Japan is Screwed.

[MKSheppard]

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For Japan, a Long, Slow Slide
Declines in Productivity, Population Combining to Stifle Economic Growth

By Blaine Harden
Washington Post Foreign Service
Sunday, February 3, 2008; A17


TOKYO -- As the United States frets noisily about a recession, Japan is quietly enduring a far more fundamental economic slide, one that seems irreversible.

This country, which got rich quick in a postwar miracle of manufacturing and alarmed Americans by buying up baubles such as Rockefeller Center, is steadily slipping backward as a major economic force.

Fifteen years ago, Japan ranked fourth among the world's countries in gross domestic product per capita. It now ranks 20th. In 1994, its share of the world's economy peaked at 18 percent; in 2006, the number was below 10 percent.

The government acknowledged last month what has long been obvious to economists and foreign investors, if not to the Japanese public and many politicians. The minister of economic and fiscal policy, Hiroko Ota, told parliament that Japan could no longer be described as a "first-class" economy.

"I have a sense of crisis because Japan has not nurtured industries that will grow in the future," said Ota, who offered no specific remedies for the crisis.

Japan is still the world's second-largest economy, as measured by gross size, although the island nation has been surpassed by China in purchasing power. In coming decades, the economies of China and India will dwarf Japan's, according to many projections. By 2050, Japan's economy will be about the size of Indonesia's or Brazil's, according to a study by PricewaterhouseCoopers.

Japan's slide relative to other major economies is not a tabloid tale of suddenly squandered riches. It is rather an insidious petering out of growth, productivity and innovation -- and of political will to stop the slippage.

The slide has dovetailed with another quietly insidious crisis -- the petering out of the population. Japan has the world's highest proportion of elderly people and the lowest proportion of children.

By 2050, population decline will have reduced economic growth to zero, according to the Japan Center for Economic Research. Seventy percent of the country's labor force will have disappeared.

The undertow is already being felt here. Supermarket and department store sales have declined for 11 consecutive years. Toyota now is arguably the world's largest carmaker, but sales of new cars of all brands in Japan peaked 18 years ago and have been falling steadily since then.

Still, with the exception of increasing poverty among the elderly in shrinking rural towns, this remains a remarkably comfortable middle-class country, with good health care and infrastructure and a low crime rate.

Unemployment is at a 10-year low of 3.9 percent, although wages are stagnant or declining. Thanks to six consecutive years of (relatively slow) growth, the panic and deflation that accompanied the bursting of Japan's real estate bubble in the 1990s are gone.

"People here are rich, happy, safe and clean," said Oki Matsumoto, chief executive of Monex Inc., an Internet investment company. They also have more savings in the bank than residents of any other major wealthy country.

And that is precisely the problem, according to Matsumoto and many others who worry about Japan's future.

"Although the situation is not good, because it is not so bad, people from top to bottom remain indifferent," said Minoru Morita, a political analyst in Tokyo. "The leaders in this country don't expect too much and they are very good at adapting to a new environment, even if that means a downward spiral."

Economists here say that although Japan's economy is growing, it is not growing nearly fast enough to keep pace with other countries, especially booming China and much of the rest of Asia.

Japan, in many ways, continues to keep out foreign capital and foreign management. It ranks last in foreign direct investment among the 30 members of the Organization for Economic Cooperation and Development, and second to last in venture capital investment.

Its market for initial public offerings is shrinking because of onerous regulation, according to the Nihon Keizai Shimbun, the country's leading financial newspaper.

As stock markets boomed across the rest of Asia last year, stocks here declined by nearly 12 percent. They are off another 11 percent so far this year. Two major investment firms here say Japan has fallen into recession.

Many foreign investors are pulling their money out of Japan and looking elsewhere for good long-term return, said Hiromichi Shirakawa, chief economist in Tokyo for Credit Suisse.

"Japan has failed to generate any interesting investment themes," he said. "Inside this country there is a very limited sense of urgency."

Shirakawa says there are good reasons to be urgently concerned, even about the one area of Japan's economy that remains relatively strong: manufacturing.

"Over the medium to long term, I think that Japanese manufacturers cannot survive because of international competitive pressures," he said.

