I miss being able to buy high quality electronics from Japan that would last 20 years, instead of crap from China. I recently got a stereo for my home office in the garage. I went to a local thrift store to get an older receiver made in Japan, instead of China. It (still) works great.
Japan as a country needs to run a consumer oriented advertising campaign: "Buy stuff from us instead of China, it will last 10 times as long!" They also need to find a way to make their stuff available again in US (and other) commercial outlets.
Did you know that iPhones, Xboxes, ThinkPads (the only laptop certified for use on the International Space Station) and loads of other quality electronics are made in China? I wouldn't say "made in China" automatically implies it's crap.
I'm writing this on a MacBook, but who knows how long it will last. Maybe it's a high quality device, and maybe I'm not supposed to care if it starts flaking out after 2 or 3 years. I like the software, and the exterior construction is nice.
Stuff made in China might be half price from what things used to be, but it's hard to find any alternatives now.
So, any time an article like this comes along, I think something like "interesting, I guess I should go out and short the Yen... but wait, if everyone is already shorting the Yen, won't that already be baked into the price?" s/Yen/Gold/g or whatnot.
I've sometimes thought that I should just bet against all seemingly persuasive investment articles like this one on the principle that the market will essentially over-indulge in said advice and have to correct in the opposite direction. (Would be interesting to test that theory with historical data.) Case in point: I bought a few silver ETF shares a while ago on the theory stated (by lots of people like SeekingAlpha and the like) that quantitative easing will cause inflation and people will rush to precious metals. (Well, that and I probably have a thing for silver/gold.) Since then, it's dropped over a third. Now I'm a little more cautious about betting on macro-economic trends...
Love the idea. The rub is figuring out which article will influence people (100s are written every day at Seeking Alpha for many views of the same issue) -- if you can predict influence then I think you've found a nice little money machine :)
Given a massive amount of debt and a problem with deflation, isn't Japan in an ideal position for an aggressive negative income tax?
Imagine inflating by printing money and distributing equally among all citizens. Domestic price increases would be offset by the extra cash and the real debt would decrease accordingly. Why would that not work?
Many economists agree with you and believe Japan has mismanaged its monetary policy for a long time. In fact, the West's aggressive reaction to the Great Recession of 2008 was largely a lesson learned from what Japan didn't do.
From an essay by Paul Krugman (I think from the late 90s):
>So why doesn't the Bank of Japan just go out and print lots of money? The best theory I have heard is that the bureaucrats at the Bank of Japan and the Ministry of Finance are still mesmerized by the memory of the "bubble economy" - the wild speculation of the late 1980s, which pushed the prices of stocks and real estate to crazy levels (remember when the grounds of the Imperial Palace were supposedly worth more than the whole State of California?). They believe that loose monetary policy created that bubble - which may be true - and that the bursting of the bubble caused the slump of the 1990s - which may also be true. And so they are afraid to increase the money supply now for fear of repeating the experience.
>Go ahead and buy stocks, says John Mauldin--if you've got a 10-year time horizon. If you don't, don't. Because it's just another sucker's rally.
-John Mauldin March 2009
John Mauldin seems to have a spotty track record. He correctly called the summer 2008 rally as a bull trap.[1] However, he failed to call the 2009 low, and has been calling a top for the past few years.[2][3]
Eventually I'm sure he'll get it right, and there will be another market crash. But if you listened to him in 2009 [3], you would have missed out on a 250% increase in your portfolio over the past 4 years.
Based on 4 year boom/bust business cycle, I actually think the market is overdue for a serious correction to 1200-1400 S&P in the next year, but I don't see any doomsday scenario playing out in the next 5 years.
These types of strategic economic articles have always fascinated me. But I have to ask, what can the Japanese do about that high retiree:worker ratio? As the article mentions, they aren't the only country with that issue. Presumably there is some solution other than "sit there and suffer" or to push the retirees off onto an ice floe.
Japan is overcrowded and has famously long and lengthening lifespans. The result is that families have little space to raise children and retirees accumulate so the retiree to worker ratio grows to great heights.
