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How Japan can turn the tables on its economic decline

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By CB Liddell

After the Black Ships appeared off Yokosuka in 1853, the Japanese made every effort to import the advances and discoveries of the West. But one of the few Occidental innovations they neglected to acquire was a proper understanding of economics. So when the country had its famous economic miracle, it was more down to luck than design. And since the early ’90s, luck has been in very short supply.

The thing that really powered Japan’s economic miracle, apart from a low dependency ratio (i.e., a population with few old people and a rapidly falling birth rate, typical of most take-off economies), was the low value of the yen. From 1949 to 1971, the yen was fixed at 360 to the dollar, meaning that Japanese exports were ridiculously good value in foreign markets, while anything from abroad was regarded as a “luxury.” This situation led to the establishment of the massive export-driven industries that still dominate the J-conomy.

When these industries do well, Japan does well, but, of course, with the ever-rising yen, they haven’t been doing well. Japanese companies now survive by outsourcing more and more production to other countries, most notably China, a process that ultimately exports the technology and techniques they rely on, and which spawns the foreign competitors that will undersell and ultimately drive them out of business. In short, the nation is in the process of digging its own economic grave, and the harder it works, the deeper the hole gets. This is the result of a profound lack of economic understanding.

So what can Japan do? Unfortunately, inventing a time machine and setting the controls for pre-1971 is not an option. At the same time, getting back to a devalued yen would clearly be a good idea—especially now that everyone has enough Louis Vuitton handbags and the novelty of Beaujolais Nouveau has worn off.

But how to do this? Nations like Zimbabwe have no problem. They just leave the printing presses switched on overnight and, when they open up the mint in the morning, a few more zeros have been added to the currency. But this is probably not such a good idea for a country like Japan that imports most of its food.

A subtler method is to have a behaviourally erratic finance minister. Back in 2009, the then incumbent Shoichi Nakagawa was doing a great job undermining confidence in the yen by dozing off in front of cameras and groping statues at a G7 finance ministers’ get-together in Rome. But just when there was about to be a beneficial run on the yen, the PM foolishly sacked him.

Japan can probably learn the most from a country whose economy is rather similar: Germany. Like Japan, Germany is a massive, high-quality exporter, and until quite recently was caught in the same vicious trap of an ever-rising currency. The more German companies exported, the more foreign currency they received, but the less that currency was worth as the Deutschmark soared. This in turn led to falling corporate profits, which spurred efforts to increase exports, which only exacerbated the situation—a classic catch-22. However, unlike their Japanese counterparts, the Germans know a thing or two about economics. That is why they invented the Euro.

At the moment, with the Euro in apparent crisis, to praise this trans-national currency sounds like errant madness. But this ignores the fact that the Euro’s real purpose is to stop German exporters being hit by currency overvaluation. By sharing their currency with less awe-inspiring economies, the Germans have gained the economic ballast to escape the trap that Japan is in.

In fact, the more talk of crisis in Greece or Ireland the better, because it keeps the Euro at a profitable level for German exporters. This is why, amid the stories of Greek and Irish panic, Germany is enjoying a boom with near full employment and soaring exports, and business confidence is at a 20-year high. Now that’s an economic miracle!

The lesson for Japan is clear: it, too, needs to pursue monetary union to ensure that it is not destroyed by its own success. While Germany has the shaky economies of its neighbors to provide the necessary ballast and bad PR, Japan must join its economy with those of its more disreputable neighbors.

But the great thing about any Far Eastern version of the Euro is that the obvious name—the “Asio”—has just the right connotation of ass-like stupidity.

This commentary originally appeared in Metropolis magazine (www.metropolis.co.jp).

© Japan Today

©2021 GPlusMedia Inc.

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A subtler method is to have a behaviourally erratic finance minister. Back in 2009, the then incumbent Shoichi Nakagawa was doing a great job undermining confidence in the yen by dozing off in front of cameras and groping statues at a G7 finance ministers’ get-together in Rome. But just when there was about to be a beneficial run on the yen, the PM foolishly sacked him.

i assume this is a joke....

