
The Story of Japan's 'Lost Decades' was a Hoax - mattm
http://www.forbes.com/sites/eamonnfingleton/2013/08/11/now-for-the-truth-the-story-of-japans-lost-decades-is-the-worlds-most-absurd-media-myth/
======
lkrubner
It's important to realize that this article is by Eamonn Fingleton, who has
been pushing a fixed idea for decades now: that Japan is secretly a terrifying
power. He has written several books that touch (in whole or in part) on this
theme:

[http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-
alias%3D...](http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-
alias%3Daps&field-keywords=Eamonn%20Fingleton)

I read Blindside back in 1996 and I thought his argument was interesting for
that time. However, when you read him, it is important to remember that he has
not changed his opinion in 20 years, and there are new facts to be accounted
for. At that time he seemed certain that Japan would be the worlds #1 economy
by the year 2000. His prediction was wrong, but he has not much changed his
opinion: he still believes Japan is an important success story.

Japan suffered a long depression in the 1990s. That is not fiction. That is a
fact. However, it is also true that some of the stagnation of the period
1990-2013 should be attributed to demographic change.

Paul Krugman offered a partial counter-argument to Eamonn Fingleton here:

[http://krugman.blogs.nytimes.com/2012/01/09/japan-
reconsider...](http://krugman.blogs.nytimes.com/2012/01/09/japan-
reconsidered-2/)

Also, it is worth noting that for the last 20 years Fingleton has constantly
harped on the fact that Japan has a trade surplus, sometimes a very large
trade surplus, and he thinks this represents economic strength. Numerous
economists have made the point that a large trade surplus can be a sign of
economic weakness: perpetual insufficient demand at home in the domestic
market. Fingleton has rarely taken this view into account.

~~~
gadders
Michael Crichton was excellent for identifying the latest "worry" that was
making the US anxious (sexual harrassment, nano-technology etc) and writing a
novel about them.

Rising Sun was written when a lot of people were worried that Japan would
overtake the US as an economic power. We all know how that turned out. It's
also why I'm sceptical when people talk about China being the next economic
superpower.

~~~
yardie
I have no doubt China will become an economic superpower. They are investing
heavily in the African continent and central and South America. Those are long
term, strategic investments.

~~~
lukifer
It's a little disturbing to think that autocratic China at least _seems_ to be
able to plan decades ahead, while free America is largely stuck in quarterly
business cycles and two-year political cycles. An oversimplification in both
cases to be sure, but our culture could definitely learn some things about
being patient and thinking ahead.

~~~
enko
If you look around a bit you'll find a lot of people who are rather bearish on
democracy as practised in the first world west - professional politicians with
no real world experience, being voted in by the cynical, uninformed masses,
propagandised by bought and paid for mass media. Democracy has collided with
the middle class and a free press concerned only with their own interests and
come off second best - bitter, entrenched political paralysis at best. Like
unions, it was a wonderful idea at the time, but now the cure is basically
worse than the disease.

Frankly, the age of democracy is over, and we now have the age of the
permanent civil service. The good news is, it is almost certainly an
improvement. China, Japan and Singapore are run exclusively by their civil
services (democracy in the latter two is an irrelevant sideshow), and they are
run much better than most western countries, or at least with more long term
strategy. In fact, pretty much everything wrong with Japan can be blamed on
the idiot government trying to save face by not admitting reality. The USA
would be pretty well served, IMO, by taking control of budget away from
congress and giving it to - well, almost anyone. The GAO, maybe. The Fed, the
SEC, the commerce dept, anyone, so long as they're not elected. Being
accountable to the electorate turns out to be the worst idea ever for people
who are actually trying to do their jobs. It means never being able to admit
you're wrong.

