Wednesday, February 10, 2010

The final failure of the Meiji right-wing ideology … Japan fades into the future with a walking stick…

This blog does not usually play war with other bloggers – but something in Ampontan’s criticism of me has got my goat.  So if you do not want to indulge me a little flame-throwing just skip this post. 

Ampontan (AKA Bill Sakovich) writes a wryly amusing but deeply nationalistic Japanese blog.  He is – as far as I know – the only English language exponent of the virulent Japanese nationalism that initially gained power with the Meiji Restoration, waged and lost the second world war and – unlike the German equivalent – respectably survives to this day.  My favorite comment on his blog – and one I do not think he resiles from is that he has “Hirohito’s nutsack lodged so far down his throat its amazing he hasn’t asphyxiated himself long since.”

Ampontan is surely the only native English speaker who simply denies the Japanese (war crime) of mass forced prostitution as “comfort women” happened (more precisely he endorses deniers).  He regularly defends the Yakasuni Shrine (and by extension the visits to the shrine by any serving Japanese Prime Minister). 

Not that I can complain about that.  The Shrine was on my must-visit places list when I went to Japan.  It is a dull Shinto shrine with a bizarre attached museum which with thoroughly revisionist history absolves Japan from all and Nazi Germany from much responsibility for any atrocities committed in the Second World War.  I paid my admission fee – and by extension I supported that nonsense.  The Shrine also memorializes war dead including those who died at the gallows after being convicted of war crimes. 

It is not that Meiji era Japanese nationalism has nothing to recommend it.  That view of Japan, how it should be administered and Japan’s place in Asia and the world is one of the most successful industrial-development ideologies ever invented.  Not only did Japan grow into an industrial superpower twice (once before and once after the war) but the system was copied by Korea and it worked there too.   Nazism too was a successful economic system in that it allowed Germany to build an industrial base large enough to wage total war from a relatively small country.  Germany and Japan (and Italy) took on the UK (then the largest empire the world had ever seen), the US, Russia and China, and a host of other countries and had a military-industrial establishment that made more than a show of it.  These ideologies worked at producing industrial goods (and a military-industrial complex). 

They were also of course deeply nationalistic and racist ideologies.  Colonialism always had an undertone of racism (as any modern reader of Rudyard Kipling should not fail to notice) but these ideologies were far more murderous than anything imposed by the Brits or French (even though the Brits occasionally and the French more often were murderous).  The scale of the atrocities committed by the Japanese in China were only exceeded by Hitler at his worst (though they have also been exceeded by some murderous Post War regimes).

I said I find Sakovich’s blog wryly amusing.  I would not find a German equivalent amusing but that was because I was raised to vicariously remember the holocaust.  My grandmother ran a safe house in Warsaw and a man who was by repute her husband and my grandfather was murdered at Auschwitz.  I was not raised to remember Japanese slave drivers on the Burma Railway, comfort women or Nanking – and so an unapologetic Japanese blog is amusing whereas an unapologetic Nazi one would be offensive.  Propaganda about Asian co-prosperity zones was pure propaganda.  The truth was that much of occupied Asia was a Japanese rape-and-plunder zone.   

I can’t envisage a German leader visiting a memorial to Nazis hung after Nuremburg whereas Japanese Prime Ministers make a show of going to Yakasuni.  But then that particularly rabid Japanese nationalism survives whereas the German equivalent is dead.  Denazification is a word that appears in many modern history books (see for example Tony Judt’s excellent history of Post War Europe).  I do not know the equivalent Japanese word…

That said – this is an economic/finance blog and not one to inclined to debate with a heartless denier of Japan’s less-than-glorious Imperial history.  And I should outline the good-bit of the Meiji industrial system.  I have done it before in a stylistic history of industrial Japan (one that a few Japanese economic professors endorsed as simplistic but essentially accurate).  I will just repeat the key bits modified to fit the narrative (but you can find the original here):

First however I need a stylised history of Japan starting with the arrival of Commodore Perry’s black ships in 1853.

Before Perry Japan was almost autarkic. There was a relatively weak central government and about 300 “han” – being relatively strong feudally controlled districts. The Emperor did not effectively speak for Japan when Perry came in, guns blazing.

The Meiji Restoration changed this. Japan was reformed as a centrally controlled empire – with a ruling oligarchy ruling through the Emperor who claimed dominion over all of Japan. The “han” were combined to form (75?) prefectures with a governor appointed centrally.

The view of the new oligarchs was that Japan would get rich through (a) industrialization and (b) unequal trade treaties to match the unequal treaties imposed on Japan by Perry et al. To this end they invaded Korea and started the military industrialization that ended eventually with World War 2. There were major wars in Korea and against an expansionist Tsarist Russia (especially 1904-1905).