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Lord, dear Lord, please save me from another article about "what Japan should do" that begins with a reference to the "Black Ships".

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An interesting treatise... extremely well-written.

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"But one of the few Occidental innovations they neglected to acquire was a proper understanding of economics." Japan might well benefit from a common Asian currency. But this must be a joke, as well. Japan knows enough about "economics" to avoid the 10% unemployment that America's understanding of economics caused. To say nothing of the consequences of constant economic disruption that Americans think are normal: high crime rate, high divorce rate, high illegal drug use rate, high infant mortality rate, high home loan foreclosure rate, high school drop out rate, illiteracy rate, etc.

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I like the jokes about the FM and Asio, but the idea of a monetary union as being around in Asia for some time. In my opinion the main attraction of the idea is that it lower the risk of currency wars in the region. The second is to increment trade between members by making buy and sell much easer. The devaluating benefit for Japan is debatable but I reckon that the example of Germany is undeniable.

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Just to clarify, the reference to the "Black Ships" is the only part of this article that I don't admire. A very interesting read.

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Japan has already proposed a regional currency. this article is so Economics 101, it's disappointing.

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to avoid the 10% unemployment that America's understanding of economics caused. To say nothing of the consequences of constant economic disruption that Americans think are normal: high crime rate, high divorce rate, high illegal drug use rate, high infant mortality rate, high home loan foreclosure rate, high school drop out rate, illiteracy rate, etc.

With respect, this article is about Japan not the US.

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The writer makes some good points, especially the one about exporting technology, but not sure that Japan can learn much from Germany. Conventional wisdom is that Germany is a roaring success. But Germans banks lent billions, probably trillions to the smaller Euro economies creating real estate bubbles and propping up the Greek government, and creating demand for all those German exports. Now that those loans can not be paid back, these banks are getting bailed out by the ECB and IMF through supposed bailouts of Greece and Ireland, with others likely to follow. Basically Greece, Ireland, Portugal and Spain have to suffer so that German banks and the German people don't. If you ignore all that then Germany is a big economic success. If you don't ignore it, they are probably a basket case.

Also the writer does not mention the long term effect of the 80's bubble. About ten years ago at the gym I was on a bike next to some hedge fund/private equity guy, and he was going on about how Japanese business people are always blaming everything on the bursting of the bubble instead of getting on with it. At the time I thought he was a pretty smart guy, but now I think he didn't know what he was talking about. Financial bubbles do an incredible amount of damage, both because of the stupid things done during the bubble (misallocation of capital) but mostly because of the stupid things done after it bursts by making the real, productive economy cover the losses of the idiots. That just damages the real economy and sets a downward spiral in motion, and one that Japan still hasn't escaped from. That is the number one problem.

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I'm afraid the 'Black Ships' paradigm is only popular here in JT.

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This article is decidedly hit and miss. The author is right in that exporting manufacturing capacity is a death spiral of exporting skills and technology, however misses the entire reason for that, which is Japan's skills profile, which is that with 3% of Japan's population having at least a university degree the country has too many managers and not enough workers. Immigration would solve 90% of this country's economic woes... the other 10% could be solved by taking English and ramming it down their throats.

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The Edo period (from 1603 to 1868) bequeathed a vital commercial sector in burgeoning urban centers, a relatively well-educated elite, a sophisticated government bureaucracy, productive agriculture, a closely unified nation with highly developed financial and marketing systems, and a national infrastructure of roads.

now ,you can see Japan had been more like a developed west Europe country than an undeveloped Asian country(such as china,korea) before "Black ship" arrived in Japan .

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without EDO period ,there would not be success of Meiji restoration, so we can conclude there was no luck for Japan to be No1 in Asia.

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In effect, the author is suggesting that Japan should compete with China's labor cost advantages by reducing its wages to Chinese levels, a position that is as undesirable as it is unrealistic. In fact, the only feasible survival strategy is to ride the high yen until China matures, and that will not be as long as many think. Vastly lower commodity import costs enabled by a strong yen supports the higher value-added engineering that Japan excels at and with which no other country can at this point compete. Certainly, this may be of no greater comfort to those less skilled than the trickle-down effect delivers, but that still is better than a Chinese wage.