I don't mind if they keep parliament/congress around for show but they're
going to go the way of the Queen of England - a figurehead, kind of a sounding
board for the people, a super-ombudsman. A hundred years from now we're going
to look back and wonder how we ever could have been so mad to think that
giving _politicians_ the reigns of power could ever have been a good idea.

~~~
enko
To the person who replied quoting the Economist about democracy in Japan, then
deleted their comment - thanks for the link. Well yes, on a superficial level,
I suppose democracy is kind of healthy in Japan. It sort of misses the point
though.

Japanese Govt, like that in Singapore and South Korea, is characterised by the
extreme strengths of their bureaucracies. It would be fair to say that the
Japanese Diet, their government, is basically a peer to the JR railway company
or MOFA. Imagine if in the USG, all the departments basically operated at the
level of the DoD or Dept of State - frankly at the same level as congress.
Congress can declare war on the DoD, sure, but would only do so under the most
dire circumstances. In practise they cooperate.

Well, in Japan, that's how it is. Basically, the government could probably, if
it came down to it, fire the heads of the bureaucracies, but it won't come to
that and never has. They are peers for all practical purposes. They are like
competing departments in a large corporation. You might think that is a recipe
for wastefulness and corruption, and you would be absolutely right, but in a
crazy sort of way they keep each other honest, somewhat, and it's better than
Fox News making all your decisions.

Don't get me wrong, I'm not some fanatical Japanophile - I don't even live
there anymore. But man, at least they can get at least some stuff done. In the
west we could not even dream of having a 50-year high speed rail plan. Just
think about that. What does that say about us? Look, we're not a dystopia, but
we're still basically coasting on past success. The car is still moving, but
it's slowing down. Maybe we ran out of gas, or maybe we're so caught up in
fight about which way to drive we can't even put our foot on the accelerator.

Corporations that lose the ability to invest in or even think about the long
term go out of business. I don't believe countries are any different. We are
going to have to change, radically, or we'll simply be taken over - it's only
a matter of time.

------
dev_jim
I don't see why he keeps trotting out this thesis that just isn't supported by
data. Japan's GDP has been stagnant over the past two decades:

[https://www.google.com/search?q=japan+GDP](https://www.google.com/search?q=japan+GDP)

Adjusting for working age population shows a similar trend. And if data
doesn't work for you then there's a ton of other signs that the economy is not
doing well:

\- Interest rates have been stuck against the zero lower bound

\- Stock market is 1/4 of what it was at it's peak

\- Property values have still not recovered in major cities

\- Debt as a percentage of GDP has ballooned to over 200%

Now with that being said - if I had to choose a country to spend two lost
decades in, it would be Japan. Local savers have allowed them to issue debt at
very low interest rates which has been able to cover shortfalls. And there is
signs that Abenomics is taking hold.

~~~
wjnc
TL/DR: Worker productivity in Japan is high and has risen like all other
western countries. Other factors, like lacklustre respons to zombie banks,
must explain "lost decade".

I look at the Penn World Table.

In: * Real Income per Population, * Real Income per Employed Population, and *
Real Income per Employed Work Hour

Japan has lagged the USA pretty consistently. That is consistent with all
other major economic countries. In the '90s Japan actually outperformed on the
Income per Worked Hour.

That means there are still 99 problems left for the Japanse economy, but
worker productivity ain't one.

Still zombie banks and government reponse to zombie banks might have created a
consumption crisis (just as, for example in the Netherlands at this moment,
consumers must pay for increasing bank buffers), but I would venture that
corporations have retained profitability through the crisis.

Japan didn't grow compared to it's neighbours. But that's catch-up growth for
Korea and China. You can't blame Japan for already being first-world in 1990.

Stock market isn't a good indicator for welfare of general population. Japan
just might have been overvalued, or other countries overvalued. Property
markets have gone beserk pretty much first worldwide, only in Japan first.
Another pointer that we are just mimicing their banking crisis.

------
tsiki
It's always hard to tell what's really happening behind the GDP growth figures
when comparing countries. The population of US and UK are currently increasing
around 0.7% a year, while Germany is around 0%. That's a lot of additional GDP
growth for both UK and US, even when excluding the fact that immigrants are at
their prime working age and usually more beneficial for the GDP than an
average citizen. This has a fairly big impact on what's seen on the news.
Since depression is defined as two consecutive quarters of negative growth,
it's much easier for countries like US and UK to avoid "official" depression,
and much easier for news outlets to talk about the "stagnating old Europe" or
such; and of course, at the same time the living standard of an average German
might be increasing and that of a UK/US citizen decreasing.

~~~
ekianjo
GDP is anyway an extremely biased thing to look at. There are many ways you
can influence it to make it look like you are growing.

