News & Analysis
Japan: The Tipping Point
The Bank of Japan, which holds a policy meeting on Monday, injected 7 trillion yen into the money market via a same-day operation. It later injected an additional 5 trillion yen in same-day funds and a BOJ official said the central bank will closely monitor the currency market in deciding the need for further market operations. – Nagoya
Dominant Social Theme: It will be OK. The Japanese are industrious.
Free-Market Analysis: Demographically, the Japanese population has continued to age at a substantial rate, aggravating many of the problems that the Japanese economic infrastructure already faces. This is actually the best evidence we have of the dysfunction of Japanese society; demography doesn't lie. The Japanese system is dysfunctional and discouraging population growth.
All economies are similar in the age of central banking. When confronted with disasters, economic or otherwise, the first instinct is to print money (see article excerpt above). Many things in life are uncertain, but central banking is not one of them. Central banks in the modern era print money from nothing. They print money-from-nothing when times are good and the economy demands increased liquidity. They print money-from-nothing when times are bad and banks have additional liquidity needs because the system is "stressed." But they always print. That's the point. They never stop printing and devaluing purchasing power.
One would think that people would be fairly wealthy given all the money that central banks around the world are printing on a consistent basis. But for some reason (actually ones that we explain regularly) it doesn't work that way. Western economies have surely been on a downhill slide since 2008; in Japan the trends have been flashing negative not for two years but for two decades. The miserable post-bubble economy that was supposed to return to health numerous times has never quite managed to break out. The Nikkei stock market average, once hovering around 40,000 remains stuck around 10,000 and as of this writing is actually under 10,000 and probably headed down farther.
When people are truly miserable they stop reproducing. They don't get married, don't build families, don't have children. That's what's going on in Japan. There are plenty of commentators who will tell you that Japanese social and economic misery is over-emphasized and that things are not nearly as bad as they are made out to be, but the demographics tell a different story. This is a society in seemingly terminal decline; one in which Western style central-banking economics has been grafted onto an ancient, hierarchical culture with devastating results.
The economy has never recovered; and this earthquake, which has destroyed some seven percent of the productive Japanese economy, is likely to make things a lot worse. Let's examine some of the potential ramifications of the earthquake and subsequent devastation. What is noteworthy to begin with is the inevitable economic illiteracy on display. The Broken Window fallacy has already assumed the predictable high-profile, with plenty of economic commentators who should know better opining that the devastation should be good for the Japanese economy as rebuilding is always a profitable enterprise.
How people can make such points with straight faces is always a wonder to us; if they really believed such things why are they not advocating regularized "creative destruction" at home. Perhaps they ought to be setting fire to their own cities or working out clever ways to flood their business districts with seawater. If natural disasters are so very good for economies, surely they should find ways to institutionalize them so as to better mount satisfying and profitable recoveries.
In truth, the costs of natural disasters can be measured in broken homes, broken families, lowered living standards for all. People lose loved ones, husbands, fathers, mothers and daughters; families are uprooted and whole communities vanish never to be reestablished. The costs are measured out in individual tragedies; but this is not the calculus commentators wish to notice. These are the discounted expenses, the invisible side of the ledger. Only the profitability of corporate rebuilding is to be noted, the efficiencies of modern reconstruction. The broken window fallacy is an alluring myth. It's unfortunate that so many ignore the truth whenever convenient.
There are other more straightforward ramifications to the earthquake damage. Leaving aside Japan, it is going to aggravate the EU's problems as the Eurocrats had cleverly figured out a way to ameliorate their own profligacy and miscalculations via Asia. Yes, the Japanese and Chinese governments were going to start to make coordinated purchases of the bonds of reeling Southern European economies; that won't happen now, or not with Japan anyway.
Japanese wealth will be needed closer to home, what's left of it. And there is substantially less of it than there was even 20 years ago. It is true that the Japanese have an enviable savings rate, even when confronted by the inevitable inflationary depredations of central banking that makes savings illogical. But what inflation hasn't robbed, the Japanese habit of writing bonds against non-existent assets has quietly pilfered away.