In not much more than a decade, China will itself begin confronting its own aging society and will most likely turn into a net importer at a time when Japan's population will have peaked and begun its return towards a relatively younger economy. This will naturally strengthen Japanese exports, both material and cultural as China learns from Japan how to cope.

Germany is quite a different animal from Japan, both having only recently absorbed the East and with a relatively large immigrant population, so comparisons are spurious. In fact, a strong yen is most definitely in Japan's best interest for the foreseeable future.

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In not much more than a decade, China will itself begin confronting its own aging society and will most likely turn into a net importer at a time when Japan's population will have peaked and begun its return towards a relatively younger economy.

Um, Laguna, I think you're being just a bit over-optimistic on Japan's behalf there. Most projections I've seen show the demographic crisis biting hardest 40 years up the road.If it was just 10 years, everyone here could just batten down the hatches and ride it out, couldn't they?

I thought the article was thought-provoking, though the joke about the finance minister was an easy crack. If only it were that simple. Japan's political system, finance ministers included, has turned the country into a national laughing stock. Don't think the long term repercussions of that are too rosy for Japan. Foreign governments and investors might act for their own quick, short-term advantage (speculation if there are any quick pickings to be had), but being an ungovernable country doesn't generally do wonders for the economy over the long term. Ask Bob Mugabe down in Zimbabwe.

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Whoops, I meant international laughing stock. Though quite a few Japanese of sound mind are laughing too.

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What? japan worried ? According to consensus Japan is STILL 2nd in world economy . Isn't that so ? LOL

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Oh yeah, how long did it take to get the Euro working? Only 50 years or so... Good plan.. Japan will be rocking in 2060.

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As long as the new currency is in some sort of precious metal I am all for it. We must protect ourselves from the fiat money machine that has enslaved many other nations thru fiat debt.

Rare-earth currencies seem to be the fad right now and China encourages the practice among its' populace. (silver/gold)

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According to consensus Japan is STILL 2nd in world economy .

Japan's still 2nd. Though some people are now counting even India could overtake Japan by 2012-14.

In fact, a strong yen is most definitely in Japan's best interest for the foreseeable future.

Agree personally, but the political consensus is that it's not-- right now-- in Japan's best interest :(

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This article basically argues that Japan should dump the yen and join a currency akin to the euro with weaker Asian nations. The suggestion that Germany formed the euro to take advantage of weaker nations is not surrported by any fact. Germany is also now in the situation of having to bail out other nations with weaker economies (Greece, Ireland and maybe more), hardly something Japan would support.

There are numerous reasons why a single asian currency would be disasterous for Japan. I hardly know where to start.

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Japan is a welfare state. The only way to turn the tables on its economic decline is to accept a position under China as a supplier of sophisticated consumer goods to the largest growing consumer market in the world. Japan will do just fine when swallowing this reality.

Forget about joining any single asian currency.

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"its economic decline"

The Japanese economy is booming all around me...

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It's true that Germany benefits from an Euro that is undervalued from their point of view... but if the Euro is undervalued for Germany, it means that it is overvalued for other countries who have it and who are suffering horribly because of it, Ireland, Greece, Portugal and Spain mostly. Do you think other Asian countries are going to volunteer to be thrown under the bus so that Japan (a country they don't always like, WWII memories last long) is better off? Especially when they see what is happening in Europe?

No, forget that. At best, maybe Japan should try using inflation some to lower their currency's value and to correct some of the huge debt the government still has from the time they saved the country from disaster following the bubble bursting in the late 80s, early 90s.

I think also that the author of this article has forgotten one basic fact: Japan is an old country, growing older. That is hurting its economy a lot, just like having a low dependency ratio after WWII was good for the economy, having a high dependency ratio is bad for the economy. Japan doesn't compensate with immigration like many other advanced countries either. That is a huge drag on economic growth, but in a way, that's OK... because economies can't grow forever, reality will impose a limit to growth due to lack of resources, and the richer you are, the more you have to rely on technological breakthrough to increase even slightly the economy.