It's pretty straightforward to deal with the trend, though.
You could mitigate the cost of a high ratio by investing in automation so that a smaller workforce can provide more goods and services to the population, and Japan is, in fact, the world leader in robotics and automation.
You could make child bearing and rearing cheaper so that the necessary generational decline in population is smoother. Japan is failing badly at promoting births, though. The economy is dominated by cartels that have been liberalizing their employment practices by reserving the high paying lifetime employment jobs to older incumbent employees and taking on younger workers as low-paid temps without benefits. Real estate taxes calcify the market and banking policy makes it even harder for young people to own homes. Social and government policy makes life very hard on working mothers. The result is young Japanese people that want babies find them difficult to afford. Japan has among the lowest birth rates in the world.
It's easy enough to stop providing government support to the industrial and banking cartels and liberalize real estate and school policies but the voters so far prefer national decline and bankruptcy to liberalization.
You could raise retirement ages or cut benefits so more people continue working longer. That's not popular either, for good reason.
You could promote immigration of younger workers, but then you stop being a Japanese nation and inflict an underclass on all your posterity. A wise nation would not do that.
As an Asian in the United States, yes. In most places in the US being Asian is certainly being part of the underclass, though (fortunately?) we have it a lot better than most other minorities.
All of the ethnicities you mentioned were, for decades, if not an entire century, the underclass. Racism against the Irish, Italians, and Jews was extremely commonplace until relatively recent history.
An when they stopped being demonized as minorities society find more, newer immigrants to vilify instead. Hispanics for one, and in our industry, Indians.
I'm all for immigration and diversity, but let's call a spade a spade. Immigrants are an underclass, and it takes generations for the stigma to fade - if ever! Jews are still frequently discriminated against.
Not to mention, politically, Japan is very high on the xenophobia scale. I'd be interested to see the effects of large-scale immigration on their society, though I suspect it won't be pretty. At all.
So your argument is what, exactly? That the Jews, Asians, etc. shouldn't have been allowed to come because they wound up spending some time in the "underclass"? That's the original poster's argument, as near as I can tell. Is it also yours?
Personally, I'm very happy that all those groups came.
P.S. 49% of Asian-Americans 25 and older have at least a bachelor's degree, compared to 28% of the general population, and the median household income for Asian-Americans is $66,000, compared to $49,800 for the general population.
Pardon the aggressiveness, but are you Asian? I live with my skin color and my last name every single day - are you seriously going to whip out a bunch of numbers and telling me that my experience, on the ground, as well as the experiences of my family and every other Asian around me, is null and void?
Note that I specifically disclaimed in my post that I support immigration. But you're idealizing immigration to an absurd extreme. Immigrants are treated as second-class in near every facet of life in the USA. That we don't have lynchings and head taxes anymore doesn't mean this class separation doesn't exist.
But let's get at your numbers:
> "49% of Asian-Americans 25 and older have at least a bachelor's degree, compared to 28% of the general population"
True, until you realize that despite consisting of 5% of the population[0], and being extremely over-educated compared to the general population, Asians represent only 2% of corporate leadership positions[1][2].
Let's not forget also that despite years of Whites being dramatically over-represented in top universities and colleges, no quota'ing was ever put in place until Asians started to threaten White dominance in schools[3]. This isn't a sob story about Asians in particular - if you replace Asian with Black, or Hispanic, the result would be the same.
Minorities in America were never meant to take center stage and assume influence - we were supposed to stick to the sidelines and provide color to society and little more.
Your claim for median income is meaningless in this context. Asians fare very well in the job market, so long as they stick to individual contributor positions. Want to move into management? Not impossible, but you now have to work harder than your White colleagues to overcome the stereotype that Asians are timid and indecisive. There is a gigantic glass ceiling in place for all Asian-Americans which few have successfully broken.
So let's talk about what we mean by "underclass". An underclass is not solely defined by income or education - an underclass is defined by how its members are treated in common society. We have a demographic here that, despite proving their merit, are besieged at all levels of education for being "too smart" (imagine for one moment that claim being leveled against Whites). They are, in popular culture and the media, portrayed as sidekicks and cultural curiosities rather than humans of depth. They are, in higher levels of society (both in income and in influence) dramatically under-represented.