~~~
tsiki
Absolutely, personally I dislike how it's the single most powerful figure for
decisionmakers. There have been many alternative measurements developed for
measuring overall progress of an economy, but unfortunately they haven't taken
much foothold.

~~~
ldng
Would you care to list the one you find relevant ? I'm interested.

~~~
jjindev
If we stick to "economics" without even going to "well-being," I think median
net worth is the best bet. But you know, governments find it easier to "book"
corporate profits as part of GDP and call it a day.

------
lifeisstillgood
I cannot see several administrations plus the upper echelons of corporate
Tokyo agreeing for two decades to "pull the wool over the world's eyes".

But I also can see that Japan is not a basket case, and indeed is doing well
for a world in recession.

So, the question I have is what is the meme - presumably there is some lie
that Japan tells itself, that means when a variety of people speak they agree
"our economy is in bad shape, we have lost a decade" even if on many measures
its not true.

As a Brit, our government would love Japan's growth rates or export levels.
But we tell ourselves memes, about a special relationship with US, about
European bureaucrats, about recovery being linked to house prices - well, I
think we do, but its like a fish trying to describe the colour of water.

Interested in hearing from some Japanese fish, as it were.

~~~
shadowmint
I can only speak from the people I've met personally, but:

Older people are worried that all of Japans 'gijyutsu' is going to China now
(which literally means, art, or craft, but basically they mean, all making-
new-stuff skills are going to china now). Especially the retired folk seem
really concerned about it.

Young people complain like crazy they can't get decent jobs.

I think you'd be hard pushed to find someone who are generally speaking
positive about the Japanese economy over there.

I certainly didn't encounter anyone (Japanese) who was positive about it when
I was there (a year ago now), or met anyone who has been here since.

It'd be pretty interesting to see some japanese news paper / blog sentiment
analysis work and see how wide spread that goes in general. You could probably
use kanji as a pretty decent marker (negative words tend to make common
elements, etc). hm...

------
guard-of-terra
"Japan’s seeming underperformance is an illusion that stems not from economics
at all but from demographics"

Guess what, people in Japan don't care about how their economic perform once
it is decoupled from their well-being.

And that's what he is suggesting: output grows, all that matters.

------
agilebyte
tl;dr Japanese stock market was way overvalued so it _had to_ crash but
industries have grown since then. Japanese officials were complicit in
spreading the story that they are in a bad shape so that trade barriers on
import don't have to be lifted. Per capita, they are doing just fine.

------
smegel
Strange he didn't mention women entering the workforce when he talked about
demographics and the US increasing workforce, just about every article I have
read about Nippon's economic stagnation does.

Perhaps because it is too taboo to suggest the feminist revolution was
unnecessary, that we could have achieved both economic success and personal
wellbeing without it, as Japan had apparently demonstrated.

So we continue to perpetuate the myth that Japan is on the verge of death - I
even recall a UN committee calling for "urgent" gender equality to stave off
economic disaster - it was the "only way" Japan could regain growth.

Perhaps not.

~~~
rayiner
> Perhaps because it is too taboo to suggest the feminist revolution was
> unnecessary, that we could have achieved both economic success and personal
> wellbeing without it, as Japan had apparently demonstrated.

Utterly ridiculous definition of "unnecessary."

------
csa
tl;dr -- whether "lost decades" is a misnomer or not, evidence on the ground
suggests something is going on, and it doesn't seem to be good.

Some anecdotes from someone who has lived and worked in Japan on and off for
about half of the past two decades:

\- The quality and quantity of jobs available to young people have dropped
precipitously. Twenty years ago, university graduates from good schools seemed
to have a choice of offers from high-prestige jobs (the one's they were after)
like banks, megacorps, airlines, etc. These days, you see some good graduates
selecting from much farther down the prestige chain (e.g., small, local corp.,
cram school teacher, etc.) with fewer choices (if any).

\- The overall quality of students seems to be lower in schools that have the
same prestige. Even Todai and Kyodai students, while still impressive, don't
seem to be what they used to be socially, intellectually, or academically.
This isn't really directly related to the economy, but the universities are
the feeders into the economy.

