
The Myth of Japan's 'Lost Decades' - MaysonL
http://www.theatlantic.com/international/archive/2011/02/the-myth-of-japans-lost-decades/71741/
======
emanuer
As an business major myself and having lived in Japan for 5 years, I was a
little surprised to see no sign of a lost decade anywhere. I come from one of
the riches regions in Europe (Salzburg) and I found the living standards in
Japan to be at least on par. I lived in Tokyo, Osaka, Hiroshima and Nagano so
far.

In my opinion the Author's explanation is a little misleading. He overlooked
the most important factor: "Demographics". I am referring to the article at
[http://www.europeanvoice.com/article/2011/january/the-
japan-...](http://www.europeanvoice.com/article/2011/january/the-japan-
myth/69887.aspx)

Looking at the working age population, Japan is doing surprisingly well,
better than the US, or Europe.

Despite the rapid decline of the working age population and the infamous long
life expectancy Japan achieved economical growth. In other words there are
considerably fewer Japanese working than a decade ago, but those few manage to
make everyone in the country richer.

I agree with the author, Japan's 'Lost Decades' seems to be a myth.

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patio11
I think this myth is largely believed within Japan, too, at every level of
Japanese society I have access to. (From retirees to college kids to
governors.) That doesn't make it true, but I'd be careful about characterizing
it as wily Asians trying to pull one over on whitey. (Japanese cell phones in
Chinese paper boxes counting as Chinese cell phones, on the other hand, is
_totally_ according to plan.)

~~~
dtby
With all dues pect (and I think it's clear I respect you) , this is yet
another case of taking a non_normative view of economicsl We can not conern
ourselves with whether another party is doing better against us, until such
time as we are not doing better against our past.

Do I live better than those who preceeded me under thse same circumstances?
The answer is, almost without exception, yes. It may be popular to decry how
one or another advtantage which is enjoyed by one population is not enjoyed by
another. But the question should always be, not "Am I doing better than the
Other Guy? But 'Am I doing better than one might expect (given my invariant
circumstances)?

To ask more than that does diservice to the entire concept of progress.

~~~
nazgulnarsil
unfortunately humans don't think like this. when asked if they would rather
make $50k while everyone else makes $25k or 100K while everyone else makes
$200k (the costs of goods and services being the same) people overwhelmingly
choose the former. why? status is zero-sum. mate-pairing relies on looking
good compared to the next person, not on absolute scales of standard of
living.

~~~
anamax
> when asked if they would rather make $50k while everyone else makes $25k or
> 100K while everyone else makes $200k (the costs of goods and services being
> the same) people overwhelmingly choose the former. why?

I'd like to see the cite, because most behavioral economics research that I've
seen is crap.

But, even if that's true, so what? It's dumb to act as if pi = 4 even if
"everyone" wants it to be.

Yes, I realize that you're not arging that we should act as if envy is better
than greed, you're just saying that people think that it is. So, what do we do
about that?

~~~
nazgulnarsil
you abandon populism as a decision method in economic matters. people don't
care about wealth creation, they only care about their own status.

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wisty
Japan spent a decade or more working off the debt that it's citizens had, just
as the US is taking a long time to get its citizens out of financial trouble.

The government eventually rescued the private sector by building railways to
no-where. That's still causing problems, as they have to spend tax revenue
paying interest, not paying for healthcare or research (or tax cuts).

The excessive debt shouldn't have been there in the first place.

Of course, it's not all bad news, and Japan has grown in some ways (despite
competing with Korea and China), but its high trade balance is the result of
abused consumers (who were first conned into taking in giant loans for their
houses, then taxed so the government could rescue lenders), not of great
economic strengths.

~~~
anamax
> The government eventually rescued the private sector by building railways to
> no-where. That's still causing problems, as they have to spend tax revenue
> paying interest, not paying for healthcare or research (or tax cuts).

Did that "rescue the private sector"? Or did it rescue the folks who worked
for railroads and their dependents while causing greater problems in the rest
of the economy?

Bad capital allocation, by definition, means that you got less for your
investment than you would have gotten otherwise. A "train to nowhere" means
that you couldn't do something that would have produced greater benefits.

Yes, building that train benefitted the folks who built it, but that ignores
the costs.

~~~
wisty
By talking about "resource allocation", you are ignoring the dynamics of
credit and debt. Resources aren't fixed, because labor (a very important
resource) is very flexible. You are not just allocating resources within the
economy, you are promising people resources in the future. People work harder
if they are promised resources later on, but only while that promise is
credible.

Creating lots of debt makes people work hard, and creates the illusion of
wealth. People do jobs, because you told them you would pay them. People spend
money, because they know you are going to pay them. Paying off the debt is
where things come unstuck.

The government took on a lot of debt, which made everyone work harder and
spend more. But that creates a future issue when the government has to pay
that debt back.

