The Story of Japan's 'Lost Decades' was a Hoax

* Zombie giant banks, addicted to bailouts

* Currency pushed and pulled by Yen carry trade

* Complete efficiency collapse. Workers work very long hours accomplishing little

* Eye watering debt ( worlds largest on many measures )

On the dissident end, it's common knowledge that Japan's weakness has been overstated. Left Business Observer interviewed Fingleton (http://www.leftbusinessobserver.com/Radio.html#S130530), and Chomsky often mentions it.

(Never dug into the motivation though.)

Rising Sun was written when a lot of people were worried that Japan would overtake the US as an economic power. We all know how that turned out. It's also why I'm sceptical when people talk about China being the next economic superpower.

Exports are real costs, imports are real benefits. A trade surplus can help you keep net government spending low, but there's nothing positive about that in and of itself.

This is a good read about the real problems, lack of aggregate demand. Everytime government spending gets high enough to lift GDP, they pull the rug out from under the economy by raising taxes. A process they're looking to continue.

http://www.inginvestment.com/idc/groups/commentary/documents...

> Ordinarily, a decline in working-age population — and, thus, a decline in the supply of workers — would tighten the labor market and cause the unemployment rate to fall; in Japan’s case, however, the gradual rise in the unemployment rate and tepid job growth is occurring in spite of these demographic shifts, reflecting economic stagnation and weakness in aggregate demand.

I look at the Penn World Table.

In: * Real Income per Population, * Real Income per Employed Population, and * Real Income per Employed Work Hour

Japan has lagged the USA pretty consistently. That is consistent with all other major economic countries. In the '90s Japan actually outperformed on the Income per Worked Hour.

That means there are still 99 problems left for the Japanse economy, but worker productivity ain't one.

Still zombie banks and government reponse to zombie banks might have created a consumption crisis (just as, for example in the Netherlands at this moment, consumers must pay for increasing bank buffers), but I would venture that corporations have retained profitability through the crisis.

Japan didn't grow compared to it's neighbours. But that's catch-up growth for Korea and China. You can't blame Japan for already being first-world in 1990.

Stock market isn't a good indicator for welfare of general population. Japan just might have been overvalued, or other countries overvalued. Property markets have gone beserk pretty much first worldwide, only in Japan first. Another pointer that we are just mimicing their banking crisis.

IIRC, a lot of the money "borrowed" are the contents of the postal savings accounts (or whatever they are) of elderly Japanese who are extremely conservative investors. I have further seen it commented that there will be complications when that sect of the population switches to net withdrawls as they near end of life or pass on inheritance, etc.

Doesn't sound so bad when you phrase it that way.

Older people are worried that all of Japans 'gijyutsu' is going to China now (which literally means, art, or craft, but basically they mean, all making-new-stuff skills are going to china now). Especially the retired folk seem really concerned about it.

Young people complain like crazy they can't get decent jobs.

I think you'd be hard pushed to find someone who are generally speaking positive about the Japanese economy over there.

I certainly didn't encounter anyone (Japanese) who was positive about it when I was there (a year ago now), or met anyone who has been here since.

It'd be pretty interesting to see some japanese news paper / blog sentiment analysis work and see how wide spread that goes in general. You could probably use kanji as a pretty decent marker (negative words tend to make common elements, etc). hm...

Utterly ridiculous definition of "unnecessary."

This is one of my favorite anecdotes about Japan that does a good job of exemplifying some of the changes that have happened in Japan over the past two or three decades.

Before my time in Japan, maybe up to some point in the 80s, alcohol distribution was heavily regulated. I am not sure how the regs worked, but during the regulation period, there were about 7 or 8 hands touching a beer between the time it left the factory and the time it reached the consumer. Each of these hands took a cut. After deregulation, it dropped to about 2 or 3 hands, although the prices didn't really seem to change. If I recall correctly, this delayering was made due to clamoring by "the West" that Japan's market was insulated, overregulated, protected, inefficient, etc. All of these claims were pretty much true.

The rest of the story that largely went untold at the time in western media (even in relatively informed higher brow publications like The Economist), was that this "inefficiency" effectively served as a social welfare net for the country in some obvious and not-so-obvious ways. Specifically:

- Each of those layers of distribution created direct jobs. Some of these jobs were still needed after deregulation but in fewer numbers (e.g., delivery guys, warehouse folks, logistics managers, etc.), but some were not (e.g., most management positions that could be REALLY good for social connections but not actually needed to get the alcohol from one place to another).

- Each of those layers were socially obligated to do some business with companies farther down the chain. A simple example is that a mid-level distribution company would make sure to hold their enkai parties at a restaurant/bar that is a client of a client of theirs. The owner of a typical bottom-level liquor distributorship (I have befriended a few) would visit 1-3 of their clients for a drink and maybe some food each night for 3-5 nights a week. It was an expected part of greasing the wheels of the economy.

The loss of these layers, a often times the loss of the high-touch layer of distribution to discount "wholesalers", meant that the money cycled fewer times in the economy.

Liquor distribution may seem like an obvious example, but this type of delayering has happened throughout the economy, and the backscratching patronage has decreased along with it. Without getting into a discussion of velocity of money, I would say that this has had a pronounced negative impact on the economy because the money just isn't cycling as much. Unfortunately this is sometimes happening by design.

For those economically inclined, I don't want to suggest that the inefficient alcohol distribution system should have stayed in place. Maybe it should have, maybe it shouldn't have -- that actually gets into a tricky discussion about the weak or non-existent welfare programs in Japan and how this leads to an inability to deconstruct and reconstruct some areas of the domestic economy. My main point is that I don't think anyone had a right to be surprised that the domestic economy took a long and big hit when a high-velocity system was replaced with a low-velocity system with no other social or political changes made to pick up the slack.

Twenty years ago, middle class workers went out quite a bit more often and quite a bit more luxuriously than they do now. Some examples:

- The typical end-of-year party (bounenkai) 20 years ago at a some small-sized (20-30 people) organization I knew and/or worked at would cost about $150-$400. These days, it's more like $50-$100.

- After a big party in the 90s, you would frequently go to a second, third, and fourth parties. Now you often only go to one or maybe even to none. Total cost per person for these big parties and after-parties were often in the $500-$1000 range.

- There number of "big" parties used to be much higher 20 years ago than they are now. As a simple example, some places that used to have 3 or 4 a year now only have 1.

- There used to be a lot of parties throughout the year -- maybe a small party for a small win like reaching a milestone in a project, maybe a small and wild off-the-hook party for a promotion (e.g., kachou, buchou, etc.). These are largely gone or toned down significantly.

Note that these are for middle class folks, which is basically all of Japan. Multiply these seemingly small figures by the multitudes of small offices and organizations throughout Japan. This guts the service industry. As I mentioned before, the number of bars, snacks, and small restaurants seems to have fallen precipitously. Those closed shops are a big reduction of unskilled or semi-skilled jobs and a reduced velocity of money.

[Interesting side note: There were no shortage of owners of small/tiny bars who made $X00,000 annual incomes in the 90s. These low-prestige jobs clobbered the typical salaryman wage, but most "smart kids" were not willing to start bars because it was largely stigmatized. For some reason, jobs at "normal" bars were grouped with jobs at "hostess" bars.]

Also note that a lot of times these modest expenditures are not being made due to limited finances -- a lot of these people have really stable jobs and make really good money. Rather, it seems like there is a perceived need to be more frugal. Perhaps this is due to social pressures, perhaps this is due to irrational fears, perhaps it's just more efficient.