly lost, but those that generally stand to benefit from less inflation (savers / "main street") will view those decades in a more positive light.
I have some friends who don't travel internationally and who have totally bought into the propaganda that the USA is better than any other country using any metric.
Love of one's own country and mild forms of nationalism are good things, but they should be tempered with a realistic view of the world. In the USA we have a clear and present danger to the economic health of our country: spending too much money on "defense."
It is easy and popular for westerners to romantacize Japan - but it has serious and structural problems. When analyzed on its own (instead of comparing it to the USA) it becomes readily apparent.
I will just say a few observations which show that the picture the article paints is not quite accurate.
Firstly, yes there are many people with fancy clothes. What the author does not say is that a lot of those people live with their parents - and their whole income is expendible. I don't know if this phenomeneon started after the bubble economy, but it is quite shocking.
Then there is the fancy cars - what is the percentage of car ownership?
About employment - finding permanent employment for young people has become almost impossible. Many young people now have short term contracts or do so called "arebeito" (extremely short term work with hourly wage). This is clearly not optimal and is a new in this generation.
Japanese health care is a joke. They spent a lot on the last years of life (everywhere you look is AED machines), but nothing on the quality of life. Japanese dental care is below third world country! The majority of people do not get orthodontal treatment even when clearly necessary. Take a look next time you walk around.
Another example of the quality of health care - I've spoken to two dermatologists (from national health care in Japan) and they don't even know about ruaccutane (isotretonion). This surely is a basic treatment that in some cases are necessary?
Japanese banking is pathetic. It seems they do everything by hand - which is nice but inefficient. With my non-japanese banking I get internet banking for free and ATMs are open 24/7. Good luck getting that in Japan.
> What the author does not say is that a lot of those people live with their parents - and their whole income is expendible. I don't know if this phenomeneon started after the bubble economy, but it is quite shocking.
In many cultures, it's customary, even expected to live with one's parents at least until marriage, and possibly longer. Extended families are an important social resource, and the American model of immediate familial alienation upon reaching age 18 followed by a detached nuclear family is in many ways weaker.
I won't argue with your other points, though at the very least, a forum like Hacker News should have skeptical attitudes about such ideas as "permanent employment".
I understand your objection, but perhaps what he is saying will make more sense with a little background. It's not that these youth are people between jobs at startups, which is what this community might have in mind when hearing about someone who lives with their parents. There is an ever increasing number of Japanese youth who choose not to obtain full time employment, who work multiple part time jobs, and who do not amass any savings. It's not necessarily that they are not saving money because they aren't making enough; rather, they are spending all of it on non-essential material goods -- be it clothes or technology or collectible figures or any other such thing.
As far as I understand, this is a "live for now" cultural reaction against the failure of the salaried worker lifestyle that existed prior to the Lost Decade(s). It was once the norm for a Japanese student to graduate college and to then work for one company for the rest of their life. This was known as being a "salaryman". When Japan entered this long recession, many young people saw that their parents had worked so hard for a promise that couldn't be fulfilled. They rejected the salaryman lifestyle for the sake of a less stressful, less structured lifestyle focused more on cultural identity, such as style, music, a hobby, etc.
Sometimes such youth do move out (such as living with a partner -- marriage is becoming increasingly delayed though) but I think that the criticism is that this lifestyle is just the pendulum swung fully the other way: it is too focused on the immediate future and lacks any long term planning. A person in this situation will have a difficult time dealing with a family emergency, whether it is a sick parent or a pregnant girlfriend, for instance.
There's quite a bit of disinformation in your comment.
* that people live with their parents is only "shocking" if you happen to come from a country where that is considered taboo. In many countries it's not considered shameful to live with your parents while you're single. It didn't start after the bubble, it started like 1000 years ago. Yeah, there's a downside to it, but then there's also a downside to getting into debt in order to live by yourself.
* the percentage of car ownership is quite high. Just google it.
* "Japanese health care is a joke" compared to what? Look at life expectancy numbers, doctors per capita, etc.
* Internet banking has been around for years. ATMs are open 24/7 in convenience stores.
> In many countries it's not considered shameful to live with your parents while you're single.
I can completely understand that you want to live with your parents when you are studing (or a young working adult). But 28years+ is becoming a bit ridiculous. Maybe it is because a lot of people are not getting married anymore. But the point is that many people (and some of my friends) can not afford a really expensive apartment. Tokyo is expensive to live in.
Anyways, the point I wanted to make is the Article's comment about the clothes young people wear - it is quite deceptive to use such a metric.
> * "Japanese health care is a joke" compared to what? Look at life expectancy numbers, doctors per capita, etc.
Life expectancy is higher in Japan partly because of diet (there are not that many overweight people - that is almost the norm in USA and Aus. Even trying to get overweight with the FAtkins diet followed in USA and Australia would be prohibitively expensive in Japan).
The USA's life expectancy is also lower due yo violent crime, excessive deaths due yo traffic accidents, AIDS and other lfestyle diseases).
Yet life expectancy is not the only measure of health care. There are other factors such as quality of life. The simple fact is that dental care in Japan is far behind the west (and I am not talking about the poorest of the poor without proper dental care, but fairly rich upperclass people).
> ATMs are open 24/7 in convenience stores.
That is true, I grant you that. 7-11 ATMs are open, but you will not find your banks ATM open after 19h00 (e.g. JP postbank).
PS: The goal of my post is not for Japan bashing but trying to give an unromanticized balanced view. There are many things wrong with the Japan, just as there are many things wrong with the west.
> Anyways, the point I wanted to make is the Article's comment about the clothes young people wear - it is quite deceptive to use such a metric.
