♠ Posted by Emmanuel in
Cheneynomics,
Japan,
Migration
at 2/23/2014 10:03:00 AM
The plight of the developed world is of massive interest to developing countries such as ours for the simple reason that, since we aspire to being developed status, what comes next is of consequence. Sadly, the examples of moribund Western Europe, North America (especially the hapless US), and Japan are not especially encouraging. As our nearest neighbor in Asia, Japan's plight is especially troubling. Could American-style helicopter-dropping and free-spending economic nihilism AKA "Abenomics" really revive Japan from its lost decades?
As we are learning, the answer is loud and clear: HELL NO! It's not as if some folks were exceedingly wary of the fantastical American delusion that currency debasement and unlimited deficit spending could revive an economy. However, in combination with shutting down any number of perfectly good nuclear plants, Japan is arguably worse off than before. Flatlining GDP growth--
1% in Q4 2013--has been the status quo for over two decades, but now add to this mix (1) a
gargantuan, punishingly huge budget deficit [as opposed to a merely unsustainable one] and (2) a
snowballing trade deficit [those energy imports more than cancel out export increases] and their situation is clearly
deteriorating:
Funny thing, though: All that cash hasn't solved Japan's problems.
The virtuous cycle that aggressive BOJ policies were supposed to unleash
still hasn't begun. A 20 percent drop in the yen isn't raising living
standards, as hoped. Nor has it convinced companies to fatten paychecks.
Whatever inflation Japan is feeling is the bad kind: Energy imports are
boosting consumer prices and denting business and consumer confidence.
Instead,
[Bank of Japan Governor] Kuroda's main achievement in his first year has been to settle a debate
once and for all. Japan's big problem clearly isn't the amount of yen
in the system but how it's used. Unless people borrow and banks lend,
monetary policy lacks the multiplier effect that can revive economies.
Besides, deflationary forces still abound -- from Japan's aging
population to China's rising influence. Just as money can't buy you
love, a wall of yen can't buy Japan prosperity. "Kurodanomics" just
isn't enough.
Helicopter-dropping money is easy enough. However, long-advocated structural changes are harder to come by:
He must implement the structural reforms at the heart of his "Abenomics"
program -- rewriting corporate taxes, lowering trade barriers,
stimulating innovation, empowering women and opening the labor market.
Otherwise, Japan's best chance in years to restore vibrant growth will
likely fail like every other over try the last two decades.
Here, "opening the labor market" means
bringing in folks for the simple reason that Japan is well and truly depopulating. Actually, Japan has been trying to attract skilled migrants, but the trouble is that this homogeneous and closed society has trouble attracting
any sort of migrants for precisely those reasons:
National Institute of Population and Social Security
research projects that the current population of 127 million will be 84
million in five decades’ time. The working-age population (15–64) will
apparently fall by nearly half from today’s level of 80 million to 42
million. In short, 50 years from now, not only will the population have
fallen dramatically but the
labour-force population will have fallen even faster.
The number of elderly people
65 and over will amount to 40 per cent of the population, causing
substantial strain on Japan’s workers to sustain the non-working
population.
For Japan, accumulating highly skilled foreign
professionals has been more difficult than expected. This is made
challenging because Japan has few features that can be considered
appealing to foreigners as a migration destination, including a highly
homogenous country with a language barrier that makes it difficult for
migrants to have a rich social life.
The pressing need to generate homegrown power aside, there is no greater issue for Japan than that which they fail to address since it's a lot harder to than, say, increasing the national debt from 200% to 400% of GDP. The debt burden also makes you wonder why anyone would come to Japan to work off being a debt slave, but hey, these questions are the sort the Japanese really need to confront instead of playing foolish economic games that leave them worse off in the long run alike Abenomics.