In the classes he teaches at Tokyo's Keio University, Shumpei Takemori compares Japan's passive acceptance of economic slippage to that of a frog swimming in a dish of slowly warming water. "Our problem is that the frog is already boiled," said Takemori, a professor of economics. "It doesn't have enough energy to jump."

A jump toward restructuring did occur here after the bursting of the bubble in the 1990s.

Junichiro Koizumi, prime minister from 2001 to 2006, moved more aggressively than any postwar Japanese leader to overhaul the banking system, deregulate big business and open up the economy. His government convinced many investors that "Japan is back," and the stock market rebounded.

But under his successors -- Shinzo Abe and now Yasuo Fukuda -- the momentum for change has stalled. In recent months, there has been re-regulation.

New building codes hobbled the home-building industry, sending housing starts last fall to a 40-year low. New lending regulations created a credit squeeze for small businesses. For the first time since 1990, Japanese companies are increasingly buying each other's shares to stave off acquisition by foreign companies, according to research done by Nomura Securities.

Japan's foreign minister, Masahiko Komura, said last month that the government might consider requiring long-term foreign residents to prove proficiency in speaking Japanese, a suggestion that spooked foreign businessmen here.

Regardless of government policy, some downward drift of Japan from its lofty economic perch is natural and inevitable, according to economists and business leaders.

Japan's spectacular flush of manufacturing wealth after World War II was, in many ways, "lucky," said Matsumoto, the investment company executive, who is a student of Japanese economic history.

"The government took a huge bet on a few strategic industries -- like steel and automobiles -- and it worked," he said. "It took our economy up to second place in the world. It is totally abnormal for a country with 127 million people."

Citing the rise of China and India, Matsumoto says global capitalism is shifting patterns of wealth creation in a way that more closely links a country's gross domestic product with the size of its population.

What concerns political and economic analysts is that many Japanese politicians -- and the voters they represent -- do not understand how wealth is being created in the 21st century.

"The current leadership of Japan came of age during the incredible success after World War II," said Matsumoto. "They think that what worked then will work forever."

Special correspondent Akiko Yamamoto contributed to this report.

[Superman]

Nothing new, really. Japan needs to experience some fundamental changes, like allowing foreign workers to come in. Their culture of xenophobia is something they're going to have to work on.

[Battlehymn Republic]

Ditto for Western Europe. Below replacement birth rates + large welfare systems = uh oh.

[Fingolfin_Noldor]

Ditto for Western Europe. Below replacement birth rates + large welfare systems = uh oh.

I hear the EU is trying to push for something similar to the Green Card in hopes of attracting talent. I haven't quite followed up on that though. The EU's main problem is to get around the funding problems of its research institutions and stop the constant brain leak to America.

Japan on the other hand, has some serious fundamental problems. Some of their flagship companies appear to be doing well, but it seems they are more inclined to move their manufacturing operations elsewhere and leave the R&D at home. They really need some infusion of new ideas, but sadly, xenophobia is at its worst.

[brianeyci]

I remember reading Rising Sun or other such crap in high school a book about Japanese corporations taking over America. I laughed then, and it's been long in coming but I can say I told you so to all those Japan wankers. How some thought an economy which focused on a few key industries would last I don't know.

At least this time there won't be a fleet of carriers and battleships to take over the world.

[K. A. Pital]

So you have your 30 years of greatness, make cheap electronic shit, cheaper cars of good quality. You make a great welfare system so that your people are taken care of. You create supercorps. But then international capitalists, ruling those corps, find out that you can make cheap electronic shit with cheap Chinese and Indians. You're screwed. Oh well. Shit happens to everyone.

[Battlehymn Republic]

Isn't the EU's main problem is that they suck at integrating immigrants even worse than the U.S. right now?

[Fingolfin_Noldor]

Isn't the EU's main problem is that they suck at integrating immigrants even worse than the U.S. right now?

They certainly have a problem integrating fundies and refugees. I doubt that much of a problem with regard to people with some degree of an education like a university degree.

