Friday, September 2, 2016

Modern Asian Mess – Japan

Let’s start with the obvious. Japan is a fairly closed and xenophobic land that does not embrace immigration. But it is losing both population and younger workers, and even if Japan were to begin to welcome the needed replacement foreign workers moving to their nation, by 2050, 30% of its workforce would be comprised of non-ethnic Japanese. An intolerable vision to most Japanese. So they are trying to figure out how to replace workers with robots… including robotic geriatric caretakers! It won’t work; the population contraction is just too steep.
“Over the past five years (Japan conducts full census surveys once a decade, with a partial count after five years), Japan's population shrank by nearly 950,000 people (by 0.7 percent) to 127.1 million people. Nearly a third of all Japanese were over 65 years old in 2015. By 2050, almost 40 percent will be older than 65.
“To make matters worse for the future of Japan's population, the country's fertility rate has been about 1.41 births per woman, putting it well below the ‘population replacement rate of about 2.1 (the average number of children born per woman to replace the population for nearly forty years since the 1970s).”, March 3rd. Simply put, from a peak population of 128 million in 2009, given current trends, projections for 2050 put that number at 108 million. Wow!
The problem is that will a top-heavy elderly population, supporting them in retirement will rely on the economic values generated by rapidly-declining number of younger workers (through taxes and payments into pension plans). “In 1950 one elderly person was supported by 12 members of the working population, by 1990 it was 5.5 workers, and by 2020 it is estimated to be 2.3 workers…” The Dilemma Posed by Japan's Population Decline by Julian Chapple on
Look at this another way: “The old-age dependency ratio (calculated by dividing the aged population by the population of the working-age group) based on the medium variant projection increases from the current 26% (that is, 3.9 labor forces supporting 1 senior resident) to the 50% range in 2030 (that is, 2 labor forces supporting 1 senior resident), then eventually up to 67% in 2050 (that is, 1.5 labor forces supporting 1 senior resident)…” Population Projections for Japan 2001-2050, on (1/2002). Not sustainable.
So why? Some say the cost of raising a child in a heavily urbanized, space impaired environment with hideous work demands, is not conducive to having children, particularly not more than one child. And then there’s this possibility: “[In] a 2014 article in the online edition of magazine Toyo Kezai, Sechiyama Kaku, a professor at University of Tokyo, cites the 2006/07 Durex [condom maker] study to argue that ‘Japan has the lowest sexual frequency in the world.’ (In the Durex study, Japanese respondents reported having sexual intercourse 45 times a year, the lowest number among all the 41 countries surveyed.)” Oy. But wait, there’s less!
Since 1991, the Japanese economy has, for the most part, been stagnant. Once the dominant player in consumer electronics, Japan’s labor costs pushed Taiwanese, Chinese, Korean and even Mexican manufacturing up to a competitive-cost-advantage that Japan just cannot beat. Even its automotive industry is facing challenges from Korea, China and even post-carmaker-bankruptcy America. With a highly-educated and very expensive labor force, highly reliant on imports, Japan has struggled to find new ways to ignite its moribund economy.
Prime Minister Shinzo Abe has struggled to find monetary and fiscal solutions – referred to as Abenomics – to little avail. Deflation continues to plague the Japanese economy as local consumer demand continues to fall… along with prices. Efforts to get savings-oriented Japanese to spend, to rebuilt the economy with local demand, have generally failed.
“Tokyo has been trying to raise inflation for years to stimulate spending and boost the economy… The disappointing data comes on the heels of weaker-than-expected economic growth released earlier this month and despite an aggressive spending policy by the government… In July Prime Minister Shinzo Abe announced the latest stimulus effort, a massive new package worth 28 trillion yen ($265bn; £200bn).
“Japan has been desperate to boost consumer spending for years which accounts for 60% of the economy… The government's policy of economic reforms… consists of a three-pronged fiscal, monetary and structural approach to lifting the economy out of its protracted slump.

The three arrows: explaining Abenomics

§  The monetary arrow: expansion of the money supply to combat deflation
§  The fiscal arrow: increased government spending to stimulate demand in the economy
§  The structural arrow: structural reforms to make the economy more productive and competitive

“Yet despite three years of Abenomics, inflation has remained significantly lower than the than the central bank's 2% goal… Persistently weak household spending is to blame combined, more recently, with a strengthening yen which has pushed down import prices… Analysts expect the rate to remain low or even fall further.
“‘As such, inflation expectations may weaken further in coming months,’ Marcel Thieliant, senior economist at Capital Economics said in a note… ‘The Bank of Japan has recognised that there are considerable risks to its forecast of hitting its 2% inflation target in the coming fiscal year. We therefore continue to expect more stimulus to be introduced at the Bank's September meeting.’”, August 26th.  All those notions of “guaranteed lifetime employment” are teetering as companies cannot guarantee their own continued existence is this economically impaired country. Lower consumer demand and a strong yen are hardly stabilizing growth builders. Japan needs a top-to-bottom reexamination of its cloistered existence; the habits built from living on a once-isolated island nation really need to change.
I’m Peter Dekom, and the notion that the plights of large economies have no impact on us also has to die; globalism cannot be legislated away no matter what some people believe.

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