Ok – that is your 143 word history of Japan from Perry to World War 2. Like any 143 word history it will leave out important stuff. I just want to focus on how this foreign policy adventurism was financed.

Financing Japanese expansionism - and that financial system until today

Firstly it is simply not possible to expand heavy industrialization of the type required by an early 20th Century military-industrial state without massive internal savings. Those steel mills had to be funded. And so they set up the infrastructure to do it.

Central to this was a pattern of “educating” (the cynical might say brainwashing) young girls into believing that their life would be happy if they had considerable savings in the form of cash balances at the bank (or post office) or life insurance. Japanese wives often save very hard – and are often insistent on it. The people I know who have married Japanese women confirm this expectation survives to this day.

Having saved at a bank (and for that matter also purchased life insurance from an insurance company loosely associated with the bank) the financial institutions had plenty of lendable funds. 

The financial institutions by-and-large did not lend these funds to the household sector. Indeed lending to the household sector was mostly discouraged and was the business of very seedy loan sharks. To this day Japan has a relatively undeveloped credit card infrastructure with very high fees. These high fees are a throwback to the unwillingness of the institutions to lend to households. [The Japanese establishment are willingly forcing these consumer lenders to bankruptcy as any Takefuji shareholder will tell you…]

Japanese banks instead lent to tied industry – particularly heavy industry. It was steel mills, the companies that built power plants, the big machine tool makers. Many of the companies exist today and include Fuji Heavy Industries, Kawasaki Heavy Industries and other giants such as Toshiba. Most of these super-heavy industrials were tied to the banks (and vertically integrated) called Zaibatsu.

Now steel is a commodity which has wild swings in its price. Maybe not as ordinarily wild as the last five years – but still very large swings. And these steel mills were highly indebted to their tied banks. Which meant that they could go bust.

And as expected the Japanese authorities had a solution – which is they deliberately cartelized the steel industry and used the cartel (and import restrictions) to raise prices to a level sufficient to ensure the heavy industry in question could service its debt.

The formula was thus (a) encourage huge levels of saving hence (b) allow for large debt funded heavy industrial growth. To ensure it works financially (c) allow enough government intervention to ensure everyone’s solvency.

When the Americans occupied Japan their first agenda was to dismantle the Zaibatsu. They were (in the words of Douglas McArthur) “the moneybags of militarism”.

Like many post WW2 agendas that agenda was dumped in the Cold War. The owners of the Zaibatsu were separated from their assets and some cross shareholdings were unwound – but the institution survived – and the Zaibatsu (now renamed Keiretsu) remained the central organizing structure of Japan. Dismantling Japan’s industrial structure did not make sense in the face of the Korean War.  The pre-war Zaibatsu had more concentrated ownership than post-war Keiretsu. 

Unlike in Germany there was no real attempt to dismantle the establishment ideology.  Douglas McArthur may have appeared to tower over the Emperor in the famous photo – but Hirohito was not tried as a war criminal – even though he would certainly have been hung if put to a fair trial. 

The point is that it was the similar structure before and after the war – and it allowed massive industrialization twice – admittedly the second time for peaceful purposes.

Now the system began to break down. Firstly by 1985 steel was not the important industry that it had been in 1950 or 1920. Indeed almost everywhere you looked heavy industry became less important relative to other industrialization. By the 1980s pretty well everywhere in the world tended to look on such heavy industries as “dinosaurs”. This was a problem for Japanese banks because they had lent huge sums to these industries guaranteed by the willingness of the State to allow cartelization. You can’t successfully cartelize a collapsed industry.

Still the state was resourceful. Originally (believe it or not) they opposed the formation of Sony – because they did not know how to cartelize a transistor industry. Fifteen years later the French Prime President would refer to his Japanese counterpart as “that transistor salesman” and he was not using hyperbole. Still the companies coming out of new Japan – technology driven mostly – did not require the capital that Japan had in plentiful supply. If you look at the companies coming out of Kyoto (Japan’s Silicon Valley) they include such wonders as Nintendo – companies which supply huge deposits to banks – not demand huge funds from them. [Incidentally in typical Japanese fashion the biggest shareholder in Nintendo is Bank of Kyoto. Old habits re-cross shareholdings die hard.]

The banks however still had plenty of Yen, and they lent it where they were next most willing – to landholders. The lending was legion and legendary – with golf clubs being the most famous example of excess. [At one stage the listed exchange for golf club memberships had twice the market capitalization of the entire Australian stock exchange.]