And all of the above isn't unique to Asians. South Asians, African-Americans, Hispanics and Latinos, all face similar issues.
Is the situation getting better? Hell yeah. The Italians and Irish who were the butt of this sort of discrimination decades ago are largely free from it now - but it took decades upon decades of fighting discrimination, and gritting their teeth to get there, and it will take the same for the current whipping-boy minorities to do the same. So let's not pretend that we live in some kind of utopian society where immigrants are welcomed with open arms and treated equally.
Japan doesn't have the same melting pot background as the U.S. It would take significant culture change for the Japanese to adopt an immigrant-inclusive culture.
Within living memory, Japan has been transformed from (paraphrasing a line from Neal Stephenson here) just about the fiercest culture on Earth to a nation of nerds obsessed with cute anime characters.
Interesting. Fortunately you didn't hit what demographers call "lowest low", a rate of 1.3, and as you say, you're climbing back from your nadir of 1.50, now bouncing at or a bit above 1.90 per Wikipedia. I have heard of various things the government has done to encourage child bearing; congratulations on deferring and very possibly avoiding societal death.
The problem is as the article states its already baked into the cake. Fine, encourage a salaryman and his wife to squirt out a kid in 2013 (well, unless you parallel process nine women into producing a full term baby in one month, In early June 2013 if you convince them to do it, its somewhat more likely they'll squirt out a kid in early 2014...), that's not going to change the employment situation in 2030.
Or another way to put it, 2030 is right around the corner.
There are four options - live with a smaller economy, make more babies, bring in immigrants, or increase productivity to the point where a smaller number of workers will be able to do the work that currently requires a larger workforce.
The latter is not an unreasonable option. If worker productivity grew by an unimpressive 1% per year from 2010 to 2030 (the time frame given in this article), the 67.7 million Japanese workers of 2030 will do the work of 82.6 million 2010 workers, which is more than the 81.7 million workers in 2010's workforce.
The sky is not falling, and there is no need to mandate that Japanese women become brood mares, and no need to import huge numbers of immigrants from poor countries.
"live with a smaller economy ... The latter is not an unreasonable option"
Former is not a bad idea either. How's the energy security of a rocky island with no petrol more or less right next to China? Oh they're shutting down nuclear plants too, you say? I hope they got lots of windmills and solar panels...
This is an interesting way to analyze their 2030 scenario, lets say they only have the population to run at 80% capacity, sounds bad, but what if they only have the energy available to run at 75% capacity anyway? Sounds like squirting out more kids would be the worst thing they could possibly do in that scenario.
Another "limiting reagent" analysis is that at least a decade ago Japan imported a bit over half its food. In other words they must import most of their food, or starve. Again, growing industrial giant to the west, hows that going to work out WRT food? Oh and at the same time as energy prices are going up / availability going down? Lets say they only have food to keep a mere 90% of the current population alive on a bland starvation diet, or certainly not as good as they currently eat now, anyway. Good luck talking them into squirting out a couple more kids to watch starve under those circumstances. "Well the bad news is, we're cutting the rice ration, but the good news is, we want more babies" hmm good luck.
"import huge numbers of immigrants" = as long as you can feed and energize them, sure. Which Japan is not going to be able to do, so its all kinda irrelevant.
As a Japanese, you could certainly get your money out of Japanese banks and into a different currency. If it was me, I would have moved my assets out a long time ago. But I have no idea what Japan as a nation should do.
The ever popular pro business (multi-national mega corp flavor) type solution: turn your country into a hell hole, and we'll make it a better hell hole, we promise!
Like another poster astutely put: create an underclass, and diminish their country's cultural heritage.
> "and diminish their country's cultural heritage"
Woah woah woah. Careful there, this line of argument has been used in the past.
Ditto with a previous mention of immigration making the country "less Japanese", which has shades of certain groups making a certain country "less German".