\- The corporate folks seem to complain that the quality of applicant has
dropped over the past two decades, and the quality has sometimes dropped (they
say) to a point below a threshold of acceptability. As such, they do not hire,
hire temps, or hold their nose and hire. Some of this is certainly hubris, but
none of it bodes well for the workers, the corporations, or the economy.

\- The number of small businesses seems to have dropped precipitously. The
most obvious is bars/snacks and restaurants (e.g., once popular nightspots now
seem dead even on their busiest nights), but the number of small support
businesses (e.g., small light industrial shops, distributors, etc.) seem to
have decreased as well. Some of this is due to legal changes that took away
legally-mandated middlemen, but other parts of it seem to be due to lack of
demand.

\- Everyone is worried about money and jobs.

\- The famous savers of Japan seem to be mostly the folks in their 50s and
higher (maybe 40s), but the folks in their 30s and younger seem to be mooching
A LOT off of these savings and not really saving as much on their own.

\- There is a massive generational gap between people who came of age before
the bubble crashed and those who came of age after. The older folks seem to
think that the younger people are lazy and just need to be more disciplined,
and the younger people think the older generation just don't get the new
economic reality. This tension is ripping the social fabric of Japan and seems
to create a lot of inefficiencies.

\- The velocity of money seems a lot lower. If folks are interested, I can
give some examples in a follow-up post.

~~~
csa
VELOCITY OF MONEY -- LEGAL ASPECTS

This is one of my favorite anecdotes about Japan that does a good job of
exemplifying some of the changes that have happened in Japan over the past two
or three decades.

Before my time in Japan, maybe up to some point in the 80s, alcohol
distribution was heavily regulated. I am not sure how the regs worked, but
during the regulation period, there were about 7 or 8 hands touching a beer
between the time it left the factory and the time it reached the consumer.
Each of these hands took a cut. After deregulation, it dropped to about 2 or 3
hands, although the prices didn't really seem to change. If I recall
correctly, this delayering was made due to clamoring by "the West" that
Japan's market was insulated, overregulated, protected, inefficient, etc. All
of these claims were pretty much true.

The rest of the story that largely went untold at the time in western media
(even in relatively informed higher brow publications like The Economist), was
that this "inefficiency" effectively served as a social welfare net for the
country in some obvious and not-so-obvious ways. Specifically:

\- Each of those layers of distribution created direct jobs. Some of these
jobs were still needed after deregulation but in fewer numbers (e.g., delivery
guys, warehouse folks, logistics managers, etc.), but some were not (e.g.,
most management positions that could be REALLY good for social connections but
not actually needed to get the alcohol from one place to another).

\- Each of those layers were socially obligated to do some business with
companies farther down the chain. A simple example is that a mid-level
distribution company would make sure to hold their enkai parties at a
restaurant/bar that is a client of a client of theirs. The owner of a typical
bottom-level liquor distributorship (I have befriended a few) would visit 1-3
of their clients for a drink and maybe some food each night for 3-5 nights a
week. It was an expected part of greasing the wheels of the economy.

The loss of these layers, a often times the loss of the high-touch layer of
distribution to discount "wholesalers", meant that the money cycled fewer
times in the economy.

Liquor distribution may seem like an obvious example, but this type of
delayering has happened throughout the economy, and the backscratching
patronage has decreased along with it. Without getting into a discussion of
velocity of money, I would say that this has had a pronounced negative impact
on the economy because the money just isn't cycling as much. Unfortunately
this is sometimes happening by design.

For those economically inclined, I don't want to suggest that the inefficient
alcohol distribution system should have stayed in place. Maybe it should have,
maybe it shouldn't have -- that actually gets into a tricky discussion about
the weak or non-existent welfare programs in Japan and how this leads to an
inability to deconstruct and reconstruct some areas of the domestic economy.
My main point is that I don't think anyone had a right to be surprised that
the domestic economy took a long and big hit when a high-velocity system was
replaced with a low-velocity system with no other social or political changes
made to pick up the slack.

------
alexeisadeski3
Nice to see more people catching on to this story.

The Economist covered it previously as well.

------
adventured
Right up there with the myth that Japan suffered two decades of deflation.