Another place of excessive lending was to people consolidating (or leveraging up) the property portfolios of department stores. Think what Bill Ackman plans to do to Target being done to the entire country – and at very high starting valuations.

Meanwhile the industrial companies became zombies. I have attached 20 year balance sheets for a few of them here and here. These companies had huge debts backed by dinosaur industry structures. They looked like they would never repay their debts – but because they were so intertwined with the banks the banks never shut them down. As long as interest rates stayed near zero the banks did not need to collect their money back from them. As long as they made token payments they could be deemed to be current. There was not even a cash drain at the banks at low rates. The rapid improvement in the zombie-industrial balance sheets in the past five years was the massive boom in heavy industrial commodities (eg steel, parts for power stations etc). Even the zombies could come alive again…  only to return to living dead status again quite rapidly with this recession.

Anyway – an aside here. Real Japan watchers don’t refer to the banks as zombies. They refer to the industrial companies as zombies.  (Although most of the Western blogosphere does.) 

Most of the banks had plenty of lendable funds and a willingness to lend them. They did not have the customers – and the biggest, oldest and most venerable of Japanese companies were zombies. So were the golf courses, department stores and other levered land holders. I get really rather annoyed when people talk of zombie banks in Japan – it shows a lack of basic background in Japan.

Note how this crisis ended.

1). The bank made lots of bad loans – firstly to heavy industrial companies and secondly to real estate related companies (golf courses, department stores etc).

2). The loans could not be repaid.

3). The system was never short of funding because the Japanese housewives (the legendary Mrs Watanabe) saved and saved and saved – and the banks were thus awash with deposit funding.

4). The savings of Mrs Watanabe went on – indeed continued to grow – with zero rates.

5). Zero rates and vast excess funding at the banks made it unnecessary for the banks to call the property holders and (especially) the industrial giants to account for their borrowings. Everything was just rolled.

6). Employment in the industrial giants of Japan thus never shrank (Toshiba alone employs a quarter of a million people). The economy continued to sink its productive labour force into dinosaur industries and dinosaur department store chains.

7). The economy stagnated – but without collapse of any of the major banks and without huge subsidies to the banking system. [The number of banks – mostly regional banks – that failed during the crisis was not large given the depth of the crisis.]

They system is very good at funding heavy industry – but it is less entrepreneurial than you would want in a modern economy.  The best Japanese tech companies tend to come from Kyoto (which is outside the Tokyo establishment).  Toyota – what I think is Japan’s finest company – is in Aichi prefecture – well away from Tokyo.

Anyway – this industrialization structure worked brilliantly and the Koreans copied it (with radically different banking outcomes).  It however is less good at low-capital but high-innovation industries.  The tech-boom was an American phenomenon – encouraged and nurtured (for better and for worse) by the American system.  It was not nurtured by the Japanese establishment though Sony and Toyota most certainly are by now…  Many of the most innovative Japanese companies started away from the bosom of the establishment – though the establishment later embraced them.

The Japanese industrial structure and the ideology that drove it produced industrial goods really well – and innovation based goods less well.  But – the system works. 

Economic stagnation is not the greatest of Japan’s problems.  Many a UK visitor has gone to Japan and observed that if that level of economic activity (and living standards) represents stagnation they they wanted some of it. 

The real threat to Japan is demographics.  Mrs Watanabe saved and saved and had fewer than two children.  (Children are expensive – especially housing them in a place with land values where they were in the 70-90s).  So an aging population became a dramatically aging population.  Here is a projection of the median age of population in three OECD countries.  Australia is an aging population offset by immigration, Italy an aging population exacerbated by emigration and Japan is a result of Japan’s military industrial policy and the booms and busts it has caused.  The chart is from the Australian Treasury intergenerational report – but the numbers are broadly accepted:

image

 

Japan will have a median age of about 55.  This means that the vast bulk of the Japanese population (or more precisely Japanese women) will be well beyond child-bearing age and given low fertility rates anyway (below 2.0 per woman) the population will crash.  That is more-or-less baked in.  Simple equation – most the women past child-bearing age and very low fertility amongst those who bear children anyway.

There is a solution – immigration.  There are an endless supply of well educated and skilled young people (mostly) from the subcontinent who would happily move to a developed country.  There are more than a few from China too.  Australia will import them.  Ampontan rhetorically asked where I expected them all to fit into Japan?  Well that is easy – with a demographic like that I expect them to fit into the slots left by the dying warriors of Japanese industrialization.

If Japan does not do it then aging and death is inevitable.  The working population will be stuck looking after and funding the huge numbers of retired.  Japan’s industrial growth – now anemic – will collapse entirely with its population.  The great Japanese industrialization experiment will walk slowly into the setting sun aided by a walking stick.

