In case you managed to miss it, Japan has taken a huge fall in its relative economic standing by more or less standing still for almost a generation. The comparative fall is 30%. And even though visitors to Japan do not see the superficial signs of distress (infrastructure is well maintained, people are neatly dressed, restaurants, bars, and tea houses look busy), the consumer has retrenched to a degree that (now) seems unimaginable to the US.
The big reason Japan has had a high savings rate is the lack of Social Security or tax-advantaged retirement plans, plus families are more nuclear than in other societies (i.e., less reliance on extended families). But a second reason is the extreme instability of employment among the young. Many are so-called “freeters”, or basically long-term temps, doing low level work for employers, the first to be fired, and little hope of advancement even if they do wind up staying with the same company a long time. This is not only materially difficult, but psychologically hard, since Japan places great standing on group membership.
The examples from this New York Times story are revealing:
The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.
Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.
The Takigasaki family in the Tokyo suburb of Nakano goes further to save a yen or two. Although the family has a comfortable nest egg, Hiroko Takigasaki carefully rations her vegetables. When she goes through too many in a given week, she reverts to her cost-saving standby: cabbage stew.
“You can make almost anything with some cabbage, and perhaps some potato,” says Mrs. Takigasaki, 49, who works part time at a home for people with disabilities.
Her husband has a well-paying job with the electronics giant Fujitsu, but “I don’t know when the ax will drop,” she says. “Really, we need to save much, much more.”…
To better compete, companies slashed jobs and wages, replacing much of their work force with temporary workers who had no job security and fewer benefits. Nontraditional workers now make up more than a third of Japan’s labor force.
Younger people are feeling the brunt of that shift. Some 48 percent of workers age 24 or younger are temps. These workers, who came of age during a tough job market, tend to shun conspicuous consumption.
They tend to be uninterested in cars; a survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales.
Young Japanese women even seem to be losing their once- insatiable thirst for foreign fashion. Louis Vuitton, for example, reported a 10 percent drop in its sales in Japan in 2008.
“I’m not interested in big spending,” says Risa Masaki, 20, a college student in Tokyo and a neighbor of the Takigasakis. “I just want a humble life.”…
“My husband is retiring in five years, and I’m very concerned,” says Ms. Masaki’s mother, Naoko, 52. She says it is no relief that her husband, a public servant, can expect a hefty retirement package; pension payments could fall, and she has two unmarried children to worry about.
“I want him to find another job, and work as long as he’s able,” Mrs. Masaki says. “We must be ready to fend for ourselves.”
Perhaps I am wrong, but my impression is Americans understand frugality borne of real or near poverty but are less able to identify with middle class desperation. But studies have also found that happiness is correlated strongly with relative rather than absolute economic standing, that is, someone would be happier earning $100,000 in a community where the average income is $75,000 than they would earning $150,000 in a community where the average income is $200,000. Since Japan has very little income disparity, the fact that the belt-tightening is widespread no doubt makes it somewhat easier to bear. I do not know how well America would bear up if we had a long period of Japanese style austerity with the big differences we have between the bottom, middle, and top echelons.
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You forget to mention that consumers in Japan are punished for spending. In order to pay for the pork-barrel stimulus after the property bubble popped, the sales tax paid by consumers has been raised several times. They are also lack access to credit, in a fashion that U.S. consumers are only now becoming familiar with. While credit cards are common here, the Japanese mostly have debit cards or equivalent schemes based on their cell phones.
Six Happiness Tips
To be fair, it’s more than just the (idiotic) moves of Paulson and Geithner.
My grandfather-in-law was in his late teens during the depression. Once the sins of Wall Street was laid bare, he trusted nobody (and I mean nobody) to get near his money. He has lived on a farm his whole life, and considers even the most basic of “necessities” luxuries.
I strongly doubt that the majority of america realizes the change that is in our future.
[As an aside, he once told me a story about something happening back in the nineties. It took me a minute to figure out that he was talking about the 1890s, not 1990s.
