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Thread: The Myth of Japanís Failure

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    Armchair Worrier Senior Contributor bolo121's Avatar
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    The Myth of Japanís Failure

    Came across this article saying in effect that Japan's problems do not exist or in any case are overblown.

    Given the several articles i have read in the Economist especially pointing out Japan's political and economic stagnation, does this guy have any points or is it just silly wishful thinking?

    The Myth of Japanís Failure
    By EAMONN FINGLETON
    Published: January 6, 2012

    DESPITE some small signs of optimism about the United States economy, unemployment is still high, and the country seems stalled.

    Time and again, Americans are told to look to Japan as a warning of what the country might become if the right path is not followed, although there is intense disagreement about what that path might be. Here, for instance, is how the CNN analyst David Gergen has described Japan: ďItís now a very demoralized country and it has really been set back.Ē

    But that presentation of Japan is a myth. By many measures, the Japanese economy has done very well during the so-called lost decades, which started with a stock market crash in January 1990. By some of the most important measures, it has done a lot better than the United States.

    Japan has succeeded in delivering an increasingly affluent lifestyle to its people despite the financial crash. In the fullness of time, it is likely that this era will be viewed as an outstanding success story.

    How can the reality and the image be so different? And can the United States learn from Japanís experience?
    Full Article Here: http://www.nytimes.com/2012/01/08/op...pagewanted=all
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    Their economy is largely based on being export-dependent. An export-dependent economy works with a cheap currency. When the recession hit in 2008, the Japanese yen was already cheap due to having lower interest rates than anywhere else in the world and so they had nowhere to go while every other economy sent their currency down to encourage exports. The Japanese having zero wiggle room saw their currency rise in value which increased the value of their exports, making them more costly to buy and reducing the numbers sold in other markets. It also increased the cost of their home-based labor in terms of a percentage price of their end product. Before the recession it was something like 110-115 yen to the dollar, it's now something like 85-90 yen to the dollar. So there's less income in the country and they have a major issue with demographics when it comes to an aging workforce and not enough kids to support them.

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    Administrator Tarek Morgen's Avatar
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    An export-dependent economy works with a cheap currency.
    2008 Germany was the leading export nation, ahead of China. The $ to € Exchange rate hit 1,6 Dollar (highest point ever) the same year.

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    Contributor mustavaris's Avatar
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    What matters the most, in terms of cultural survival and economy in the long run is demographics. And the Japanese are a dying race. The population is set to decline by 50 - 90 % during this century and it is estimated that if they wanted to stabilize their population level during the this century, the Japanese females 15 years and younger ought to have somewhat over 4 children. That is impossible, nothing more, nothing less. Japan and Germany are descending into shadows of history. Once great nations, tomorrow, pale shadows of their former selves. Germans ainīt gonna rule Germany in 2100 with the curren trends though. Japanese still got their island. By 2100, if the current trends continue, far more people live in Nordic countries than Germany+Austria. For the first time in history.
    Last edited by mustavaris; 13 Jan 12, at 20:47.

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    Senior Contributor Bigfella's Avatar
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    Quote Originally Posted by mustavaris View Post
    What matters the most, in terms of cultural survival and economy in the long run is demographics. And the Japanese are a dying race. The population is set to decline by 50 - 90 % during this century and it is estimated that if they wanted to stabilize their population level during the this century, the Japanese females 15 years and younger ought to have somewhat over 4 children. That is impossible, nothing more, nothing less. Japan and Germany are descending into shadows of history. Once great nations, tomorrow, pale shadows of their former selves. Germans ainīt gonna rule Germany in 2100 with the curren trends though. Japanese still got their island. By 2100, if the current trends continue, far more people live in Nordic countries than Germany+Austria. For the first time in history.
    Projecting demographic trends is always a dangerous thing. Things can change a lot in a generation or two.


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    Administrator Tarek Morgen's Avatar
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    Quote Originally Posted by mustavaris View Post
    What matters the most, in terms of cultural survival and economy in the long run is demographics. And the Japanese are a dying race. The population is set to decline by 50 - 90 % during this century and it is estimated that if they wanted to stabilize their population level during the this century, the Japanese females 15 years and younger ought to have somewhat over 4 children. That is impossible, nothing more, nothing less. Japan and Germany are descending into shadows of history. Once great nations, tomorrow, pale shadows of their former selves. Germans ainīt gonna rule Germany in 2100 with the curren trends though. Japanese still got their island. By 2100, if the current trends continue, far more people live in Nordic countries than Germany+Austria. For the first time in history.


    I am sorry but reality does not work this way. For that very reasons the US stills falls quite a bit short of the projected 1 billion citiziens expected on the growth it had in the early 20th century if the then current trend had continued

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    Quote Originally Posted by Tarek Morgen View Post

    I am sorry but reality does not work this way. For that very reasons the US stills falls quite a bit short of the projected 1 billion citiziens expected on the growth it had in the early 20th century if the then current trend had continued
    Agreed, though the consistent decline in birthrates in pretty much every country as it gets wealthier is a rather interesting trend- it does seem to have a certain universality to it. Probably there will be counteracting trends as populations begin to fall significantly, but who knows? Until Hari Seldon finally comes along, anyway...
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    In my opinion,the main problem for the Japanese economy is what will happen when the Chinese finally manage to manufacture their Toyotas?
    Korea already managed with Hyundai and KIA to be the new Lada in many countries.

    Anyway,the biggest enemy for Japan is neighbour China,covering a long range,from security to financial issues.