[brianeyci]

Actually, it's a very serious problem. Foreign credentials unless they're from America from a big name university are near worthless. References in another language are worthless -- references work because if someone cocks up a reference, the employer will never take a reference from that source ever again so references work for local. But when the guy is long distance, the guy could lie through his teeth and there'd be zero chance of payback.

People who come to a new country highly educated expect high wages and salary, but what they fail to take into account is those jobs intake natives first, and soft skills and the social hurdle is huge.

The poor have less problems because they're willing to work for shit and have their little community enclaves. University education should not and don't want to haul shit for 20 years, and don't want to be treated like shit as second-class citizens.

[FSTargetDrone]

So you have your 30 years of greatness, make cheap electronic shit, cheaper cars of good quality. You make a great welfare system so that your people are taken care of. You create supercorps. But then international capitalists, ruling those corps, find out that you can make cheap electronic shit with cheap Chinese and Indians. You're screwed. Oh well. Shit happens to everyone.

Somehow, someway, the answer will be robots. Remember, this is the country that wants to use robots to replace the declining numbers of young people.

Perhaps they intend to make robots to fix these other issues.

[Fingolfin_Noldor]

The poor have less problems because they're willing to work for shit and have their little community enclaves. University education should not and don't want to haul shit for 20 years, and don't want to be treated like shit as second-class citizens.

If you have been reading, France is having a serious problem with rather large community enclaves of Muslims who are feeling rather disenfranchised.

In any case, you are forgetting that work visas are unlikely to be issued unless the said person has a job already. Otherwise, the point is moot.

[white_rabbit]

New building codes hobbled the home-building industry, sending housing starts last fall to a 40-year low.

This little line crashed their construction industry literally overnight.

[brianeyci]

The poor have less problems because they're willing to work for shit and have their little community enclaves. University education should not and don't want to haul shit for 20 years, and don't want to be treated like shit as second-class citizens.

If you have been reading, France is having a serious problem with rather large community enclaves of Muslims who are feeling rather disenfranchised.

In any case, you are forgetting that work visas are unlikely to be issued unless the said person has a job already. Otherwise, the point is moot.

You only see it's a larger problem because of the youth riots. You don't see the disgruntled adults, professional class who have to make due at shit jobs. Germany had a green card program for tech workers that was an utter failure.

Work visas run out and then the people leave. They are unsatisfied. Believe it or not some people leave early, and others resort to working at total crap. Ph.D. working in taxicabs are a tremendous waste. It is not a moot point.

I don't buy that the only kind of immigration should be educated, or that educated have less problems than the non-educated. When you move to a new country, everybody starts on the same level. Except the less educated have lower expectations.

[K. A. Pital]

Ph.D. working in taxicabs are a tremendous waste. It is not a moot point.

Totally agree. Tremendous waste of resources. In fact, many Russian PhDs who came to Europe and US and had been treated like shit came back, I've personally knwo a few. They say "better be a doctor here than a shit-dragger in America".

[Guardsman Bass]

Actually, it's a very serious problem. Foreign credentials unless they're from America from a big name university are near worthless. References in another language are worthless -- references work because if someone cocks up a reference, the employer will never take a reference from that source ever again so references work for local. But when the guy is long distance, the guy could lie through his teeth and there'd be zero chance of payback.

That's . . .fucked up. Haven't they tried to set up some kind of partnership, or at least a system, in order to determine which universities provide quality educations in countries of origin for educated immigrants? That sounds like a godawful waste.

As for the Japanese, I'm surprised there isn't a bigger group of undocumented immigrants (although I'll admit that I'm ignorant about Japan's rules regarding illegal immigration, and they probably are stricter), considering that they are going to be dealing with major population problems.

[Darth Raptor]

I'm sure the whole being on an island thing prevents a major influx of illegal immigrants.

[Stark]

I think it's hilarious that in his chestbeating Americanism, Shep has pointed out a problem faced by many western nations ... the answer to which is increase immigration.

[Ubiquitous]

I'm sure the whole being on an island thing prevents a major influx of illegal immigrants.

Hehe, yeah just like Britain...

[Darth Raptor]

Hehe, yeah just like Britain...

Are there rail tunnels connecting Japan to the mainland? Is it confederated with the mainland?

[Colonel Olrik]

Hehe, yeah just like Britain...