‘Many are so-called “freeters”, or basically long-term temps, doing low level work for employers, the first to be fired, and little hope of advancement even if they do wind up staying with the same company a long time.”‘
Sounds like the US fields of
1. Computer science.
2. Engineering
3. Physical Sciences- Chemistry/biology
America today is a world of contract temps (ala 3M, IBM, Oracle), temp visas and job insecurity.
You finance people are finally going to get a taste of the real world. You’ve been sucking the blood out of the rest of us for years.
I’m baffled by why Yves thinks Japan should be immune to US labor productivity evolution.
To a Kraut these lessens sound all too familiar: Yum – cabbage and potatoes! And on Sundays some pork as well. Just kidding. I also remember the laundry trick. But recently my sister didn’t even want a new subcompact car as a present! She bicycles. (Do you believe these Germans are the people who will save Ireland from eating their babies by donating their own?)
Now Americans might not refuse a free ride. But they are adopting well otherwise. All these people that get foreclosed on, seem to disappear without a trace. Nobody knows where they went. And rents are going down at the same time in CA. (Body snatchers out there?) Do Americans really have families in the heartland that will take care of them? Or are they more like the Japanese: everyone for themselves. Maybe they are finding religion and are getting help by Jesus? I would never know.
I grew up in California in a frugal middle class household. It was not the end of the universe to be among the last of my cohorts to have a color television or dishwasher.
To be honest most of discretionary consumption contributes fairly little to overall happiness – one adjusts to whatever level, within reason.
Anon of 12:08 AM,
I may not have made my point clearly enough. Japan has traditionally seen companies in family terms. You don’t fire relatives. Remember lifetime employment?
Having people who are part of the company but not really attached to it is a very alien model to them, while it is no biggie in the US, since we have employment at will, and employment relationships have been becoming shorter and less stable over the last 20+ years.
How will modern America fare with its new, reduced standard of living? Hmmmm…
Thomas Carlyle once wrote that happiness is what we have divided by what we expect – and if his math served him well, adding the the numerator wasn’t nearly as effective as learning to reduce the denominator.
Henry David Thoreau wrote that he embarked on his “experiment in simple living” on Walden Pond, reducing life to its barest necessities, so he would be sure that he didn’t end up missing out on what was most essential in life.
Fast forward to 21st century America, when a few years ago, a new fad of “simplicity” started popping up – mainly propelled by a huge glossy monthly magazine titled, “Simplicity”, which costs about $8 per issue, and is as thick as a Melville novel because it’s full of thousands of slick ads for new products to buy buy buy to help you create your new “lifestyle of simplicity”
I’d weep at the Tragedy, but I’m too busy laughing at the Comedy.
This will be a very strange transition.
” in the US, since we have employment at will, and employment relationships have been becoming shorter and less stable over the last 20+ years.”
While the above is true, it had not affected the non-manufacturing sector employees sense of fear of running out of money. The shorter tenures have been used more by employees to optimize their situation than it has been used by employers to keep efficiency up.
That is starting to change. In my cohort real fear is being experienced for the first time. My father was a depression baby and WW2 soldier, his attitudes about life were meaningfully more insecure to anything we have seen since.
So what happens to our credit and bond markets when Asia starts to use its savings to keep itself together instead of giving it to us?
Perhaps some good to come out of this worldwide crisis will be less babies born.
After all, as a parent, do you want to roll the dice that your 3, 4, 5, 6 or more children will be able to find gainful employment and remain employed for the remaining 40-70 years of their lives? Or even that YOU will be able to remain employed and support your children until they are on their own?
OTOH, less population means less spending, which goes against all that is held holy in many economies today. Also less people spending means less people working which leads to less people contributing to Social Security, which raises questions of future funding.
The old saying is “Dammed if you do and dammed if you don’t” or maybe “Between a rock and the hard place”.
One more anecdote from the frontlines of America’s psychological adjustment to the seismic downshift in wealth. I have a friend who is a psychotherapist. Most of his new clients are people who are having extreme emotional difficulty coping with the fact that their property value has fallen, after years of rising. Not so much economic anxieties, but more of clinical depression-levels of loss of self-esteem, hopelessness, loss of meaning…..