There are also structural problems in how the job market is structured and the culture people have. Japanese work long hours but they aren't very productive by hour. Maybe an approach that focuses on reducing working hours but increasing hourly productivity would be better, a bit like the mentality dominant in Europe, where people at work really work hard and maximize productivity, but work hours are short and allow for people to go back to their families and enjoy their own lives too. Maybe you'd be able to reintegrate "freeters" in traditional careers if you didn't force them to work so long needlessly.

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Pretty muddled exposition.

If the goal is to bring the yen down by creating risk and uncertainty, then why merge Japan with some loser nation to do it? I have said it time and again: Japan ought to either sell more bonds at ridiculously low interest rates OR it ought to print up rafts of yen and use it to do what it has never done before. Japan cannot go back to 1871, or 1971, or 1986. Japan needs to move ahead confidently... recklessly.

Massive and widespread geothermal, wind, and other projects. Give Japan energy like it has never had. Heavily subsidize electric vehicle development. Give Japan cheap energy, cheap mobility, cheap communications, and bountiful agriculture. I will just keep it simple and say ETC.

Japan needs a transformation if it is ever going to get real growth. If it has to DOUBLE its current debt to do it.... well, I can think of a lot of investments that will return better than 1.5%. Effectively HALVING the price of energy while giving Japan energy independence would solve almost all of Japan's problems.

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One idea is that Japan should just become a part of the new China, whaddaya all think?

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Japan is no Germany, the only thing similar is Japan has the same mighty industry capability as German has. But German just swallows its Eastern part and the demand there creates the huge need for the growth, Japan has no such thing, the Japanese infrastructure is already the first class in the world.

The only way for Japan to turn around is to be integrated into the great Chinese economic zoom, as it is undergoing right now. Or call it Greater East Asia Co-Prosperity Sphere, a Japanese invention anyway.

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In another 10 years, Japan economy will be about 3/1 to 1/2 of Chinese's size in normal GDP. By that time it will be pointless to argue over anything.

It will be swallowed anyway.

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Agree with Klein. If Japan seriously wants to devalue their own currency, they could act irresponsibly like China and just print the money like there's no tommorrow.

The common misconception here is that the author assumes that Japan is an export depended nation when in fact, it's never been like that for decades. (roughly 14% export/GDP ratio for Japan while Germany is close to 40%) In other words, there's just too much emphasis on exports as an indicator for economic groth when the nation as a whole doesn't rely on it that much to begin with. (Like USA).

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"they could act irresponsibly like China and just print the money like there's no tommorrow."

"(Like USA)."

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Not even close, mushroom.

Hint: Money supply as a percentage of GDP.

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Yes, there are still some things that the Japanese-Government KK could do to prevent a Grecian-style economic collapse, but as my financial analyst friend says, "They won't change anything until the trash starts piling up in the streets." :(

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With strong yen, japan can go oversea and buy up everything........LOL

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Unemployment in Japan is still only about 5%; United States 10%; most of euro area except for Germany is 10-20%. No trash piling up on streets, crime-rate at a record-low, and you don’t see people lining up to receive rations. I think the situation in Japan is still pretty mild compared to what some other countries are going through.

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oberst, yo're correct. Kirin, for example, is the largest distributor of dairy foods, juice, and soon, beer in Australasia. Not bad for a people who didn't acquire "a proper understanding of economics."

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Japan needs a transformation if it is ever going to get real growth.

Japan's problem is basically the same as the rest of the world, it is just a few years further down the road. The transformation that is needed is for money and credit to be targeted for productive use and away from unproductive use. There is a very interesting article by a guy named Richard A. Werner called "Understanding and Forecasting the Credit Cycle" which I would recommend to klein2 and anybody else willing to give it a shot. The basic point he makes is that Japan's and other countries' problems are not unsolvable, and that the solution is quite simple and not a secret.