There is of course an alternative which is modest levels of immigration.  New immigrants will – like it or not – be Asian – mostly from the subcontinent.  Over time they will also include many Muslims.  The Japanese will have to accept – as Australians have accepted – that their children will breed with these people.  As a white Australian I have fully accepted that it is likely as not that my grandchildren will arrive as little brown babies.  I do not have a problem with that. 

But Japan is a country where they won’t let their hookers sleep with foreigners because – well they are foreigners.  (It was that story in this post that got Ampontan all upset with me.)  But it does not have to be that way.  There can eventually be an Asian co-prosperity zone in Japan – it will be with Japanese children and other Asian children and eventually their joint grandchildren.  The Meiji racist ideology does not have to end with a walking stick – it can end in a truly multicultural society that will lead Japan onto greater things than the original modern revolutionaries of the Meiji era could ever have imagined.

 

 

 

John

40 comments:

Oliver Townshend said...

I wonder what would happen if a legal brothel in Australia had a "no foreigners" policy. It would be shut down pretty quickly I suspect, or howled down or forced to go underground.

C said...

There is also one glaring implication that you have left out. I picked it up from an article on Crikey but in a nutshell, those old ladies saving their money *WILL WANT THEIR MONEY* back and that will be when their husbands stop working... which is right about now. 60 is the compulsory retirement age in Japan and somehow, those banks will need to get money back from somewhere (e.g. by selling long-held US bonds) or default on them. Or print lots of money.

Either way, either the yen to crash or the dollar will crash... or both in some monumental forex contagion once the Japanese elderly begin to make big calls on their cold hard yen.

non said...

"But Japan is a country where they won’t let their hookers sleep with foreigners because – well they are foreigners. "

The consensus among people I've talked with (I live in Japan) is this is because many Japanese people think foreigners have STDs and Japanese don't. I actually agree that Japanese racism will prevent enough immigration to fix the demographic problems, but the anecdote doesn't prove or show anything.

mark t said...

Is global homogenisation - of culture, language, cuisine, entertainment, economics, politics (and, I suppose, race) unambiguously a "good thing"?

Convenient for balancing national budgets and providing big corporations with cheap labour, sure.

But... is _nothing_ lost?

Eddie Bravo said...

first off you are unlikely to get a rubdown in Korea as a foreigner so on that basis Korea is as racist as Japan.
Secondly, if you really want to get your rocket polished in Tokyo for cash you can.
Thirdly, a segment of Japanese politicians may not be particularly contrite about the country's WW2 conduct but most of the population is AND the country's attitude towards history on a comparative basis to its neighbours is FAR superior. China? Cultural Revolution, Tianamen Sq???

More importantly though, there is a fixation on the elderly to working population ratio.
And most people seem to advocate more immigration. What people seem to ignore is that a ratio has two components - the numerator and denominator.
Mass scale immigration is socially disruptive whatever the culture - Enoch Powell's 'rivers of blood' speech in the U.K. anyone? and the U.K. is arguably one of the more successful multicultural western democracies.
So the level of immigration conceived is unrealistic, probably.
However, you can tackle the elderly bit - you can set up care communities abroad. One Japanese politician has advocated this publicly and there are Japanese focused nursing homes in the Philippines for example.
Via this kind of combo the blow can be softened.

Jingsu said...

Not to take away from your points, but how do you figure this?

"The scale of the atrocities committed by the Japanese in China were only exceeded by Hitler at his worst."

The Japanese killed a lot more Chinese than the Nazis killed Jews. Also, the Japanese were ruthless with POWs. 30 percent of POWs captured by the Japanese were executed. The Germans were much less likely to murder captured enemy combatants.

Anonymous said...

Nah. I think I'd be happier if the Japanese economy just dies a slow death for the next fifty years. That'll teach those fanatical genocidal bastards.

IF said...

Last year I've read an article that impressed me a lot about a disappearing mountain village in Japan. I can't find the exact link, but it was not unlike this one:
http://www.nytimes.com/2006/04/30/world/asia/30japan.html

The pictures showed well maintained infra structure, lots of concrete poured. And the story described stoical old people being taken care off by a younger American. (No racism here, he even married a Japanese and had kids.) The village elders (well, basically the village) was determined to take the village with them to their grave. What a shame, as the infrastructure seemed designed to outlive them all.

What a contrast this article was compare to visits in Eastern Europe, where old people vegetate in crumbling buildings. If this is the Japanese catastrophe, I want some of that in my old age! In other words, in most societies it is normal that the old are poor, neglected, unhealthy and hungry. They make do with what they have, what other choice is there? But the western expectation is catastrophe: "When I am old, my children shall suffer!" Where does that attitude come from?