It is Japanese savings that has underwritten the endless profligacy of the Japanese government and it is likely this current disaster will only aggravate the situation. Already, the Bank of Japan has printed another 12 trillion yen from "thin air" to ensure there is enough "liquidity" in the face of a sudden surge of withdrawals from the Japanese banks. Doubtless there will be more such printing in the coming weeks and months. There are estimates that that the Bank of Japan stands ready to issue into the market some 40 trillion yen – all of it printed from nothing.
This is in fact part of Japan's larger problem. Japanese society like many Asian societies places a premium on social comity and obedience. What this means in practice is that Western regulatory democracy – even more so than the EU and America – has run amuck in Japan, manifesting itself most notably in the gridlock of Japanese political parties. As in other countries, political power has begun to change hands regularly but the underlying policies do not change. Japan still spends more money than it has and the corruption within the federal politics is notable and systemic.
Recently, AFP reported via Yahoo that "Japan's beleaguered premier faced an internal party revolt when 16 of his own lawmakers failed to vote for his centre-left government's record $1.1-trillion budget." The premiere, Prime Minister Naoto Kan, in office less than a year has approval ratings BELOW 20 percent and legislative gridlock from the "conservative opposition" is once more the order of the day.
Of course this miserable state of affairs was PRIOR to the earthquake. One can only imagine what Japan's sclerotic establishment will do now. Some are predicting that the earthquake and subsequent misery will galvanize the political establishment and shock it into changing and become more responsive and efficient. But disasters of any kind usually do not have a salutary effect on corrupt governments, merely making them more dysfunctional in our opinion.
There is however the beginning of a change overtaking society, as reported by the Economist recently in an article "Maverick as hell." The Economist noted that reformist politico Takashi Kawamura won a landslide re-election as mayor of Nagoya, a big industrial city. This was not of itself especially newsworthy, but the platform that Kawamura was running on emphasized reductions of all kinds – of the bureaucracy, taxes and overlapping public services.
Kawamura himself characterized his victory as the beginning of a new era in Japanese politics and compared his nascent movement to the Tea Party in America. He was not alone in victory; his political ally – someone who shares his views – Hideaki Omura, won a similar victory on the same day, gaining the governorship of the surrounding prefecture of Aichi, which is the home of Toyota. Omura was quoted as saying, "This is a citizen's revolution."
Predictably, the national media claimed the victories were nothing out of the ordinary, merely a protest vote against the unpopular Prime Minister Naoto Kan. Yet there was more. As the Economist noted, "Nagoya citizens not only gave Mr. Kawamura three times the votes of his DPJ rival. Nearly three-quarters of them supported a referendum to dissolve the current Nagoya assembly, an unprecedented revolt..."
We've pointed out that disasters – natural and otherwise – don't usually bring out the best in large, corrupt government entities. (The New Orleans flooding and FEMA spring to mind.) And the earthquake is an unmitigated disaster, broken-window fallacies aside. But optimistically, one can make the case that the current troubles could support the kind of governmental efficiencies that Kawamura and Omura want to introduce in Japan.
Conclusion: So much of the world is already subject to various kinds of democratic convulsions and regime changes; Japan may be due for its own modest socio-political reconfiguration. That would be at least one positive that could come out of the current disaster.
Editor's Note: Edited on date of publication. A speculative cite involving unmarried Japanese women was removed from the article.
Posted by Catevala on 03/18/11 04:10 PM
@Bob: "Japan is a small country with sizable segments of its territory expected to look like the Chernobyl surroundings. It will take at least 5-8 years for Japan to recover. People just are ignorant of the scope of this catastrophe and its consequences for the entire world economy."
I believe you have put your finger on the real issue Bob, whereas I think little of all the demographic analysis and its attendent sociological ramifications. This disaster is not even just about Japan. This is one of those Big Events that change history globally.
When I saw the title using the words "tipping point" I thought the article was going to talk about the disaster as a catalyst that will send shockwaves throughout the World, and not only economically, although that will be the first thing to be felt. Later though, it will be seen to have been also a tipping point in the whole nature of the human enterprise in this age. For one thing, radiation just does not go away like some other problems. Once can clean up after a tsunami, rebuild after an earthquake, but there is nothing you can do about a nuclear accident except to abandon the place for a couple of hundred years.
[It is one thing to make uninhabitable a place as remote and unimportant in most people's minds as the Ukraine. It is another thing altogether to do so in a place as nearby and very important as Japan.]