Which goes along with what is becoming more and more obvious to me. Economic problems are completely unnecessary and exist only because mainstream neo-classical economics is nothing more than a religious cult, and that the solution to the problems would mean the end of the private bank money creation system, which forces us to pay for the privilege of using money. That is the system that those in charge are trying to save, not the economic system.

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eigokun at 12:11 PM JST - 23rd December. Unemployment in Japan is still only about 5%; United States 10%; most of euro area except for Germany is 10-20%. No trash piling up on streets, crime-rate at a record-low, and you don’t see people lining up to receive rations.

Unlike in the U.S. and Europe, Japan's definition of the “unemployment rate” only includes people who do not have a job and continue to look for new work. Former job seekers, those who have given up on job searching are not counted with calculating the labor force and thus are not counted in figuring the unemployment rate. As a result, the Japanese unemployed figures slightly understate the situation.

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kchoze, thank you for an excellent post.

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The proportion of people over the age of 65 is set to rise to nearly 40 percent by the middle of this century, causing pension and healthcare costs to balloon. By the year 2025 around 70 percent of government spending will be eaten up by debt service and social security spending. Japan is going into very dangerous territory. Post war baby boomers are retiring and they have less than 10 years left to fix the imbalance problem. Japan has to drastically change the immigration policy to make young College and University graduates easier to immigrate from neighboring countries. However, this is Japan, they rather starve and this will not happen.

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@sfjp330 Please provide a ref above "Japan's economic recovery stammering, uncertainties ahead" from China's mouthpiece People Daily. Thanks!

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nigelboy,

How about national debt as a percentage of GDP?

The USA has a $14 trillion dollar economy, and guess how much national debt? 91% of GDP (2008 figures)

Japan has a $5 trillion dollar economy, and guess how much debt? 192% of GDP (2009 figures, and yes, much of this debt is held by it's citizens).

Your country (the UK) is also in the can with roughly 70% of national debt to GDP.

China is down the list at 18.20% of national debt to GDP. Not great, but certainly manageable.

Looks like the U.S. and Japan have been quite irresponsible with the way they handle their money. Oh, look, 2008 financial crisis! Guess who caused it!!

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"How Japan can turn the tables on its economic decline"

"Japan’s Public sector debt is very high. However, Japan has a high savings rate which makes it easier for the government to finance the debt. 90% of Japanese debt is owned by Japanese individuals. US has a low savings ratio and 25% of US debt is owned by foreigners. Nevertheless the National Debt of Japan is a real burden for the economy"

-CIA Factbook

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How about national debt as a percentage of GDP?

Approximately 94% of the debt is owned by Japanese (financial institutions, insurance companies, and individuals) at an average interests rate less than 1.5%. The reason for this high percentage holdings especially in the financial institutions are that the banks have excess cash holdings (deposits) due to cut in lending and coporate investments. So to get some return, their choice is to purchase JGB. It's no wonder that even at such low return, Japanese banks keep buying them.

The flip side of that is when banks start to lend more=economy picked up=more tax revenues=less purchase of JGB.

Your country (the UK) is also in the can with roughly 70% of national debt to GDP.

Not my country.

China is down the list at 18.20% of national debt to GDP. Not great, but certainly manageable.

What's not manageable is the excess money supply which had lead to inflation. 260% of GDP which is unheard of when you consider that even during the bubble period of Japan, it did not exceed 120%. What's more frightening is the relatively miniscule % of consumption/GDP ratio (35%) and a large investment to GDP ratio (46%). For developed economies, the ratio for the former is about 60~70% range and the latter is around 15~20%. In simple terms, what China is doing is building a skyscraper in middle of nowhere. "If you build it, they will come" approach is just a pipe dream at this pace.

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The article by Professor Richard Werner on the credit cycle (see G J Dailleult) is at the web address for Q Finance: Understanding and Forecasting the Credit Cycle — Why the Mainstream Paradigm in Economics and Finance Collapsed

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"What's not manageable is the excess money supply which had lead to inflation. 260% of GDP which is unheard of when you consider that even during the bubble period of Japan, it did not exceed 120%."

