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The Myth of Japan's 'Lost Decades' (theatlantic.com)
50 points by MaysonL on Feb 27, 2011 | hide | past | favorite | 21 comments



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-...

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.


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.)


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.


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.


> 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?


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


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.


> 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.


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).


> 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....


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.



I have also been somewhat worried about the "safety first" approach that a lot of the Japanese young take around here. I have been in Tokyo just for some months, but I truly believe that things could be infinitely better if I only these guys could find the proper motivation.


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.


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


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?


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.


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...


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.


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.


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?




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