Bad things happen when people are exposed to hundreds of thousands of ads from birth (TV, radio, print, etc), all professionally designed to convince them that their self-worth DEPENDS on buying what the advertisers are selling. Even when the money is flowing and the shopping bags are full, something still doesn’t feel right. And once the money STOPS flowing, for many the psychic implosion is immense.
Wall Street 1929 was symbolized by busted brokers leaping from office window ledges. Main Street 2009 might be symbolized by busted shoppers leaping from the 7th level of the atrium at the mall.
So… America will resemble Venezuela during the 1986-1999 oil depression. 60% of the middle class wiped out. Even in 1995, hunger through out society, the rich still partying in Miami, and the final election of a dictator to “fix stuff”?
great,
ntm
Although there may be less “income disparity” in Japan in terms of corporate salaries, there are huge disparities in total income and purchasing power.
Japan Inc. has been remarkably successful at promoting among the US intellectual classes the meme that Japan’s economy is on the ropes, such that anyone who speaks out about their mercantilistic practices will be seen as attacking a poor nation struggling to survive, and risking estrangement of a vital US ally. Eamonn Fingleton has written usefully, if with perhaps somewhat excessive fervor, on this subject.
Note how the Times’ relates information such as the following in a way that implies it represents serious economic malaise:
Nontraditional workers now make up more than a third of Japan’s labor force.
Younger people are feeling the brunt of that shift. Some 48 percent of workers age 24 or younger are temps. …
As the fraction of Japan’s labor force that enjoyed true large-corporation “lifetime employment” was never more than about 20%, the Times’ statement that non-traditional workers are more than a third of the workforce informs us only of the utter uselessness of most main-stream-media reporting about Japan.
Recent papers
here and here, and this Wikipedia article give much more useful portrayals of Japan’s employment market.
jm,
I have buddies in Japan who report otherwise, particularly at the deterioration in conditions at former top employers. Wage compression between young career hires and those in their 40s and 50s is so pronounced as to be demotivating. And having worked with the Japanese in the runup to the bubble, primarily with owner controlled companies, some with minority public shareholdings, some private, that were NOT they Toyotas of the world, they offered far more stable employment than Japanese enjoy now. It may not have been the formal lifetime employment deal, but the risks of job loss/career interruption were lower than today.
Note how a quarter-to-quarter decline of about 3.3% in Japan’s GDP was almost universally headlined in the US media (including, alas, the blogospere) at its annualized rate of -12.7% to better make it appear that Japan is economically worse off than the the US.
Comparing Japanese and US quarterly GDP growth rates for the last five quarters we find:
Japan US
2007 Q4 +1.1% -0.2%
2008 Q1 +0.2% +0.9%
2008 Q2 -0.9% +2.8%
2008 Q3 -0.6% -0.5%
2008 Q4 -3.3% -3.8%
Note that on an annualized basis the US Q4 2008 GDP decline was 15% worse than Japan’s, but it’s Japan’s that gets headlined on the annualized basis.
jm,
I have long said Japan plays up its basket case status so no one would bust their chops over their once cheap yen.
However, the decline in manufacturing in Japan in 4Q was stunning, and most observers expect at least as bad in 1Q 2009. You have to go back to the very very worst periods in the Great Depression to find comparable levels. That was what got the headlines, not GDP.
Investors often look at behavior to forecast what will happen in the stock market. But consider the effect on behavior from the fall in the stock market especially if it falls another 50%. Most people in their 20s-40s have most of their 401K in stocks. That is what their financial advisors said they should do. Even people nearing retirement have a large fraction in stocks, maybe 40%. If the S&P hits 500 like I think it might, they will have lost 2/3 of their retirement money. In addition they will have lost anywhere from $50K to $200K on their house. Many will lose their jobs to boot. I find it amazing that you hear economists predicting that Americans will raise their savings rate to 5%. That doesn't get them anywhere. The normal rate was 10% for much of the century. For the past 20 years it has fallen from 10% to -1%. Savings is a cumulative thing. They need to overshoot on the upside to get back to 10% averaged over their lifetime. That means 15-20% savings rates over the next ten years. What does that imply for retail spending? It is not pretty.
jm,
you are dishonest, as you are comparing Japans q/q with USA y/y.
“Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — decreased at an annual rate of 3.8 percent in the fourth quarter of 2008″
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
Japan Q4-2008 “-12.7% is the annualized rate”
http://www.aleablog.com/japan-gdp-down-127-in-q4-2008/
Yves: you should catch such blatant data misrepresentation.
Isn’t it a bit contradictory to say that
a) Japan has a very low level of income inequality
but also
b) young people can only get unstable short-term jobs with very low pay, as opposed to the older generation’s cushy life-time employment with the big corporates
and also
c) there is no social security net, i.e. lots of people fall through the cracks
If b) and c) are true, then a) is at best misleading.
I’m also wondering as to how reliable income-disparity measures such as the Gini coefficient really are.
Wikipedia compares countries by Gini coefficient, and the UN-Ginni is totally different from the CIA-Gini, as far as Japan is concerned (Japan ranks 2nd in the UN table, but way down the list according to the CIA):
http://en.wikipedia.org/wiki/List_of_countries_by_income_equality
IF,
Great catch, thanks, I was too busy doing another post to focus on the data. I just recall how awful the manufacturing data was, did not recall what the GDP #s were.
Thomas.
The US has very high income inequality due to the very high pay for people at the very top. There is nothing even remotely comparable to that in Japan now. The are some billionaires left. albeit with fewer billions, but no equivalent to our upper middle and new rich classes.Those have taken big hits, but are still a lot better off than middle class earners here.
Japan never had the income disparity we had in our bubble, even in their peak years (and the comparatively lower level they had was socially disruptive, that and not the worry about the bubble per se was the reason the monetary authorities decided to intervene).
Social security is for retirees. The wage compression is among the working age. Two different issues. The lack of social security and tax advantaged or employer provided pension schemes leads to high savings rates.
Thomas,
PS I had billionaires and the very rich among my clients, and their lifestyles bore no resemblance to the rich here in our bubble era. They lived at a vastly more modest level (there were admittedly some showy ones, not ones I dealt with, but they were the exceptions that proved the rule).
Missing the point. Fifteen years of living in Japan, through the bubble and after provide me with a view that is frequently at odds with Yves’ otherwise well-supported posts. Something like 50% of the Japanese economy is based on local mom/pop businesses. The ‘company as family’ model affected, I think, no more than 20% of the workforce, the fabled ‘salary-man’ stereo-type. Bonus systems and social hierarchies create work environments that stress team accomplishments, rather than the individual. However, the ‘loyalty to the company’ maxim didn’t really survive the bubble.
Folks are again loyal to the company mostly because the employment situation is so grim. Frugality and the willingness to cook with cabbage and pork, tofu, and other high protein bean products means that families can get by very reasonably.
What we do need is clear leadership from the world’s biggest market. We’re not getting it. There will be an election in Japan quite soon and whoever gets elected will be facing pretty much the same problems: how to keep people employed in an export-based economy.
It should be noted that Asians are not going to wait indefinitely for America to figure out what to do. Japan isn’t the only nation of savers in Asia. The US is currently regarded as the essential center of the world economy. There is a very real danger that may change if the US can’t show markets that America is serious about putting its house in order.
I suppose you’re right from an American perspective.
I look at it through German eyes, so Japan’s “low level of income inequality” doesn’t look so extraordinarily low to me.
By the way, all this stuff about low-paying temp jobs for the young generation could just as well be said about Germany, where the corporates are very reticent about laying off their “core staff” right now (and in many cases aren’t even allowed to fire them for several years due to agreements with the unions), but hundreds of thousands of temp staff not only get lower pay for the same work, but also very little job security. We didn’t have that 20 years ago, but now it’s standard practice.
Yves,
thank you once again for your informed posts.
As to young people not wanting cars, I think it has more to do with rapid transit systems than with low consumption.
I live in the Madrid region, and I don’t need a car. If you work in Madrid city, a car is useless due to traffic jams. Everybody takes the underground, which reaches every corner both in the city and the suburbs.