Yes. Now you have me wondering about part II of the financial crisis. Since China is floating much of Western Europe and the United States through bonds purchases, if China teeters, or ends it's growth, it will mean a global depression on a massive scale.

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China's bond purchases are necessary for them to keep their own currency low which is their only strategic advantage. In other words, China is floating their own economy through bond purchases. (i.e. Selling/printing 元 and buying foreingn currencies). 260% money supply/GDP ratio is a result of that.

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Yes. What will happen when China stops buying European Sovereign debt, and US Treasury bonds?

The party has to stop and some point.

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Yes. What will happen when China stops buying European Sovereign debt, and US Treasury bonds?

Spike in interest rates perhaps, China is basically forced to float the yuan, trade deficit with China decreases (China's trade surplus decreases), and China's outstanding holdings value decreases.

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So China is basically forced to fund Europe United States debt to keep the yuan devalued.

Terrible cycle.

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nigelboy at 01:21 AM JST - 24th December Spike in interest rates perhaps, China is basically forced to float the yuan, trade deficit with China decreases (China's trade surplus decreases), and China's outstanding holdings value decreases.

Especially this year, interest rate increase is the result of accerated inflation in China and the govenmenet is agressively trying to slow the flow of the easy money. This has very little to do with U.S Treasury bonds and Euro debts because they already have $2 trillion to safeguard their currency.

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The city to the north of where I lived in Germany 4 years ago had 20% unemployment. I think that is pretty typical for a lot of Germany. I wouldn't exactly be saying they are a paragon of economic virtue.

Japan builds a lot of stuff and thus a strong yen makes it easier to get raw materials. Thus having a strong yen is not all that bad. Japan can go a long way towards decreasing the cost of production through incorporation of advanced technology. This would lead to quite a good and sustainable economy without making the country worthless.

The only thing hurting this is Japan's massive debt that keeps increasing at astronomic levels. A strong yen is going to bring this debt crashing down on all of us. Better start growing your own food.

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Japan's hopeless.

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The only hope for Japan is having more children or else japanese people will simple cease to exist. No children no workforce and no future.

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I have to agree with Sephysys, no matter what economics we talk, it's quite clear that the only ones that can bring Japanese economy to a robust life is its population. Japan should open its doors to foreigners, entire families, it's the only way to save its economy.

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An interesting treatise... extremely well-written.

I think you meant: "I agree with it much". Well, written, it is not. It's based upon baseless assumptions.

But this must be a joke, as well. Japan knows enough about "economics" to avoid the 10% unemployment that America's

I'm not sure how you missed it, but the "article" is trying to compare things with Germany, not the USA.

I'm afraid the 'Black Ships' paradigm is

It's not a paradigm, it's a reference point. But it works like a shibboleth.

According to consensus Japan is STILL 2nd in world economy .

Ok, I guess you love pyrrhic victories. I mean, unless China commits sepukku, its economy will overtake Japan's one month or the next. It's inevitable. To quibble over such little things, tends to indicate avoidance issues.

The author is right in that exporting manufacturing capacity is a death spiral of exporting skills and technology…

Huh, how? So, you're saying Japan should keep things in-house and pretty much by-pass the Chinese economy --unless you're suggesting the Chinese (and everyone else) would prefer to buy [the now necessarily] overpriced Japanese goods. And, you're also saying, all those jobs where people toil on the assembly floor are something Japan should compete for? For reals?

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Huh, how? So, you're saying Japan should keep things in-house and pretty much by-pass the Chinese economy --unless you're suggesting the Chinese (and everyone else) would prefer to buy [the now necessarily] overpriced Japanese goods. And, you're also saying, all those jobs where people toil on the assembly floor are something Japan should compete for? For reals?

Keeping a manufacturing base is vital, because:

1- Manufacturing provides for the basic needs of people, most of the prized "knowledge economy" can exist only because our basic needs are well-provided for and we have a lot of idle people who then are paid to provide for less important needs. If you become dependent on others for your basic needs, they have you by the balls.