They have the right to. Is it a good idea for the long-term though? If the issue is that the birthrate is too low and the deficit you need to make up is, say, 300,000 people per year, then the numbers say you need to let in 300,000 people per year, which may be far above what a xenophobic society can assimilate (I feel like we're talking about Master of Orion 2 here btw :P)
Not the only one, another is to give economic incentives for having children. Sweden has a general payout to families per child, it was created for the same reasons.
Kids cost a lot of money, the government can give a lot without them being a profitable proposition for the parents. Aid to families would only be a help to those who want kids but can't take the economic risk.
Yes, but that only works in the VERY long term. Suppose you doubled the birth rate now - the effect on the working force would only be felt after at least 20 years.
TL;DR: shorting the Japanese government is the trade of the decade. (According to the author). "Will I succeed? Time will tell, but I am joined by Japanese public pension funds that have announced they will reduce their holdings of local bonds while increasing their share of both domestic and, in particular, foreign equities. No time frame was provided in the data I saw, although indications are that they have already started."
A lower ratio of workers to seniors is supposed to be a problem because the workers need to produce stuff both for themselves and for non-workers. It's an argument that there will be too much demand, not enough supply.
If you then say that consumers aren't buying enough and there isn't enough demand, then that could also be a problem (recession). But too much consumption and not enough consumption can't both be problems at the same time.
> But too much consumption and not enough consumption can't both be problems at the same time.
What if the the problem is that the demand is for things that Japanese companies have a hard time producing? E.g., oil/energy (which of course actually is a big problem in Japan), iphones, etc...
Purchasing power is vaguely bell curve ish centered on middle age. Old people don't buy much other than medical and food. Lets say you lead the world in automobile production, then 20% of your population get too old/poor to buy cars anymore. Whoops.
I'm not on the side of doom and gloomers WRT Japan because they're basically the USA in 1970 without a 3rd world nation to the south (no Australia jokes please...). Every year for the median USA worker has been worse, etc, but its not that bad, the rich keep getting richer, its just not the end of the world.
As a thought experiment, reread the whole article substituting in the USA in roughly the early 70s for Japan.
The USA has a lower number of employed people every year, lower fraction of population with jobs, increased fraction of old people, reduced economic outcome for all but the top one percent, blah blah. Only difference is we've been doing it longer, and we have illegals to boost the population and govt expenses.
I find it a bit unbelievable that the bank of Japan wants inflation but has been unable to produce it. A simpler explanation is the bank of Japan does not want inflation because it is not politically possible. I also noticed he mentioned that economic textbooks say an aging economy should produce inflation so Japan is confusing. But what do political economy textbooks say about the monetary policy demands of an aging population? I can't see an inflationary monetary policy going down too well politically with older people who have savings in fixed interest. Japan has had low monetary growth because that is what is politically popular.
I think a lot have fixed rate long term bonds that would hurt if inflation increased. 95 % of Japanese bonds are owned domestically (http://m.nber.org//papers/w18287). Japanese people with wealth (ie old people) would have large direct or indirect exposure to government bonds which are mostly fixed interest.
Does anybody have ideas about how a small foreign investor could borrow money in yen? I've got a mortgage too, and it is denominated in the too-strong-for-our-good Euro :)
Banksters will not let small investors to make money in this financial fuss. Credit interest rates for ordinary people are going to be much higher than the expected inflation.
This is sort of off-topic, but it would be nice if there was a convenient way to know if a pundit is a complete buffoon - like a score based on how many correct or incorrect predictions he's made. Points off for saying Iraq would be a cakewalk and had nuclear weapons, and that houses in Las Vegas were a good investment in 2005. You could save a few minutes of your life and a few neurons by skipping articles by people who make those kinds of predictions.
I have no idea who Mauldin is, or whether he can be expected to give a balanced view of an issue I don't know much about.
Japan as a country needs to run a consumer oriented advertising campaign: "Buy stuff from us instead of China, it will last 10 times as long!" They also need to find a way to make their stuff available again in US (and other) commercial outlets.