John Hempton said...

My premise is not that the world needs more people... I figure a really nice world has a fertility of about 1.95 and an median age of 45. People live to about 90. That world would have a stable slightly declining population.

The problem I have is we have a finance system that is insolvent in many countries with a RAPIDLY declining population. Japan is such a country...

J

Josh Kalish said...

Great post.

My father escaped from Europe in WWII and traveled across Russia and into Japan. He resided there for the remainder of the war.

It was very strange that on one hand they sheltered about 10k Jews during the war and yet on the other hand my father would often tell stories about the stench of human death that pervaded everywhere in the parts of China which were occupied by Japan.

Tony Wikrent said...

(I followed link here from CorrenteWire.com)

My area of interest is not Japan, but U.S. economic history. It seems to me a shame that there is only one mention of the American System in this article - and it may not even refer to the American System policies of Alexander Hamilton: protective tariff, encouragement of the growth of manufactures; nationally regulated banking to curb financial speculation, and internal improvements (infrastructure). The American System was first described as such by Senator Henry Clay, and by the foremost U.S. economist of the mid-1800s, Henry C. Carey. To the best of my knowledge, the American System was brought into Japan by American economist E. Peshine Smith, and played a key role in the industrialization of Japan in the late 1800s. I would be interested in any discussion of the role the American System played in Japan, and if and how it led to the disastrous nationalism of the 1930s. Or was the extreme nationalism more a result of the racial jingoism of bushida culture that fought its way back to domination?

IF said...

If a single young person is given the technology to take care of 30 old people (to everybodies satisfaction) and the equipment decays at a slower rate than the humans involved, how can such a society ever be insolvent in its own currency? Everything is covered by physical storage, like cavemen in the stone age. At that point you don't care about the banks anymore.

Tim Smyth said...

I have always wondered if it is easier to live in Japan being a foreigner as someone of European dissent vs other Asian nationalities. I do know there are areas of Tokyo such as Roppongi that have fairly high populations of Europeans and Americans.

On a completely unrelated note, I am wondering what John thinks of the latest tax changes proposed in New Zealand by John Key. Do these have any possibility of improving the long run economic position of NZ.

Sean said...

A couple of years back when I was in Tokyo I read an article discussing how many of the utilities & mass transport companies where looking forward to a decline in population because it was simply not possible to keep expanding the infrastructure in Kanto & Kinki.

It is important to realise that from around the beginning of the Meiji Restoration there was huge population growth for many decades. (largely due to significantly lower mortality rates). Japan probably needs to drop back to 100million people to be sustainable. Same thing could also be said for Australia that we need to drop to 20million. Unfortunately it means that a huge aging hump will need to be swallowed to return to sustainable levels again. Just look at the infrastructure problems in Sydney... net immigration is only going to make it worse.

Increased net immigration is just an economic short cut that does not address sustainability issues.

Anonymous said...

you will notice that the blogger refers to living in Saga... which is like the Wagga Wagga or Dubbo of Kyushu... they'd be desparate for any business ;-)

The main reason foreigners are turned away from Japanese cat houses is similar to the reason for being turned away from hot spring bath-houses/onsen in non-touristy areas -> etiquette & the way you go about things, even in a cathouse, is very important. Not doing things the right way will put the other customers off their "lunch".

If you speak near native level Japanese and show that you understand the conventions, you will get in ;-) Noting that in northern Japan Russians will be excluded no matter what, bath house, cat house or otherwise. Which is where a lot of the bad press comes from as things tend to get heated.

John Hempton said...

To Jingsu who wants to argue that what Japan did in China exceeds what happened in Europe - sorry - no dice.

Soviet casualties on mean estimate exceeded Chinese casualties in WW2 - and to that you need to add almost all the other European casualties.

http://en.wikipedia.org/wiki/World_War_II_casualties

The Japanese were murderous - but Hitler remains in a class of his own ...

Chinese propaganda on this is also suspect.

Also there are observable blips in the Chinese population spectrum related to stress in particular times. The big blip in China remains the Great Leap Forward famine - and that was self-inflicted.

J

Anonymous said...

It seems only sporting to assign at least *some* of the Soviet casualties to Stalin, John. That might make Hitler's record a little less impressive relative to the Japan's.

David Merkel said...

This is just opinion, but I suspect that immigration from Thailand and the Philippines would work culturally for Japan. I would mention Taiwan, but they don't have people to spare.

Japan is a complex place. I have friends in Kobe, because of the church that I am a part of. They run into discrimination for being Protestant, and thus not able to give worship to the Emperor.