And when you want to do some tourism or have to visit other cities for business reasons, it is much more comfortable and faster to take a high-speed train anywhere.
The fact that both Japan and Spain have some of the best and longest rapid transit systems and high-speed railways in the world helps to explain it.
Thomas,
That is fair, there is also an underclass, real poverty in Japan, which means the disparity is rising due to the drop in the bottom cohort. I have no sense of the scale, but rural areas are in distress, and urban homelessness, particularly among middle aged men without families, is on the rise.
Anon,
I agree the lifetime employment model was at most a generation-two generation phenomenon, but even something of that duration sets expectations. Look how the Reagan era values have been widely internalized in the US.
And you are missing my point. There is a large cohort of mid sized and a bit smaller businesses often suppliers to big companies, or business by nature that were not strongly subject to scale economies, that you are overlooking in your depiction. There were bread and butter clients to big banks and I met a lot of them. They were most decidedly not mom and pop, and although they did not have the big company career paths and trappings, they also believed in stable employment. Creating jobs was the most respected thing you could do in Japan. The top post war entrepreneurs, like Konosuke Matsushita, were revered for creating good jobs, not as, say, innovators.
My impression is that the ranks of those companies were considerably thinned in the bubble aftermath.
@Anon. 4:15
OK so if the US market does not provide “leadership” by buying enough Asian products, what is Asia going to do?
On something even simple as description of reuse of bathwater for laundry can be entirely misleading if bathing practices in Japan are misunderstood. “Recycling” of bath water is not at all a sign of increase in frugality nor indicative of non-wealth. THIS IS NORMAL and Japanese bathing practice makes yesterday’s bath water ideal for today’s laundry, as the hot water is still warm and clean as washing of bodies is done outside the tub. The tub water is shared by the family as well. In a country that has no real shortage of fresh water, while there may be costs associated with heating to bath to Japanese levels of desired heat, recycling of bath water indicated no economic significance what so ever. That said, Japan is suffering but at a level that is possibly a little more subtle and difficult to describe.
Japan does have a national pension system (although it has issues). I’m curious to know why you don’t consider this equivalent to social security.
Thomas said “…By the way, all this stuff about low-paying temp jobs for the young generation could just as well be said about Germany, where the corporates are very reticent about laying off their “core staff” right now (and in many cases aren’t even allowed to fire them for several years due to agreements with the unions), but hundreds of thousands of temp staff not only get lower pay for the same work, but also very little job security. We didn’t have that 20 years ago, but now it’s standard practice.”
Perhaps this is one of those inadvertent consequences of strong unions? Corporations want to keep people out of unions because of their higher pay and benefits plus the difficultly in firing anyone. So the young and non-union members are forced into the mercenary life of temp employment, one short job after another, unless/until/if they can get into a union job. Long-term, I do not think this is good for any society.
A life of temp work without stability should, as I mentioned in my post above, lead to reduced birth rates in developed countries and all the problems that brings.
I think one of the reasons cars are no longer as prized by youth (in some countries anyway) is that they have lost some of their allure as status symbols. That development in turn might be due to rising environmental concerns. Alternatively the environment might simply be a convenient excuse for economically insecure youths who do not want a car loan as an albatross around their necks.
Anyway, a Japan-style lost decade would probably mean a continued golden age for the net. Cheap entertainment and potential substitute for physically collecting things. Opium for the masses to quote a certain economic theorist.
A few logistical concepts about Japan.
It is the Great Britain of Asia, at least that what we were told in the 60’s so we would buy their cheap stuff and forget Pearl Harbor.
About WW II, Japan could have been starved rather than invaded or nuked. It is a net importer which is why it needed the East Asia Co-Prosperity Sphere to get by with what the US has been doing the past 30 years.
Difference is the US is in most staples independent of imports and in energy would be if Carter had not lost his second term to the great con artists.
Obama needs to shoot for energy independence soonest.
All that said, as the yen buys more dollars the number of yen needed to pay back the trillion (or half I haven’t looked lately)bucks in T Bills declines and those savers are getting a dose of inflationary destruction of debt. On the wrong end.
