♠ Posted by Emmanuel in Japan at 2/24/2013 01:40:00 PMD" and estimates $2.2 trillion needs to be spent--Japanese infrastructure is nowhere near as dire.
That hasn't, however, stopped the Japanese government from embarking on massive ("shovel-ready"?) construction projects time and again in the hopes that they will provide the foundations for Japan's recovery. With the LDP back in power, doling out projects to favoured contractors is once again on the agenda, with more train routes, bridges, and highways to nowhere on the drawing board. Throw in various ports and stations used once in a blue moon and you have white elephant projects up the wazoo. As the Reuters article notes, the "challenge" posed by PM Shinzo Abe is spending $100B in 15 months on infrastructure:
"We cannot simply continue to build roads and infrastructure the way we used to at a time when the population is ageing and shrinking," says Takayoshi Igarashi, a public policy professor at Japan's Hosei University who has advised the previous Democrat administration on rebuilding from the 2011 earthquake, tsunami and Fukushima nuclear accident...It's not as if Japan needs yet more infrastructure when there is already much more than necessary to get around?
Since he took power in December, Abe has earmarked 10 trillion yen ($107 billion) for new infrastructure and upgrades over the next 15 months - half of it funded by government debt. That is equivalent to a quarter of the amount that the Organisation for Economic Cooperation and Development estimates the entire world needs to spend on transport infrastructure each year.
Government spending is a classic remedy for weak growth. But it is one Japan has tried over and over - pouring roughly $2 trillion into concrete and steel since 1990 in a vain effort to resuscitate the economy, now in its fourth recession since 2000. Economists warn that, without reforms to lift Japan's long-term growth potential, more such spending will produce only a temporary jolt that swells a government debt already worth more than double national output...
The world's 61st largest country, Japan has 1.2 million km (745,000 miles) of roads, the world's fifth-largest network. It has 680,000 bridges, almost 10,000 tunnels, 250 bullet trains and 98 airports. Government critics have long derided many as white elephants - unnecessary, costly and environmentally harmful. The airport in Ibaraki, 85 km (53 miles) north of Tokyo, for example, opened in 2010 at a cost of about $225 million as a hub for low-cost carriers. Today, it handles just six flights a day. Construction of the nearly $5 billion Yanba Dam in northwest Japan began in 1967 to help power the needs of a growing population. With Japan's population now shrinking, it remains unfinished 45 years later.And there may be hundreds of billions more in spending in store
Yet the money represents only what Abe hopes to spend by April 2014. He has suggested spending similar sums every year for a decade - if he holds onto power that long. With the private sector and local communities expected to match government investment, this would add up to 200 trillion yen ($2.16 trillion) over 10 years - or roughly 40 percent of GDP.Last, there will be no one to use all this new infrastructure as a shrinking population implies a shrinking workforce. Perhaps there won't even be enough folks to build all these white elephants:
It is not even clear who would use all of the new infrastructure, or even who would build it. Thanks to Japan's low birthrate, the population is declining by more than quarter of a million a year, government statistics show, with its working-age population shrinking at double that pace. According to Health Ministry projections the number of Japanese is expected to fall by nearly a third, to below 90 million, by 2060. That means fewer cars on Japan's roads. Japanese automotive research company Fourin Inc. estimates car sales in Japan will fall from nearly 5.4 million last year to 4.5 million in 2020, and to about 3 million a year by 2040. Japan's construction workforce is also shrinking: today it is a third smaller than in 1997 and building firms are already having trouble finding workers to rebuild areas from the 2011 disaster.I've suggested that mass immigration [1, 2] is a much more promising solution to reversing Japan's demographic woes and quite possibly its deflationary ones as well, but that's never quite been on the cards. See if all these public works projects make a difference; I honestly cannot see why they will now when they did not before.