Away from that, there is still discrimination there against the Ainu (the original inhabitants), and the burakumin, occupations that deal with death, and some others.

The book "Ugly Americans" gave me some insight into the present culture -- honorable in many ways, but seamy in many others.

Japan at least does this for us -- it is so far ahead on the demographic decline curve that it will shine a light on the ultimate impacts.

PS -- I will likely have brown grandchildren, but then five of my eight children we adopted, and they are black to varying degrees. This is a very different world than the one my parents grew up in in Wisconsin in the Great Depression.

Anonymous said...

John do you have investments in japan?

Are you short the government bonds?

John Hempton said...

It is fair to assign some of the soviet deaths to Stalin - and probably a good whack thereafter.

I suggested that some post-war regimes have exceeded the Japanese in China. Actually I can think of only one - which is Post War Stalin.

J

Simple Simon said...

John

A good post. You're right about zombie industrial companies being the problem A few comments:

1. Before annoying the hard-line nationalists of Japan, take a moment to reflect on the tragic fate of Iris Chang who authored The Rape of Nanking.
"The book was the main source of fame for Iris Chang, who was well-respected in China for raising awareness of the Nanking Massacre in the Western world.[33] At the same time, Chang received hate mail (primarily from Japanese ultranationalists),[4] threatening notes on her car and believed her phone was tapped. She would respond overwhelmingly to any question of the validity of her work. Her own mother said the book "made Iris sad". Chang suffered from depression and was diagnosed with "brief reactive psychosis" in August 2004. She began taking medications to stabilize her mood.[4] She wrote:
I can never shake my belief that I was being recruited, and later persecuted, by forces more powerful than I could have imagined. Whether it was the CIA or some other organization I will never know. As long as I am alive, these forces will never stop hounding me.[4]
Succumbing to her battle with depression, Chang took her own life in November 2004." (Notes from Wikipedia)
There is no doubt she was relentlessly hounded by the state-sponsored nationalists. The most prominent of her vitriolic critics, who was very free with his ad personam attacks, was a former ambassador to Saudi Arabia. So much for the diplomatic touch.

2. Regarding the Japanese and their fear of STDs, I should advise anyone thinking that the Japanese are unaffected by STDs that you should watch out. Because the medical establishment there is convinced that nice Japanese kids could never suffer such ailments, there is a culture of denial that permits an epidemic of infection. The rates for chlamydia for example are apparently much higher than you might find in the highly promiscuous population of the San fernando valley. What you won't test for you won't find.
3. The chances of Japan turning into a thriving multi-cultural society? A snowball has a better shot in hell. Hey, John, I thought all hedge fund guys were hard-headed.

John Hempton said...

Thirty years is a long time. Denazification was not really a process - indeed it was not followed through. But it was an idea - and it made nazism non-respectable.

Given 30 years ideas change.

I am not ruling anything out - but I do think JGBs are a lousy 30 year investment.

(There are PLENTY of nice companies in Japan though. And they are not expensive. Its a pity about the macroeconomics.)

J

Laban said...

"There is a solution - immigration"

It's certainly a quick fix, but is it a sustainable one ? As I pointed out the other day, if the new immigrants adapt to host levels of fertility, the whole exercise will need to be repeated in the future. If they don't, that implies cultural separation which brings its own problems.

A sustainable solution might be

a) to have babies at replacement levels - this might imply serious pro-natalist policies - such as a tax allowance associated with each child, to the point where some parents might pay no tax if they had enough children. This would be better than the opposite tack of paying benefits for children, which certainly in the UK has encouraged the growth of a tax-funded, non-working underclass. Eugenics is a dirty concept nowadays, but the UK tax and benefit system is positively dysgenic - only the very rich or the benefit-funded very poor can afford large families.

b) make the necessary adjustments in the interim - were all Aussie mums to have 3 kids it would still leave the boomer bulge. Raising retirement age is one obvious possibility.

John, why do you think (as you appear to do) that immigration can be anything but a temporary fix for a society that doesn't have enough babies ?

Eddie Bravo - you said that "the U.K. is arguably one of the more successful multicultural western democracies". I think the jury is very much out on that one.

"Is Britain broken? Today's Populus poll for The Times adds some broad brush strokes to a depressing picture. More than two people in five say that they would emigrate if they could. Some 70 per cent believe that society is broken; 73 per cent say that politics is broken. Most revealingly, 68 per cent think that "people who play by the rules always get a raw deal"."

Anonymous said...

"... these ideologies were far more murderous than anything imposed by the Brits ...."