From my present vantage point attending a seminar in Tokyo, everything looks somewhat the same as it did a year ago when I was living here. The reverberations from the recent collapse in manufacturing have not reached the center of Tokyo, from what I can see and my colleagues/friends say.
But anecdotally for me, at least, it will become more apparent soon. My dear friend has been laid off from her long-time position, though she’ll be attending to her termination for a few weeks yet. This is done by training her replacement, a contract worker from an agency. She’s absolutely baffled that there’s someone out there who is willing and capable to work for significantly less than she does, because her salary is already quite low. I suspect it will be a young woman still living with her parents.
Nevertheless, she doesn’t hold it against her employer, knowing the internal details of their finances. A lot of top brass for whom she worked is also moving a little more swiftly into retirement. She thinks it’s unlikely they’ll assume the standard plush advocacy posts they would have enjoyed in the past, more likely to opt for that simple life.
For her part, she’s not sure what to do yet. Too damn principaled to leverage connections, she goes to a staffing agency for her own skills test on Thursday. Wish her luck, I suppose, but wish even harder the same future doesn’t befall us all.
Yves, the core of Japan’s stagnation is part demographic but mainly political. Their consumption inefficiencies could be defeated and an increasing standard of living could be obtained if they would “just go BIG BOX”.
The lack of retail efficiency is the main reason for their “lost decade”.
Deflation can work wonders for consumption, as long as an efficient evolving consumption architecture is put in place.
HINT: the US experience with deflation will NOT be a replay of Japan. US consumers will clearly become winners………..
Hi, to some degree I think this post is illustrative of how out of touch urban professionals are with the economic reality of most of America and in particular rural America. I live in rural New England and I have experienced a steady rise in costs alongside a stagnation of wages since I graduated from HS in 1984. It’s clear to me that costs need to fall substantially in order to more closely track actual incomes. Elites in general have lost track of the reality that there is a limit to the kind of credit gymnastics you can put people through in order to have “growth”. Most people have not participated in the “prosperity” of the last 30 years and therefore won’t miss it.
IF accuses me of dishonesty for my bleary-eyed (but admittedly serious) error in not seeing that the US figures I had Googled up at 3:00 AM for quarterly GDP growth are also annualized figures. I stand corrected (and insulted).
Yves,
My complaint was mainly about Times’ reporting, not yours. I am glad to hear that you “have long said that Japan plays up its basket case status so no one would bust their chops over their once cheap yen”, but I didn’t happen to read (or perhaps remember reading) the post in which you wrote that. It would have been nice if you had repeated it in your original post.
Regarding income inequality, as you mention, you have worked with many rich Japanese, some of them billionaires. Although as you note, with few exceptions they do not indulge in the kind of flashily vulgar displays of wealth so popular among the newly (and often transiently) rich of the US and Europe, they are most definitely there. A major difference between Japan and the West is that ostentation in Japan is more subtle and discreet.
That outward manifestations of income inequality in Japan are less (especially in forms obvious to foreigners), and there is less inequality of income amongst salaried workers, doesn’t mean the inequality (more properly of “wealth” rather than “income”) isn’t there.
As the main residence of the owner of the medium-sized company I once worked for in Japan was the entire top floor of a fairly large apartment building in one of the most exclusive residential areas of Tokyo, I was thoroughly puzzled when an American visitor who believed himself to have been entertained at his home commented on how modestly he lived. As it turned out, the home was that of the owner’s brother-in-law (and I suspect even that home was in an area in which owning a residence of any kind would have been a thoroughly impressive display of wealth to anyone familiar with Tokyo real estate prices).
The comments of Anonymous at 4:15 AM, and Yves reply at 4:31, are both quite good. YY’s comment about the bath water is also good.