Are there rail tunnels connecting Japan to the mainland? Is it confederated with the mainland?

Illegal immigrants don't use the Eurotunnel, and Britain is much assuredly not confederated with the EU, and even if it was the illegal immigrants would need to enter the EU first.

[Ubiquitous]

Hehe, yeah just like Britain...

Are there rail tunnels connecting Japan to the mainland? Is it confederated with the mainland?

Is it an Island? Yes. So shut the fuck up. It's not like illegal immigrants don't sail over or even get a plane.

[Netko]

That's . . .fucked up. Haven't they tried to set up some kind of partnership, or at least a system, in order to determine which universities provide quality educations in countries of origin for educated immigrants? That sounds like a godawful waste.

The Bologna process is an attempt to fix the recognition of foreign credentials problem - it standardises the higher learning systems of all participants to something closely resembling the US/UK model (BSc/A->MSc/A->PhD) killing off the various different models that used to be present before (most prominently, the germanic model out of the old Austro-Hungarian Empire and its engineer's degree, or engineer with diploma degree, depending on translation, which was the old default and which translated to somewhere between a BSc and MSc, but closer to a MSc). I'm actually part of the first generation locally - my BSc in computing should be accepted Europe-wide without much fuss and there is also a, rather generous, translation system in place for holders of now discontinued titles (the aforementioned engineer's degree holders are transferred into masters/magisters) to transfer them to the new system. All in all, as countries bring up compatible programmes up fully, there should be a much lessened problem for people from the participating countries (who shouldn't have any issues) and countries with compatible academic title systems (like the US, Commonwealth countries, etc.) to get their credentials recognised.

[Colonel Olrik]

The Bologna process is an attempt to fix the recognition of foreign credentials problem

The goal of the Bologna process is to standardize education levels within the EU, so that a Spanish finishing high school can apply to study in an University in France and then apply for a job in England with no bureaucratic problems. AFAIK, it doesn't solve the problem of recognizing foreign credentials, i.e credentials from someone outside the EU.

[Netko]

Yes, the primary purpose is European standardisation (not EU - its open to all Council of Europe countries, which is a more broad group), but it standardises on a system that is compatible with the US and Commonwealth systems, thus indirectly easing problems for credential holders from those nations and other compatible nations.

Previously, a big problem in continental Europe was the lack of a bachelor's degree, causing holders of said degree to not get recognised or to get recognised as only holding a vocational and not an academic degree.

There are still barriers for those that gained their degree in a non-party country (non-ECTS assigning country), true (such as certifying that the degree is actually compatible, knowledge-wise, with an equivalent Bologna-compatible degree), but they are far lower then previously when you had to prove knowledge (competency) equivalence as well as where you fit in into a system with incompatible levels for assigning titles with no clear guideline for it (like the example above or the counter-example of the engineer's degree holders who got translated into BSc and MSc depending almost on luck).

[brianeyci]

That's . . .fucked up. Haven't they tried to set up some kind of partnership, or at least a system, in order to determine which universities provide quality educations in countries of origin for educated immigrants? That sounds like a godawful waste.

Sure there are, but unless you are going into an academic field forget the market if you don't have a native degree. Mike explained it, and I knew friends who had engineering degrees from this or that university and couldn't find work here. You can get the credentials evaluated by a native university, but then what? Also, certain fields like medicine, you have to start from almost nothing and there's real question about the quality of education.

Your resume is full of foreign experience. Even worse; foreign words. If a man with a black name has a hard time, imagine what it's like if everything looks foreign. This is why TESEL, teach English as a second language, is a career bust in the long term. You go abroad and teach English for years and years, and come back with no native experience.

Ask people who have hit the market recently; ask them if employers give a shit about education besides that you have it. Durandal said he didn't get his job because of his grades or program of study. There would be zero chance of someone getting Durandal's job if he was a foreign graduate, unless he was exceptional. Foreign universities often have higher standards than native ones too -- it's harder to get into Beijing university than to get into Harvard.

Make a long story short, you move to another country get ready to start from the bottom. Might as well get people who are at the bottom rather than give false promises of a good life to people at the top who end up with their hopes dashed.