2- Manufacturing can be productive and lead to well-paid laborers, people who otherwise would not have the capacity to have well-paid jobs elsewhere. A society cannot function only with bankers, engineers, doctors and lawyers. Not only that, but if you did manage to turn more and more people into these jobs, these jobs would only be paid less and less.

The fact is that those third-world countries often are less productive by man-hour than developed countries, they appear to be more efficient only because of distortions in the market, notably undervalued currency. Note too that many of these countries, like China, are very protectionist against imports, being for free trade with these countries is ridiculously ill-advised. You only result in jobs flowing one way, and you lose good-paying manufacturing jobs that are replaced with low-paying, unproductive service jobs only. So even if stuff is cheaper, it doesn't matter because less and less of your people get decent wages, which lead to an economic meltdown in the end. That happens because the ever-growing poor segment of the population lack money to pay for the goods they need while the ever-decreasing rich have money in excess, so the rich start loaning to the poor, but the poor have no prospect to ever repay the debts, so this can't last forever.

That's exactly what happened in the US that led to the financial crisis. Have we forgotten the lessons so quickly that we should again go down that path to ruin?

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Japan has been overtaken by China as the world's No. 2 economy. Its flagship company, Toyota, recalled more than 10 million vehicles in an embarrassing safety crisis. Its fourth prime minister resigned in three years, and the government remains unable to jolt an economy entering its third decade of stagnation.

For once-confident Japan, 2010 may well mark a symbolic milestone in its slide from economic giant to what experts see as its likely destiny: a second-tier power with some standout companies but limited global influence.

As Japanese drink up at year-end parties known as "bonen-kai," or "forget-the-year gatherings," this is one many will be happy to forget.

Problem is, there's little to look forward to. With a rapidly aging population, bulging national debt, political gridlock and a risk-averse culture slow to embrace change, Japan's prospects aren't promising. And a tense, high-seas spat with China has intensified fears of its neighbor as a military as well as economic threat.

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-Associated Press on previous article

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I may have misread this article but to my understanding they are pushing the print yen into oblivion scenario. First off while the US is printing money while being the reserve currency, Japan will not get the traction it needs to weaken itself. I takes a flight to safety into the dollar and gold in order to cause the yen to get the move they desire and this is caused from fears like a european defaults. Next as we are learning here your dollars are worth less yet everyday commodities like wheat, GRAINS etc will cost more and the cost of living spikes so even if you do create jobs and more people work (which is not the case after an economic bubble as the US is learning with 2 stimulus plans) the cost of living will still be alot higher than what business would want to pay their workers. I know I am just pointing out problems with no solutions but the best thing I can think of to help Japan is that the government has to use the stronger yen to start acquiring businesses overseas. Then they can since some of their workers to work at these companies and in doing so since these Japanese workers have relatives in Japan they will send money back fueling the economy. The Japanese workers will also have to pay taxes on their earns as well. They will also have to start buying commodities on pull backs and create a reserve that they can use to sell off at higher prices and also lessen their dependence on other nations. There are a few other things they can do but it is a talk for a different time.

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but the best thing I can think of to help Japan is that the government has to use the stronger yen to start acquiring businesses overseas.

That's what's happening with the increased value of the yen. There has been an 85% increase of M&A from the previous year. The largest increase was India which was 20.3 times larger than last year. M&A for China is down 61% from last year.

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Have the BoJ print new money to the tune of around Y100 trillion. Take that money and give or lend it to any corporate pension fund that is underfunded. In the meantime push for a stronger yen overall... somewhere around Y70 to the dollar should work. Then have those underfunded corporate pension funds buy large and mid cap international stocks that are very stable and have good dividends. By doing this you will increase the value of Japanese corporations since their pensions are all fully funded. You have dilluted the value of the Yen and thus should see a weakening of it and you have somewhat covered future retirement liabilities.

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What an atrociously random article. To suggest that Japan's rise was 'luck' and not at all due to massively long work hours since the 50s where everyone grimaced and bore the pain until the affluent late 70s-80s arrived. China isn't doing things 'better' than Japan did; it's going to hit the same hurdles if its currency gets adjusted. An interesting discussion to submit, but a woefully amateur article.