Creating debt is similar to creating new money - it speeds things up (which is
generally seen as good), but can cause people to start doing irresponsible
things (which doesn't show up until somebody asks what the elephant is doing
with the sofa).

~~~
anamax
> By talking about "resource allocation", you are ignoring the dynamics of
> credit and debt.

Not at all.

> Resources aren't fixed, because labor (a very important resource) is very
> flexible.

If labor is so flexible, why is it so necessary to waste money on trains?
(Inflexibility is an argument for temporarily suboptimal allocation.)

> Creating lots of debt makes people work hard,

Only as long as they feel an obligation to pay back that debt.

> and creates the illusion of wealth.

No, debt doesn't do that. The things/services that you get in exchange for
going into debt may create wealth, or they may just create a hangover.

> People do jobs, because you told them you would pay them. People spend
> money, because they know you are going to pay them.

Yes, but none of that has anything to do with what you spend money on.

> but can cause people to start doing irresponsible things (which doesn't show
> up until somebody asks what the elephant is doing with the sofa).

Surely you're not arguing that bad resource allocation is good until someone
notices....

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melissamiranda
Lost decade or not, it is impossible to do a startup in Japan. We tried a few
months ago, with 2 Japanese classmates. Even though they both spent
significant time in the US, they could not say "no" and would not take any
risks. If in doubt, be conservative was their mantra. Releasing a mobile app
for a conference, we just needed to list the names and companies of people
attending, no contact info. It was in the spec from the beginning. At the last
second, someone got scared that someone might object, and although there was
no evidence, they refused. So we couldn't test the app and we ended up
abandoning. There is so much fear among the young.

Debate the macro economics all you want, but there is no doubt this generation
is already lost.

~~~
salemh
<http://news.ycombinator.com/item?id=1802016> "Japan: To Fix Your Economy,
Honor Your Failed Entrepreneurs" <http://news.ycombinator.com/item?id=1803426>

[http://www.forbes.com/2009/05/29/japan-entrepreneur-
conferen...](http://www.forbes.com/2009/05/29/japan-entrepreneur-conference-
markets-rebuilding-global-markets-venture.html)

------
aikinai
Regardless of any of his other points, I almost stopped reading when I came
across this artifact of the 90s,

"The Japanese boast the world's most advanced cell phones, and the biggest and
best high-definition television screens."

Maybe we can give him the benefit of the doubt and assume he just doesn't know
anything about tech, but is he trying to say that Galapagos phones are more
advanced than (Apple/Android/WebOS/Windows/etc) smartphones?

And for TVs, I guess he's just trying to say that he thinks Sony and Sharp are
bigger and better than Samsung, LG, etc?

These are the kind of empty statements that make you sound like an amateur and
completely detract from your point even if you have a valid argument.

~~~
true_religion
Perhaps he is talking about the Japanese consumers rather than the Japanese
suppliers.

------
Symmetry
Wait, why is the author saying that defaltion (or "a strong currency") is a
sign that the economy is doing well. And likewise why do they think that
exporting much more than one inports is a good thing?

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kazoolist
I stopped reading the article when I hit "Given that Japan's current account
surplus (the widest and most meaningful measure of its trade) ...".

A positive current account balance is pretty useless figure for the robustness
of a country's trade. A country could have extremely robust foreign trade and
have a zero or negative current account balance.

The US, for instance, during our economic boom times often (always?) had a
negative current account balance.

And if I were analyzing the Japanese economy, the giant current account
surplus would give me pause because it begs the questions:

a.) Why are the Japanese not importing more? b.) Why aren't foreign companies
making more capital investments in Japan?

Each of which contribute as much to the enormity of the capital account
surplus as their healthy amount of exports.

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michaelty
If you don't think they are lost now, then take a look at their absolutely
hideous public debt numbers (which was incurred when the government
transferred private bank debt on to the public balance sheet and built the
original bridges-to-nowhere to unsuccessfully fight deflation).

[http://money.cnn.com/2011/01/27/news/international/s_p_japan...](http://money.cnn.com/2011/01/27/news/international/s_p_japan/index.htm)

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mark_l_watson
The author calls the misrepresentation of Japan's economy in the USA a "media
myth," but I would simply call it propaganda reinforcing the idea of American
"exceptionalism." If you make people in a country think that they have it
better than everyone else then they won't complain about things that with
clear thinking they would complain about.

~~~
mark_l_watson
also: when I was in Japan a few months ago I asked two locals about the
economy. Both indicated that things were good: people had jobs and could
afford what they needed. I saw no evidence of any homeless people - surprising
after lingin n the USA.

------
Charuru
Assuming this article is correct, I don't understand why any political leader
would not 'fix' the growth calculations to be rosier. Surely there are great
political incentives to do so, the Japanese parliament has really unpopular
leaders basically all the time. Do the bureaucrats really have THIS much power
that PMs are basically forced to sacrifice themselves for trade policy?