I agree with that.
Also with unemployment: in Japan, unemployment benefits and welfare in general isn't as nearly as extensive as in the US (let alone Western Europe), women drop out of the workforce earlier, etc, so it's not appropriate to compare the unemployment rate in isolation.
> PS: The goal of my post is not for Japan bashing but trying to give an unromanticized balanced view
Well, you have to admit that "Japanese health care is a joke" does sound like bashing. ;-)
I'm with on most of that, but what do you mean by "FAtkins" diet?
Severe carbohydrate restriction may be to difficult for most people to stick with, and therefore not optimal for keeping the weight off. But there is is irrefutable evidence that carbohydrate restriction will result in weight loss.
I was refering to a diet full of delicious red meat, bacon and carbohydrates. The diet is popular in many countries and I love it too.
But it is a simple fact that such a diet is impossible in Japan. The price of meat, especially red meat is extremely high.
PS: I agree with you that a carbon restricted diet has obvious healt benefits. My point was that following an unhealthy red meat diet in Japan is impossible due to price.
* Internet banking has been around for years. ATMs are open 24/7 in convenience stores.
Except on public holidays when said ATMs magically cannot process credit card transactions. Japanese banks are most certainly a joke. I know of one large Japanese bank that completed all transactions on paper (they would process it electronically then print it out and hand verify the details) until a few years ago. Think of a vast network of vacuum tubes launching paper around a building storing billions of records. That was their head office.
This was the case until the mid- 2000s (to the point where if you didn't take money out before New Years, you might find yourself penniless for a few days).
Over the last few years 24/7, 365 days/yr ATMs are have become much more common. As have ATMs that accept foreign banking cards. As has a more generalized acceptance of CCs.
It happened to me last year during Golden Week so not that much has changed. I should have known better because I'd seen ATMs turned off during public holidays before. I even had large hotels refuse to accept credit cards but eventually I found accommodation and a restaurant that accepted Visa.
Ironically it happened to me today (which is a holiday in Japan). The ATM at one of the convenience stores wouldn't connect to my bank after 5pm. Luckily the ATM at the convenience store right beside it was working...
Dental care is not part of "universal health care" in many first world countries, including the one I'm coming from, Switzerland.
Countries with great public transport, such as Japan, should logically have lower car ownership rates than countries like the US of A. I don't have a driver's license.
> Firstly, yes there are many people with fancy clothes. What the author does not say is that a lot of those people live with their parents - and their whole income is expendible. I don't know if this phenomeneon started after the bubble economy, but it is quite shocking.
Living in larger family units is actually very efficient. The way we do things here in the U.S. is actually shockingly inefficient. Parents buy big houses in the suburbs when they have kids, and don't down size when the kids leave. So you have an older couple using one floor of an oversized house and the kid maintaining a separate household. Then when the kid has kids, they buy another big house in the suburbs, then pay someone thousands of dollars a month to take care of said kids after school. Meanwhile the grandparents sit around their big house bored and lonely.
There are a lot of weird cultural taboos in the U.S. that create this state of affairs, but the end result is vast inefficiency in resource usage compared to societies where bigger households are the norm.
>Living in larger family units is actually very efficient.
Maybe so, but it's not a sign of excess wealth. Japanese young people live with their parents longer than was customary thirty years ago, so it's not a question of culture. They simply can't afford to move out.
All that means is that Japanese young people are getting married later than was customary 30 years ago. For the eldest son, it's still expected in some families that he will never move out, even after getting married (my brother-in-law was roped into this, after having moved away to Kanagawa. He gave up his job and moved back into his parents home because his father more-or-less ordered him to). It's cultural as much as economic.
Which is the chicken and which is the egg? Are they moving out later because they're getting married later, or are they getting married later because they're moving out later?
Japan has the highest debt/GDP ratio in the world. It's true most of that money was lent by Japanese people, but as the population gets older people will start draw down their savings. The government will be forced to go to international markets to service the debt, and then the wheels are going to come off. If they had to roll over that massive debt at 3% interest service on the debt would consume the entire budget.
They'll have to impoverish the savers through inflation of the yen, assuming that's a political possibility. Is this the sign of a healthy economy?
The "lost decades" are not a myth. Japan has been able to preserve the appearance of wealth by borrowing it. Of course the country has great infrastructure. It was all built on borrowed yen in a futile attempt to stimulate growth. But the bill is coming due.
My main takeaway from this article and these comments is that it's devilishly difficult to make international economic comparisons.
As one commenter mentioned such activities quickly disintegrate into highly subjective "meaning of life" debates.
This is incredibly important because a lot of policy analysis depends on making international comparisons. If such comparisons are really intractable problems then what does that say about the potential for effective policy making?
The article is almost solely focused on Tokyo. Yes, Tokyo is still doing well. It's still one of the richest cities in the world. But Tokyo cannot be held up as "Japan", just as New York cannot be used as representative of the entire U.S.
Life expectancy in the U.S. has gone up by 4.43 years since 1980. All rich-world countries has seen a similar increase. [1]
Unemployment is lower in Japan because labor force participation rate is (much) lower. The popular is older, far fewer women choose to work, and many men have dropped out of the workforce (a similar phenomenon is happening in the recovery here). [2]
Cell phone supremacy? You mean the iPhone which is designed in California? [3]
He links to Shadowstats which is a conspiracy theorist website about understanding CPI. CPI is one of the most scrutinized measurements out there.
[1] http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#...
[2] http://research.stlouisfed.org/fred2/series/JPNLFPRNA
[3] http://techcrunch.com/2011/05/18/the-iphone-4-tops-handset-s...