You're not serious, are you? Are you one of those British Empire revisionists?

lewy14 said...

John,

From what I can gather, Japan desires above all to remain Japanese. And as Anonymous @ 1:53 touched on, it has as much or more to do with language and culture as it does with "race".

I think that contemporary anime - especially Code Geass, Fullmetal Alchemist, and Bleach - provides insight into how today's young Japanese are imagining - and re-imagining - themselves.

And while contemporary anime certainly isn't devoid of critical self-examination (c.f. Samurai Champloo), I mainly see an effort to rehabilitate and revise Bushido.

Embrace of a multi-cultural future - specifically the western conception of multiculturalism - well, not so much.

Personally, I'm disinclined to heap the "racist" calumny on a people who mainly just want to remain who they are.

Anonymous said...

Why do you feel a country needs to have a growing population to have a high standard of living?

If Japan's population drops by 50% it can stil be a thriving, modern country, with a high standard of lving.

The problem with you speculators is the only lens you look through is that of "growth" and hence "profits"

Anonymous said...

Japan is a culture built on trust and responsibility. A trust that many Australians visiting Niseko abuse regularly.

Trust and responsibility is such a staple of Japanese culture that it also threatens to be their great undoing. A trust that may be hard for both the aging and coming generations of Japanese to fulfill.

One night in Hokkaido, which just happened to be Australian Day, I counted less than ten people I’d consider obese.

Even then, by Australian standards, it's hard to say the word obese, it's more like they ‘let themselves go" a bit.

Japanese culture is one of trust that you won’t steal, hence the unnattended, unchained bikes that litter Sapporo (pop 1.7 million). And the responsibility not to cross the road until the red man turns green, which is why a Japanese man stands on a dead street at 11 pm, snowflakes dissolving into his jacket, waiting for the light to change.

While the trust offers great rewards, in the form of a safe, efficient society, there are serious consequences if you fuck up. Japan’s crime rate is one of the lowest in the developed world, with treason and homicide both punishable by death. But it’s their way of dealing with lesser crime that is particularly curious. If found guilty of an offense in Japan, pennance reaches beyond the criminal, to the innocent, the family. In Japan, felons are named and shamed for misdemeanours as minor as petty thievery, sullying forever more the family name. You have not only failed in your responsibility to the state but to your lineage. Both weigh heavily here.

The diet in Japan is pure. And like everything else, the Japanese exercise responsibility and restraint with eating. The result: the biggest population of pensioners in the developed world. A problem threatening economic apocalypse as a result of a gigantic labour shortfall.

By 2055 it is estimated half their population will be pensioners, a dilemma compounded by the lowest fertility rate in the western world (1.34 children per woman compared to USA’s 2.1).

What do you do? Does the government pull the responsibility string, and ask the old to fuck off into the dirt? Then ask the young to fulfill their responsibility, and fuck a lot, mate in excess really irresponsibly? Surely not. Right?

Critics have labeled it “the hurry up and die scheme.” In 2008, the Japanese government implemented a health initiative offering financial incentive for hospitals to punt over 75s after 100 days of care. The idea being to move aged care away from professionals to the amateurs at home. With, it must be said, some obvious consequences. It would seem the youth of Japan are set for a wild ride.


Oh yes. Compared to the western world's go at socialized medicine, in the long term, China's one child policy is going to look a modern medicine miracle.


Anon,

Bob Dobb

Anonymous said...

your case that Japan is deeply racist rests on the idea that Japanese pimps don't let their hookers sleep with foreigners, which is entirely mistaken

IF said...

"I suggested that some post-war regimes have exceeded the Japanese in China. Actually I can think of only one - which is Post War Stalin."

I would let that slip if you said "Pre War Stalin". But "Post War" shows either ignorance, or needs some explanation of the numbers on your side.

And why are you swiping Vietnam, Korea, Khmer Rouge, great leap, Rwanda under the carpet? Does an involvement of Australian troops remove an event from the list?

Even if we take the numbers from http://users.erols.com/mwhite28/warstat1.htm at face value, post war Stalin is small (compared to Stalin pre-war, Japan in China, and the other mentioned post-war crimes), mostly limited to returning soldiers. He seemed to have mellowed in his old days.

Not defending Stalin, your world view just seems to be off.

IF said...

By the way, if you sum up the high end death tolls for Russia from the WWI, civil war, Stalin, WWII and try to reconcile them with census data

http://en.wikipedia.org/wiki/Demographics_of_the_Soviet_Union#Population_2

you need some amazing jumps in yearly fertility of the Russian/Soviet population to account for the relatively smooth growth. Not easy to reconcile, even if just taking the numbers of the 1897 and the 1989 census and ignoring any in-between communist data.