This then becomes not just an economic issue. It begins to take on "symbolic" value; it creates a MYTHOS if you will that, like 9/11 divides time into "before" and "after". This thing is HUGE!
Posted by Ingo Bischoff on 03/17/11 03:03 PM
You have it correctly.
However, the birth rate has only meaning in relation to the death rate. The death rate is a natural perception by humans depending on the sense of security humans enjoys. That is a group or societal phenomenon. The size of procreation depends on the natural perception of the death rate.
Posted by Ingo Bischoff on 03/17/11 01:56 AM
You are on the right track....now just apply it to the population as a whole......
Reply from The Daily Bell
What? We just did. Stop being so coy. Just explain it. Thank you.
Posted by Ingo Bischoff on 03/17/11 12:40 AM
"You are a physicist, Ingo Bischoff, so you must have an understanding of these numbers. Explain how such a tiny reproductive rate guarantees the survival of the species."
You might find the answer by making a distinction between the "birth rate of 1.5" and "1.5 birth per couple"...
Reply from The Daily Bell
Ah, you seem to be saying (it is hard to interpret you sometimes) that the birth rate applies to the single individual. Thus a couple would have a birthrate of 3. Is this case?
Posted by Stephen on 03/16/11 12:15 PM
Japan will have some sort of socio-political reconfiguration but I think it may not be modest at all.
Posted by Gavin on 03/16/11 05:02 AM
You're probably correct. I was cynically thinking along the lines that the politicians were protecting their own interests along with the people they work for.
Posted by Gavin on 03/16/11 03:41 AM
Thanks. A couple more points that I forgot to include.
- Low sperm counts. I heard this from 2 people, one who said that someone in her family couldn't conceive because of this problem.
- Within the last 6-7 years the Japanese government changed the law on pensions so that it was possible for women who divorced their husbands after retirement to gain half his pension. Probably not a bad thing overall but it meant that the divorce rate shot up and further changed Japan's traditional culture.
And this Telegraph article from last year to show how much the Japanese government really values its children.
"Japanese government blocks a ban on child pornography"
"The Japanese government has blocked legal efforts to clamp down on child pornography, with the country becoming the world's "kiddie porn superpower," according to a pressure group.
"The ruling Democratic Party of Japan has refused to support legislation that would outlaw the possession of child pornography on the grounds that it would infringe individuals' freedom of expression"
Click to view link
Reply from The Daily Bell
Actually, we would tend to believe the child porn hysteria is somewhat overblown and has been used by the West to further erode civil liberties.
Posted by Gavin on 03/16/11 01:36 AM
"When people are truly miserable they stop reproducing. They don't get married, don't build families, don't have children."
With respect, DB, I'd have to agree with other feedbackers that the above is not entirely the case in Japan. You haven't really factored in the culture and their way of thinking, as bizarre as it is sometimes.
I've listed below what I think are a few other significant factors " I've been here since the end of the bubble economy days so it's not just educated guesses :). I also asked a number of Japanese people over the last day or two whether it's the poor economy that is reason for the low number of births. They said it was difficult to answer (as they do) but gave reasons in addition to economic hardship.
- Change of thinking due to parents spoiling their children. The older generation didn't want their kids to have the same lifestyle they did when they were growing up after the war so the kids were pampered. Young parents these days often lack the same kind of motivation and spirit as their parents, even though the parents went through miserable times too, probably more miserable than what people have today. Many young people in the 20s and 30s are still living with their parents and it has little to do with economics. It's simply easier and more comfortable for them.
- Changing lifestyle brought about by an affluent society and PE brainwashing (via TV, advertising etc.) Shopping, fashion, travel and career come before children for many " very fickle and materialistic. This is a big one I think.
- As you know the Japanese culture is based on extended families. I've met many middle aged people who have to look after their parents and/or parents in law as they get older. There is a very strong obligation for women in particular to take care of their husbands' parents. This causes a lot of strain on relationships. The younger ones know this only too well and it puts them off marriage. One middle aged lady told me this morning that they don't want responsibility.
- The pressure to conform has decreased somewhat. When I arrived in Japan I remember hearing an expression called 'Christmas Cake.' This referred to the shelf life of Christmas cake and how nobody really wanted it after Dec 25th. The analogy applied to young women in that once they got past 25 years they became less desirable as they got older. These days I never hear this phrase and it's quite acceptable for couples to get married when they're older, say in their 30s.
