- (July 2001)
Is Japan leading the West?
First it was Japan, and now it's everybody. Years ago, Japan was the sick
man of capitalism. Today, Japan's crisis seems to have predated the crises in
the US and Europe.
The Japanese economy keeps shrinking. Industrial production fell by 8.7% in
June 2001 compared with June 2000. Consumer spending also fell, as did the
stock market (which is now at its 16-year lowest). Unemployment is almost 5%,
the highest in recent memory.
Several factors could make it worse:
the government has run out of money and won't be able to artificially
sustain the economy with more public projects;
interest rates are very close to zero and can't be reduced anymore;
Japan's biggest market, the United States, is experiencing a slowdown.
The problem is that, by general consensus, anything that new prime minister
Junichiro Koizumi decides to do will probably
make Japan even weaker (in the short term).
The other problem is that, although everybody hates to admit it, nobody
really knows why Japan is doing so badly: its multinationals are still
manufacturing cars and devices that are highly competetive and with huge
markets and its citizens have saved more money than Americans.
The real problem is that nobody knows what the problem is and everybody knows
that any solution to this unknown problem is going to create a bigger problem.
This happens while Russia and China are posting record growth, quarter after
quarter, while European economies have been anemic for years (and America
seems bound for the same sluggish scenario).
Perhaps Japan simply announced a crisis of the capitalist economy. Only
countries like Russia and China that are newcomers to capitalism seem to
be doing well. Everybody else is slowing down for no particular reason other
than... the economy is slowing down.
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- (October 1998)
The truth about the Japanese crisis.
Japan's crisis is a worry only to the western institutions that invested in
overinflated real estate properties and now cannot get back their money.
The average Japanese has felt almost no pain. Unlike Americans, Japanese do
not invest in the stock market: they keep their money under the mattress,
which means that they are indifferent to stock crashes. Unlike Americans,
Japanese do not risk losing their jobs, because lay offs are unethical and
very few executives would risk such an unpopular measure. The quality of life
in Japan is actually increasing steadily. For example, more and more Japanese
enjoy long, European-style summer vacations: unlike Americans, Japanese have the
money and the time to travel around the world. The financial crisis will go
away when foreign investors recover faith in the Japanese financial system.
Then the stock market will boom again and real estate prices will skyrocket
again. There is no fundamental reason why that should not happen tomorrow
morning: it is just psychology.
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- (September 1998)
Don't confuse Japan with Asia.
Japan's problems are mainly political and they should not be confused (or even
associated) with the crisis of Southeast Asia. Japan's situation is
characterized by intense foreign exchange, high personal savings
and low interest rates (the lowest in recorded history, lower than the 1.125%
offered in 1619 by the city-state of Genova).
The rest of Southeast Asia is in the opposite situation:
lack of foreign exchange, low savings, high interest rates.
Japan's economy has always relied on exports because the Japanese tend to save,
therefore they don't spend, therefore domestic demand is minimal.
This makes it very easy for people to absorb the bad economic time, but it also
makes it very difficult for Japan as a country to overcome the bad economic
times. However, there should be no doubts that Japan will come back: once
the reckless banks are wiped off or saved, there will be no further obstacles
to a complete recovery. And the recovery will be welcome by foreign investors,
who are dying to start investing in Japan again (in fact, they have already
started buying cheap Japanese assetts), thereby starting a spiral of rapidly
expanding finacial boom.
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- (September 1998)
The might of the Japanese economy is measured by the magnitude of its crisis.
Since the Japanese "bubble economy" bursts in 1991, declining asset values have
erased some $5 trillion in wealth. In one week alone in september 1998 the
Japanese stock exchange dropped in value by $241 million, more than the value
of the entire Russian economy.
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- (March 1998)
Wasn't Japan the model country?
First, everybody was lauding Japan as a model society. Now that the Japanese
economy has stalled, the very same analysts are blaming the Japanese society
for all sorts of ills. The truth is that the Japanese economy is now the
second largest in the world, having passed everybody except the United
States, accounting for 13% of the world economy, and, if we divide the gross
national product by the number of people,
it even leaves the United States behind.
Is something really wrong with
Japan? Yes and no. Yes, Japan reached the point at which it cannot easily
keep growing. No, there is still no crime and their streets are clean,
trains are on time and drugs are still a foreign disease. All the talk about
corruption and politicians' incompetence is unfair if you think how much
more corrupted the West is (and our politicians are at least as incompetent
as theirs). Japan is still way ahead of Europeans in economic matters,
and light years of the United States in social matters. The West still has
a lot to learn from Japan, whereas Japan has very little to learn from the
West.
Why is the West so worried then? Because western stock markets are wildly
overvalued and the slightest tremor in Japan would cause a devastating free
fall from London to New York. The welfare of the Japanese people is not at
stake, the one of the Americans is!
(No, this has nothing to do with imports/exports: contrary to popular belief,
for most western economies Japan only accounts for 1-2% of all imports, and
for less than 1% of all exports, so an economic crisis in Japan has no effects
on the western economies per se).
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