Japan as Number One again

Since the sub-prime crisis began in 2008, we've seen story after story on the supposed lessons Japan holds for the US.

Most of these seem to be of use to those who want to push their own political/economic agenda at home using Japan as evidence to support their opinions. On his NYT blog recently, Paul Krugman used Japan as an example of why Friedman's monetarism does not work. However he has not, to my knowledge, used Japan's experience with Keynesian stimulus to claim that Keynesian economics do not work except to say that not enough was done and what was done was not soon enough---just as he says is the problem in the US.*

R.Taggert Murphy has posted a short piece on Japan Focus, Japan as Number One in the Global Economic Crisis: Lessons for the World?, which looks at Japan from another perspective. My short, overly simplistic summary of his piece is that Japan may have been the first country to experience the "New Normal."

*Krugman's blog, his NYT column, and perhaps his ABC This Week appearances are where he pushes partisan political opinion and probably should not be regarded in the same light as his economic work.

Lookin' for trouble and finding it.

Most folks around these parts go out of their way to avoid trouble, such as some idiot hanging around in back alleys in the rain taking pictures.

Others do not hesitate to look for it. For them, the NYT and Martin Fackler have published the second in the series on Japan (or is it the US?) and the "Great Deflation." Today, the never before discussed well-worn theoretical possibility of the US turning into Japan is explored in a nice quick way that answers no questions: U.S. Hears Echo of Japan's Woes. Could there be a better way to spend a rainy Saturday afternoon in Tokyo?

I guess we should just be thankful that Japan is even mentioned in a major US newspaper.

31 Oct: edited to correct spelling as neither blogger spell check nor I can spell.

The Great Exaggeration

A few weeks ago (Oct 16), the increasingly irrelevant and soon-to-be-an-afterthought like the rest of the dead-tree press New York Times published yet another controversial Japan article by the unflappable Martin Fackler.

On first read, without even looking into the data Fackler and the Times provided, it smelt of overkill and predictably included required specialized Japan story jargon such as "Godzilla." It has been analyzed and criticized quite a bit* by folk who know a hell of a lot more about that floating world known as economics than I.

But those critics are most likely clueless. After all, the NYT has fact checkers who would not allow inaccurate and/or overwrought nonsense through in anything other than an editorial.

In answer to these whining nitpickers who "object to exaggeration" especially in the publication that they believe to be "the last bastion of reliable journalism" (giggle-giggle Fackler's NYT?) , the Public Editor(s) published a response. Apparently, the biggest problem was the use of the word Godzilla, and calling Japan an "afterthought." Other than that it was all hunky-dory, I guess.**

The Regional Editor for East Asia, Kyle Crichton (no known relation to the Japan expert Michael Crichton***), agrees that Japan is an "afterthought" because the "Japanese economy is no longer a source of anxiety in Washington or anywhere else." Compare that to the 80s when Godzilla was buying up the US and you will understand like Kyle does.

Hmmm. Regional Editor for East Asia. (Note to self: Disregard all NYT reports from East Asia.)

Another Public Editor for the Times, Arthur S. Brisbane, acknowledged the problem Fackler faced of how to "bring alive" Japan's economic decline for a "wide audience." Since Martin was for some unknown reason unable to include homeless ninja in the article to bring it alive for the masses, he was left with Godzilla and selected interviews with ordinary people. The story was a tremendous success according to Art, for it was a page one story in the paper version and reached the top of the most e-mailed list. Wonderful!!!! Congatulations!!!! That is certainly more important than accuracy when one talks about success for the New York Times!!!! Whooo Hooooo! You go Gray Lady!!!

I feel for these guys. I remember the good old days, just 12 or so years ago when newspapers did not have to take time out to respond to riffraff. Back in those days, they never had to admit any weaknesses at all, except for an incorrect address or misspelled name. A simple "We stand by our story" was all that was required, no matter how obviously flawed, absurd, or insane.

Oh, the name of the article? Carrying the Facts too Far. What does that mean I wonder? How can you carry facts too far if they are facts? Is that sort of like exaggeration? And isn't an exaggeration sorta like inaccurate or even untrue to some degree? No problem, it is a Japan story after all.

*A check of NBR's Japan Forum (link in Japan Links) will give a taste.

**So as not be accused of carrying the facts too far, I have to say that they were responding to a reader who complained about the use of those terms and who had expected "at least a passing resemblance to the truth."

***Sorry, that was uncalled for. A cheap shot. Very childish of me.

1055PM: Edited

Lots of idiots around...or is it just me?

Over the last few days there have been some stirrings about the DPJ possibly, maybe, perhaps opening discussion on raising the consumption tax. Of course PM Hatoyama countered Nutty Natto Kan with his version of "Read my lips, no consumption tax increase. We are just going to start talking about it during a recession to boost the economy. We'll let the voters decide although I am not going to increase it anyway maybe for sure."

I'm cool with this. Only a bunch of lunatics would try to run a country forever with promises of no new taxes except on the other guy, while spending the money of future generations for everything except filling in potholes in roads and in society because for one reason or another, deficits don't matter. But this is not about the USA.