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    Quote Originally Posted by Tarek Morgen View Post
    2008 Germany was the leading export nation, ahead of China. The $ to € Exchange rate hit 1,6 Dollar (highest point ever) the same year.
    and I believe the German carmakers all kept the same price for their vehicles in U.S. dollars because they didn't want to lose their volume or people snub them permanently due to a price increase, which caused them to all lose money

    Germany also has going in its favor they're using economic problems in other country to reduce the value of the currency which helps their exports.

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    Senior Contributor DOR's Avatar
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    1. Demographics: When the population growth rate of one of the most densely populated countries in the world reverses, it is not necessarily a cause for concern. Yes, there are major challenges ahead in areas such as elderly care, but thatís true across the OECD.

    2. Manufacturing: China is already making Toyotas, and cars and trucks for Nissan, Mitsubishi, Daihatsu, Isuzu, Mazda, Suzuki and Honda,

    3. Sources of growth: Letís go to the numbers!.

    Percent real economic growth
    _ _ _ _ _ _ _ GDP _ _ __Consumption _ _ Investment _ _Exports_ _ _Imports
    1981-90 _ _ _ 4.6% _ _ _ _ _4.0_ _ _ _ _ _ 5.8% _ _ _ _5.8% _ _ _ _6.3%
    1991-00 _ _ _ 1.2% _ _ _ _ _1.4% _ _ _ _- 0.5% _ _ _ _4.7% _ _ _ _3.9%
    2001-10 _ _ _ 0.7% _ _ _ _ _0.8%_ _ _ _ _- 1.8% _ _ _ _5.0% _ _ _ _2.0%

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    Quote Originally Posted by DOR View Post
    1. Demographics: When the population growth rate of one of the most densely populated countries in the world reverses, it is not necessarily a cause for concern. Yes, there are major challenges ahead in areas such as elderly care, but that’s true across the OECD.

    2. Manufacturing: China is already making Toyotas, and cars and trucks for Nissan, Mitsubishi, Daihatsu, Isuzu, Mazda, Suzuki and Honda,

    3. Sources of growth: Let’s go to the numbers!.

    Percent real economic growth
    _ _ _ _ _ _ _ GDP _ _ __Consumption _ _ Investment _ _Exports_ _ _Imports
    1981-90 _ _ _ 4.6% _ _ _ _ _4.0_ _ _ _ _ _ 5.8% _ _ _ _5.8% _ _ _ _6.3%
    1991-00 _ _ _ 1.2% _ _ _ _ _1.4% _ _ _ _- 0.5% _ _ _ _4.7% _ _ _ _3.9%
    2001-10 _ _ _ 0.7% _ _ _ _ _0.8%_ _ _ _ _- 1.8% _ _ _ _5.0% _ _ _ _2.0%
    that's interesting... so the reality is that the biggest fall of Japanese GDP is actually in their Consumption and Investment... and not their export??? I had thought it would have been the other way around.

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    Senior Contributor DOR's Avatar
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    Quote Originally Posted by RollingWave View Post
    that's interesting... so the reality is that the biggest fall of Japanese GDP is actually in their Consumption and Investment... and not their export??? I had thought it would have been the other way around.
    About 20 years ago, the stock market crashed, and never recovered. That shattered quasi-liquid wealth, leaving property as the main household investment and devastating consumer confidence.

    Add to that a rapidly aging population that now has 5 million fewer employees than it did in the mid-1990s (from 65 mn to 60 mn, about an 8% drop) – and, about 90% of those jobs were in manufacturing.

    Add to that deflation and the result is a disinclination to invest or consume.

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    If anything, the current trends in case of Japan and Germany, seem to be optimistic scenarios. And when dealing with demographics you gotta remember inertia/momemtum. Even if German TFR doubled during the next 10 years, you would see drastic fall and serious problems. Even if it tripled, the effect would be felt before after a few of decades of high rates the population would start to rebound. When over well over half of the population has already passed the fertile age, the rest cannot do much.

    Quote Originally Posted by Tarek Morgen View Post


    I am sorry but reality does not work this way. For that very reasons the US stills falls quite a bit short of the projected 1 billion citiziens expected on the growth it had in the early 20th century if the then current trend had continued

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    Contributor mustavaris's Avatar
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    The counter acting trends tend to be related to fact that in most societies certain echelons of the society have not experienced such drop. Socioeconomical and/or ethnic groups. Eg. in case of Germany the highest number of children are born to people with low education and immigrant background. Thus, in the future they will become more dominant. Another factor in Europe is the religion: irreligious people are dying out faster than others.

    Quote Originally Posted by ArmchairGeneral View Post
    Agreed, though the consistent decline in birthrates in pretty much every country as it gets wealthier is a rather interesting trend- it does seem to have a certain universality to it. Probably there will be counteracting trends as populations begin to fall significantly, but who knows? Until Hari Seldon finally comes along, anyway...

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    Senior Contributor DOR's Avatar
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    Japan's Q-2 2014 economy shrank

    The bad news is that Japanís economy fell slightly (year-on-year) in the second quarter of 2014, on weak consumer demand. Household spending fell 2.7% from Q-2 2013 while capital investment continued to rise, by 5.3%. Overall GDP fell 0.13%.

    The good news is that after 18 straight quarters of deflation Ė the second longest in post-war history Ė the GDP deflator rose more than 2% from a year earlier. The longest run of collapsing prices, from 1998 to 2008, lasted 42 quarters.

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