- Shame of failure has always been very inherent in Japanese society. However there is now less pressure/shame on people who want to divorce, even people divorced 2x. This especially applies to women. Divorce used to be taboo but now it's almost considered normal. Also young people these days feel less pressure from their parents to get married and have children whereas before it was considered almost mandatory.
On the subject of divorce, the family court system is disgraceful and favours the abducting parent, usually the mother. Any visiting rights are extremely minimal (based on outdated Confucius thinking) and, bizarrely, not enforceable by law (don't want disharmony). In other words even if a couple reach a settlement at court, child visitation for the non-custodial parent can be safely ignored by the custodial parent. This and a high number of child abuse cases reaching the news may be further reasons for couples to avoid having children.
- Poor prospects for the future. Obviously this is related to the economy. But there is also the propaganda of N. Korea and China as threats. Why have children if their future looks doomed.
- There is also the phenomenon of the 'tanshinfunin' where the husband can be transferred by his company to some distant city (or cities) for years on end. The wives stay behind to look after the house and raise their children. Naturally many couples grow apart and the kids grow up seeing this separation as normal and necessary although of course it's not. I think many young people are not interested in this antiquated company-before-family system now and perhaps choose to stay single rather than live this lifestyle.
- Times might be tough for businesses but keep in mind that prices have not increased for a long time (movie tickets and soft drinks still cost the same as 20 years ago) and in many cases actually decreased due to 100 yen shops popping up everywhere and products made cheaply in China.
I agree with you, DB, that Japan is not a well society but part of the reason might be the hidden problems of a long repressed society coming to the surface in different times. I could give examples of that too but this post is already long enough.
Reply from The Daily Bell
Thank you for the first-hand insights. Much appreciated.
Posted by Ted Verspyck on 03/15/11 05:48 PM
Very well put.
Posted by Ol' Grey Ghost on 03/15/11 02:09 PM
When the state, or society through the state, keeps suggesting women wait to have children until they reach that point in life when their personal fertility is at its lowest, then one will have reduced population growth.
"Wait till you finish high school to get married and have children."
"Wait till you finish college to get married or have children."
"Wait till you have your graduate degree to get married or have children."
"Wait till you're established in your career to get married or have children."
"Sorry, ma'am, but your too old to have children."
Posted by Bob on 03/15/11 12:13 PM
"What has been done to the Japanese people by the combination of modern central banking, and US military domination is horrifying.
The government leaders having been consistently suborned and co-opted by the US, and the bankers leaving these people no options." This is so true.
Both Japanese and German leadership have betrayed their people and prostituted their people future. Japan and German, together with Russia, are moving to a national extinction.
The globalist PE loves it since national traditions and culture are the strongest barriers against the Zionist-bankers war against civilization and freedom. This is the reason for a strong PE drive for an uncontrollable immigration to the USA and EU. Note that, at the same time, PE does not enforce the same "rules" on Israel.
This is why I see the future belonging to China.
Posted by Joe Smithson on 03/15/11 12:06 PM
Thank you for the insight.
32,000 suicides translates into about 0.025% of the population of 127M (Japan), while it is tragically high in human lives still a minuscule figure in comparison to children not being born due to fertility rate.
I think that in a country where powerful psychiatric drugs (with alarming side effects such as suicidal tendencies, violence, etc.) are added to the water as a government sanctioned solution to combat the problem of suicide these results are sadly foreseeable.
Posted by Joe Smithson on 03/15/11 07:09 AM
I would debate the premise that "When people are truly miserable they stop reproducing. They don't get married, don't build families, don't have children." Truly miserable people reproduce at an amazing pace. It seems to me as if true poverty as well as a promising future, quickly bettering economic conditions would both drive a higher fertility rate. In between fertility seems to decline below sustainability (2.1). Nature appears to take care of the complex social systems by offering several behavior patterns reasonable at varying social conditions. In case of Japan, a saving grace could be in a drastic fall (true poverty wide spread) that fertility rate would pick-up offering a long term solution to the problem.