Really, the DPJ has been trying its best to right the economy they inherited from the LDP. One of the things that impressed me is how the wasteful practice of moving large quantities of earth from one spot to another for no useful purpose seems to have decreased under the new government. I have no stats, but that's just an impression from my somewhat less frequent cycling workouts along the Tamagawa. Mud-moving projects have noticeably decreased in size if not quantity since the autumn.

Perhaps, however, the money was shifted elsewhere. Every day, on the walk from my Mansion to Denenchofu station, I get to pass through the now 2 (or 3?) year old water line project which makes the street nearly impassible for humans and autos. As on construction projects everywhere, there seem to be about 5 people standing around and "supervising" for each person who is actually working. But what makes this a great economic stimulus is that not only do we get to pay the salaries of folks who could be better utilized serving tea to those who are working, but we get to pay to have the street and sidewalk dug up every single morning and refilled and resurfaced (with asphalt) every single evening. Wonder how much time and money that costs? Did Yukio not notice this when he lived in Denenchofu just a few short months ago? But who am I---a taxpaying resident who should never be allowed to vote for fear upsetting the apple cart with dangerous foreign influence---to say anything about that. Let the neighbors grumble---which they are. (Hear anything Yukio?)

Speaking of EVIL foreign influence:

Referring to the downgrading of the outlook for Japan's long-term government bonds by foreign rating companies, State Minister for Financial Affairs Shizuka Kamei said, "The Japanese are susceptible to foreign influences. There are lots of idiots." He thus indicated his dissatisfaction with the nature of credit ratings and the way people respond to them. Kamei is set to have regulatory power over credit rating companies starting in April. (From Feb 16 Asahi Shimbun. I cannot find a link as of yet.)

Now I don't really know what the hell this fellow was trying to say. He seemed to be angry that credit rating companies could rate Japanese bonds without asking. Maybe he was hinting at some future administrative guidance for those foreign companies. Why not? It's surely a lot easier than trying to un-screw-up the now decades old screwed-up economy. Besides, Japan owes most of its money to its own citizens, not foreigners, and it is easier to get away with screwing your own investors than it is screwing foreign investors. Or so the theory goes.

My question is: Does Kamei consider himself to be one of the idiots, or is he referring to the people whom he supposedly serves? (Let's pretend. We know that most folks in his line of work here do not consider themselves servants of the public, but more "nannies" of the childish masses. Tuche' to Fujiwara Masahiko.)

Incidentally, Kamei, a Shintaro Ishihara fan, "studied" economics at Tokyo University. Mr. Idiot also opposes foreigner suffrage* as allowing those bastards to vote could fuel nationalism. Who said that the LDP was dead?

A big arigatou in the direction of the Potomac for alerting me to this.

*We Western immigrants ought not be too hard on Kamei for this view, for he was apparently referring to those permanent residents of Korean heritage which makes it all OK.

22 Feb 2010 update: They have now begun to work directly on the road (instead of the sidewalk) and are no longer covering it with asphalt every evening. Time and money saved---what will they think of next?

It's better to go out and "stimulate" the economy than to read this...

at least you have some control over that.

Noah Smith has written a thought-provoking post for Observing Japan in which he explains how the system that allowed certain countries accumulating huge trade surpluses and exporting capital while requiring others to accumulate trade deficits and to import capital is under severe strain (to say the least) and discusses possible consequences for Japan. It is not easy reading for anyone who lives here.*

Frankly, not only is Japan not considering---at least publicly---how it will operate in what seems like a new global economy, there isn't much evidence that the US (or any other government) is either.

*The Far Eastern Economic Review article Mr. Smith linked to is interesting reading too as it looks at the problem as it relates to China and compares the global payment imbalances of today with those of the years immediately preceding the Great Depression.

A quote from that FEER article:

"This cannot work for long. The proper place for new demand to originate is, as in the 1930s, in trade-surplus countries. They should be engaged in expanding demand, not expanding supply."

Are we not in deep natto?

Paul Krugman writing in a NYT Op-ed, Life Without Bubbles, discussed what he sees as the future of the US economy after the recession and how it cannot return to the recent past. On the chances of the US reducing its trade deficit in the short term, he is no enthusiastic:

...Anyway, the rest of the world may not be ready to handle a drastically smaller U.S. trade deficit. As my colleague Tom Friedman recently pointed out, much of China’s economy in particular is built around exporting to America, and will have a hard time switching to other occupations...

What was this about decoupling? The Economist explained why it is (was?) not a myth back on 6 March 2008.

The start of the slide downhill for Japan?

With the global financial problems adding to Japan's already significant problems going forward and its lack of a political class with any real ideas on what to do about it, could this mark the beginning of a long slow decline for Japan?

Read the article Japan: Recession-Bound as Exports Slow (which I found via a link at Japan Economy & News Blog in which Ken Worsley writes on the topic) then read the very interesting comment by tubki below it. We shall see, I suppose. I doubt that Japan will be able to switch much if any of its US exports to China's middle class anytime soon. Where are most of China's exports going? If exports to the US slow for China too, where will the middle class get the money to absorb all those extra imports from Japan?

(Note that in the comments on Japan Economy and News Blog that there is some debate over the most accurate definition of a recession. Perhaps it is difficult to explain precisely for economists, but the definition of a recession in the US is actually quite simple: Is there a major national election coming up? If so, the US is always in recession. When Clinton was running in 1992, we were suffering from the worst economy since the Great Depression.)