In particular it is unfortunate to observe, that western democracy brought Russia a population decline. Something which even Stalin was not able to achieve in the long run.

John Hempton said...

I spent a bit of time in Cambodia -

The Cambodian Communists were PROPORTIONATELY as evil as they come... it was just that they did it to a small population.

There are PLENTY of post war regimes and post-war events that are murderous.

Your list excludes the biggest one which is the various congo wars.

J

babar ganesh said...

it's fascinating that living longer makes us feel poorer. that's so obviously wrong -- how could it possibly be true?

Ampotan crack head said...

Ampontan needs readers

That blog is very weak , and the best way to increase readership is to attack someone else .
That is the work of a hack



.

bobdobalino said...

Since this is a blog run by a couple of Australians who charge a fee to buy and sell stocks with other people's money, you don't want to offend too many of the pinks.

Australia is a very bigoted company. What would you say, drunken bogan types outnumber productive people on a 3 to 1ratio?

Careful now.

They might be pink, but their money's still green.


anon,

Bob Dobb

Anonymous said...

Racism is fairly ubiquitous around the planet. You have chosen to throw stones at the Japanese.
You neglected to mention the aboriginal massacres of Australia . Your settlers completely wiped out the native Tasmanians. Australians raped, castrated, and enslaved thousands of aborigines. Your country didn’t even give the aboriginal citizenship until 1967 or so. Your country had a stolen generation. As I write, the government of India has a travel advisory against going to Melbourne due to racist attacks. I remember seeing huge crowds of flag waving Australian beating the crap out of an Arabs they could find a couple years ago. As far as China goes, Mao and his buddies killed 60 million of his own people. China has invaded Tibet, invaded Korea, invaded Vietnam, and attempted to invade Japan on numerous occasions. Japan doesn’t need to apologize over for the events of two generations ago. Get on with it man, don’t be such a cry baby Sally.

Anonymous said...

ITT, lots of weeaboo BAWWWWWWWW.

gz said...

I read blogs like Hempton (and David Merkel) because they try to be original and sophisticaded about speculation and financial markets, which unfortunately are really not intellectually complex. so humble traders in lowly southern europe such as myself feel they are wasting their graduate education just for the sake of making some money that is not taxed 50% and welcome intellectual discussions as a distraction (financial markets only as an excuse in financial blogs, we all just trade charts to make the money)
--
Obviously, having studied at UCLA in California in 1990-1992 and see it turning now "into Mexifornia" and lived in London and Milan afterwards and seen them deteriorating (for the indigenous middle and working class, non for hedge fund and bankers types) I wonder what in the world makes ratonal people such as Hempton repeat the nonsense about immigration (and I lived in the last Italian enclave of Brooklyn, soon to diseappear as a million Italians had to live it since the '70s)
--
So here is an interesting thought, what exactly prevents we (of europeans origins and pale skin) to follow the wisdom of the chosen ones (as applied to themselves) ?
--
Australian Jewish leader Rabbi Is Leibler, a staunch defender of multiculturalism as a model of Australia stated “”There is a need to sit together and establish a way in which Australians can recapture that spirit of multiculturalism which I think we are all proud being part and parcel of, and which is really under threat.”
-- The same Australian Jewish leader was recently reported as saying that multiculturalism has no place in Israel. “[Israel] is a country which was set up and created as a Jewish country for the Jews.”

Anonymous said...

The Japanese will never learn. That's why their economy will melt away like an ice cream cone on a hot sidewalk. A few decades from now, Japan will be a hollow country of the old and the useless. The young, realizing that their earnings will be taxed to nothingness to support a dying generation, will emigrate enmass to other countries. Brazil? China? Australia? Who knows?

Meanwhile, society will unravel. Hundreds of years of social contract will bend and then break as the old lose their pensions and the young their livelihoods. People will riot, and the country's industrial machine will grind to a halt.

But the Japanese would be still too proud to change. At some point it will be too late: the country would cease to be a place young productive people would actually WANT to emigrate to. When that happens... back to the dark ages they go.

Peter Phan said...

I did not realise that this blog has turned into a forum for dark fantasy writers.

Bleichroeder said...

Japan is polishing brass on the titanic. Its always amazed me how the west continually misunderstands Japan- this is not a free market or a democracy in the western sense and the system has been threatening to cave in on itself for decades. That time may finally be at hand. I go over the issue a bit on my blog:

http://2and20vision.wordpress.com/2010/02/19/modern-mercantilism-and-the-demise-of-japan/

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The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author.  In particular this blog is not directed for investment purposes at US Persons.