Reply from The Daily Bell
Bare statistics mask human cost of Japan's high suicide rate
Japan in 2009 was a busy place " for the Grim Reaper. A National Police Agency report revealed that there were 32,753 suicides in the country last year, exceeding 30,000 for the 12th consecutive year and accounting for 3% of all deaths. Current World Health Organization figures show that of OECD countries, Japan has the second highest suicide rate, at 24.7 per 100,000 people. Only Russians kill themselves at a greater rate.
Click to view link
Posted by Gavin on 03/15/11 06:03 AM
"It sounds like the perfect Victorian man. I wonder if anyone else noticed this?"
I think you have a point there, at least to an extent.
The younger Japanese guy is certainly an improvement over his father's generation who quite often can't (or won't) make a cup of tea, let alone cook or have anything to do with housework. That's the wife's role. His is being a full time salaryman. But the younger generation of Japanese men help their wives with chores and child rearing these days. I wouldn't say it's any more than what western husbands do to help out but times have changed.
I think people in the West still have stereotypes of Japanese women being subservient to the men. That's generally true at the office but when it comes to the domestic scene the women rule and some of them are tough. Before ATM machines were invented the husband used to receive his wage directly from his employer but the introduction of the ATM and automatic transfers changed society and these days it's generally the wives that hold the cash card and control the family purse strings in single income families.
More often than not the husbands get a weekly allowance from their wives for lunch and so on. Perhaps the younger husbands have little choice but to help out if they want to keep their marriage going smoothly but they don't seem to mind leaving financial affairs to their wives.
Posted by Vauung on 03/15/11 03:27 AM
Whilst the world is distracted by earthquake, tsunami, and nuclear meltdown, Saudi Arabia injects troops into Bahrain to assist with shi'ite stomping:
Click to view link
Global apocalypse seems to be sticking to the schedule.
Posted by Wayne on 03/15/11 02:44 AM
What has been done to the Japanese people by the combination of modern central banking, and US military domination is horrifying.
The government leaders having been consistently suborned and co-opted by the US, and the bankers leaving these people no options.
And now they may have a nuclear disaster on their hands as another consequence of the Earthquake.
Only a twisted sociopath could possibly describe current events in Japan as beneficial or stimulative!
Posted by Vauung on 03/15/11 02:21 AM
"Tokyo doesn't have an official one-child policy like the one the Chinese government has tried to implement, but you'd never guess that by looking at the average family size here in the capital. // In 2008, the latest year for which data are available from the Ministry of Labor, Health and Welfare, Tokyo had the nation's lowest birthrate, at 1.09 children per woman. // The high cost of living, long working hours and scarce day-care in the capital help explain why elementary schools in some central Tokyo neighborhoods are shuttered and awaiting redevelopment, their playgrounds quiet, with only the occasional passing waterfowl visible in their algae-slicked swimming pools. // Elsewhere in the world's second-largest economy, the situation is similarly worrying. The national birthrate in 2008 was 1.37 children per woman -- up from a record low of 1.26 in 2005, but still nowhere near what the country needs to replenish its population. If current trends continue, Japan's population will fall to 95 million by 2050, from about 127 million now."
Click to view link
Posted by Vauung on 03/15/11 02:08 AM
"To sustain a population, the fertility rate of its women must be 2.1 children. Japan's rate, 1.27 children per woman, is not two-thirds of what is required to replace her present population.
In 1960, when Japan was striding to overtake West Germany as the No. 2 economy, 49 percent of her people were under 25 years of age. Less than 8 percent was over 60.
Today, only 23 percent of Japan's population is under 25, more than 30 percent of all Japanese are over 60, and Japan's median age has shot up to 45. Japan is projected to lose 3 million people this decade, and nearly 6 million in the 2020s."
Click to view link
Click to view link
Posted by Vauung on 03/15/11 01:55 AM
@ Ingo Bischoff
You have your numbers wrong. A fertility rate below 2.1 is a fast track to extinction -- near instantaneous in evolutionary time. (To perpetuate a population, two parents must produce two kids, plus margin for accidents, which among our "arboreal ancestors" was undoubtedly far higher than 0.1)
Posted by Lefthand on 03/15/11 01:47 AM
Reply from The Daily Bell
sclerotic - relating to or having sclerosis; hardened; "a sclerotic patient"