I’m hearing lots of rumors about Japan’s economy teetering on the brink of implosion — again. This comes up on a fairly regular schedule. The cycle began 20 years ago when the bubble popped, Japan nationalized most bank debt so that the bad assets never went away but instead became public liabilities, and its economic growth has been crippled ever since. Notice anything familiar, America?
The problem with calling for the end of Japan is the same one we face when calling for the end of the world: there’s an abundance of evidence suggesting it’s imminent, but somehow it never happens. I’m not saying that sovereign debt risk is not real — it is, and is one of the highest priority risks we’re watching this year — but I can’t help but notice that the latest round of reasons to expect Japan’s economic collapse are the same ones I’ve heard each year for 20 years. The difference is that the numbers in the debt column are bigger than ever, but that, too, is trotted out every year.
One day, the music will stop in Tokyo. On that day, a thousand voices will rise to tell us that they told us it was coming. What they won’t mention is when they started telling us it was coming. I’m not excusing myself from that criticism. I’ve warned on Japan and am still shaking my head with each new government report. Notice, however, that I’m just shaking my head. Part of that shake comes from not understanding how the business day continues as usual in Japan, why none of the people I meet and talk with everyday are the slightest bit concerned, or what it is that keeps the mail coming and the trains rolling.
Part of that might stem from most of the population having long since pulled itself out of anything that government mismanagement could affect. Not a Japanese soul outside of big banks owns a single share of stock. They learned that stocks can go down and stay down not just for a long time, but forever, as far as they’re concerned. If you know where the Nikkei closed last night, you know more than almost anybody in Japan. Ordinary citizens couldn’t care less what’s going on in the stock world. Their assets are cash, land, cars, and such.
Sure, something might happen to kill the yen or spark hyperinflation, but that one has also been hanging in the air for so long that it’s like warning Californians that “the big one,” that mythic earthquake they hear about now and then, is going to crack their state into the sea. Maybe, could happen, lots of evidence exists saying it will happen any day now, but what are you going to do about it? Nothing, so move on. If Tokyo is going to screw up the economy so badly that money has no meaning, well, people will just have to cope with it.
The long decline in Japan is easy to see. It’s not even the king of electronics, anymore, and Toyota seems to be working on stepping down from the top of the automotive world with all of its might. Yet, there, too, what you read in the headlines is more than anybody in Japan is thinking about. Ordinary Japanese citizens, which are a lot easier to describe as a group because nothing is as beautiful to Japan as a giant cluster of identical-looking people acting the same way and saying the same things, don’t think nearly as much about their nation’s place in the world as do citizens from other countries.
The conclusion along the narrow, winding streets left over from the days of the samurai, seems to be that there’s no use spending time second-guessing government and certainly no use hoping for better government. Why Americans think all the worrying they do makes any difference is a mystery to Japanese people, who wrote government off long ago and feel it’s just a matter of time until Americans finally figure out to do so, too. The longer I live in Japan and watch American politics from afar, the more I agree with my Japanese neighbors on this point. When Barack Obama triumphed in 2008, I asked an elderly man as he trimmed his bonsai whether he’d seen who won. “Does it matter?” he asked. No, it appears not. Nothing has changed.
So, look if you must at the latest round of dismal economic data out of Japan: the growing budget deficit, the rising mountain of government bonds outstanding, GDP growth that flatlined in the early 1990s remaining rangebound even now, the jaw-dropping ratio of government debt-to-GDP, the fact that interest rates are at zero and have nowhere lower to go, and the widely held conclusion that Japan is caught in a debt trap.
All true, and all valid concerns. But good luck knowing when any of it will matter.
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