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Keeping a manufacturing base is vital, because:

I'll take it if by manufacturing you mean 'skilled' manufacturing. Unskilled labor is not something any mature industrialized nation needs. Not in quantity. There is a need for some unskilled jobs, if only b/c there is a natural percentage of people for whom that will be the most they can do. And that's ok, but that's a rather small percentage of any labor force.

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"Have the BoJ print new money to the tune of around Y100 trillion.

...

In the meantime push for a stronger yen overall..."

These two things are mutually incompatible. If you print more fiat money with no intrinsic value, your currency will decline (as we have seen, and are seeing, with the USA).

I say refuse to print more money (devaluing the savings of the people) and let the yen stay high. Inflation would make Japan's problems much, much worse. At lease today people can save their money and ride out periods of unemployment. You can't do that if your savings is steadily being eroded.

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Economists in the U.S refer to "Japan's economic crisis of 30 years", and it is disturbing. We have seen the shocking number of homeless,the dyed hair, body pierced youth, the $5 per apple, and $1 per strawberry. And we also hear about the "endless rules and regulations",the worship of and acting out of ancient rituals; and the same "gridlock" in gov't.

We look to Japan to solve these problems, and learn from them ourselves, possibly... yet a gov't like Japan's with layer after layer of "those in charge", making complexity and ineptitude seem a national cultural pastime... and apparently a mafia no one talks about; ( this all by itself is strong indication that graft and corruption are also a way of life in Japan )...it looks like "the end" . A complete renewal/overhaul seems overdue; a 'renewing of the mind, 'Christians call it.. rebirth, etc. We also know that something less than 1% of Japan is Christian- and therefore does not know the meaning of rebirth? It begins with the admission that "this is all wrong"...we have made a big mistake, so we are all going to adopt a refreshing new way of perceiving the world and ourselves...and start all over. It's called a "revival". It has happened before, affecting an entire culture, as it has here in the U.S. It is possible. It seems to me a matter of supreme urgency.

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Yet a gov't like Japan's with layer after layer of "those in charge"

I'm a big believer of 'devolution'-- in fact the Jap. PM Naoto KAN apparently also believes in decentralization of power and stable autonomous administration of people by local officials. But it's shaky in Japan right now, like most things (/sigh).... a reassurance from the big Gov that there's something concrete behind the plan will refuel interests on it and make it efficient =/

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OOps-got bumped for 'off topic'...let me avoid the usual language of a theologian this time. All nations rise and fall, on that we can agree. This is a discussion on how to turn back the clock, just as jraustralia suggests, and still believes that it can be done.It MUST be done.

The usual metaphor you recall, is the "boiled Frog" syndrome. Put a frog in cold water and gradually raise the temp over many hours, to boiling, and the frog doesn't jump out; ever! This is in part how nations fall..it is so gradual, only the older generation sees the problem.

Let's not discuss gradual decline in morals, (me ) let's stick to practical solutions: the longer things go, the more complex, confounding, and counterproductive the regulations become. I read the other comments on this site. It is obvious that the layers of beauracracy ( and each beaurocrat receiving staggering salaries to impede and block improvement)..IS the problem. It is a kind of quicksand, and everyone goes down. We all know that people come to "revere" the way things have been, and the way they are...and detest change. This will NOT be easy...there will be an awful resistance. But , children...we all have to do this.

In the U.S. Pres Obama represented "change" and met, so far, with gargantuan resistance, and defeat. Sarah Palin was thought to represent change...but we see her milking the media frenzy over her like a "Cash Cow"...so she has fallen from grace.

What we do not need, is more of the rich getting richer, and the poor ( no, the middle class ) getting poorer. This will continue unless a dramatic (humble, not interested in riches ) leader steps forward in Japan. Is that not possible? Japan re-invented itself in the 60's and 70's ( I was there then )...I still adore my Marantz FM Stereo !...Come on, Japan!

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