Although my dissatisfaction was more with the Times’ article than Yves’ comments on it, and Yves appears to have a better understanding of the Japanese situation than the Times, I’d like to note that in regard to Yves’ comment that, “the consumer has retrenched to a degree that (now) seems unimaginable to the US,” Japanese middle-class living standards in the area of appliance use have always been unimaginable to anyone in the US. Though the Times relates that “even well-off Japanese households use old bath water to do laundry” as if this is some novel response to hard times, as YY pointed out, it is and always has been usual — the washing machine is usually in the same room as the bathtub, which holds a large quantity of hot, clean water, and it is simple either to pump the water over into the washing machine, or scoop it up with the same plastic basins the family members will have used to wash themselves thoroughly before entering the tub.
Yves
Your active involvement in this conversation is a big plus.
It’s quite interesting to see so many informed comments about Japan. A real learning experience.
In my medical practice, most of my patients were Medicare age. Many poor patients were happy, and many prosperous ones were depressed.
The brethren of the Merchants of Debt that have ruined this country are the same merchants of empty calories that have created the obesity epidemic.
Japan is frugal and the Japanese have a very long life span. They must be doing something right.
While the anecdotes in the NYT article are entertaining, I thought I might learn something from looking at the 3 graphs in the print version of the article. Unfortunately, however, the graphs are either inconsistent with each other in the data on which they are based (for example graph 1 may show per capita income, while graph 2 shows household spending) and/or they are confusingly labelled. (Also, all are unadjusted for inflation.)
The 3 graphs show changes from 1985 in what are described as (i) average annual income, (ii) average household monthly spending and (ii) savings rate. Graph 1 shows an increase in average annual income from about $35,000 in 1985 to about $44,000 2005. In other words an increase of about $9,000/yr or $750/mo.
Graph 2 shows an increase in average household monthly spending from from about $3,000/mo in 1985 to just under $3,200 2005. In other words, an increase of about $200/mo in spending.
If you look only at graphs 1 and 2 you would get a message that is generally consistent with the text of the article. In other words, over the 20 years from 1985 to 2005. nominal income went up $750/mo, while nominal spending went up by only $200/mo over that 20 years. This would imply that the residue (something like $550/mo) must have gone into increased savings.
However, when you look at graph 3, which shows a fairly steady fall in the savings rate from about 15% in 1985, to about 3% in 2005. If graphs 1 and 2 are on a consistent basis (i.e., both refer to household income), then the 15% savings rate in 1985 would imply that spending shown as $3,000/mo in 1985 could only have been about 85% of that amount, or just over $2,500/mo. If graphs 1 and 2 are not on a consistent basis, what is the point of printing them?
I have to wonder if an editor looked at the article and graphs and, if so, what s/he was thinking.
Here’s something about the savings rate in Japan:
http://www.economicshelp.org/blog/economics/japan-savings-ratio/
Part of the decline is a redefintion of savings that conforms more with how it is defined in the rest of the world.
The Japanese are suffering from Post-Bubble Traumatic Stress Syndrome. Give us a few years, and we Americans will have the same affliction.
Another thing is that space is at a premium in Japan. Most homes are small. People don’t have space for a lot of “stuff” are therefore tend to be less inclined to consume stuff than Americans.
don’t have the numbers off the top of my head, but i recall since 1991 Japan’s per capita real gdp grew practically as much as europe’s - so i concur that jp always tries to portray itself as a weakling. however, having very recently spent a couple of months in nagoya (the detroit of jp), i can also say that things are really really not pretty. we’re not only talking about the temps being generally abused, but also perm workers fired. moreover, some of the, say, toyota’s actions completely disgusted the public, e.g. mass layoffs with eviction from the company dorms right before xmas!
i think there is a revolt brewing in jp just as well as in many places. unfortunately it is less clear for me if the outcome of such revolt will be constructive.
Alex Black — Thoreau’s Walden Pond period was a two-year experiment. His friend Emerson loaned him the land, which was not located in a wilderness, but at the edge of town. He was able to walk home any time he wanted, and his mother did his laundry. His famous essay on civil disobedience stemmed from his being jailed for one night for failure to pay poll taxes. His aunt paid his taxes and he was out berry-picking with his friends the very next day.
Don’t get me wrong — I love Thoreau as much as the next person, probably more. But let’s not have any illusions that his Walden Pond experiment is reproducible for most people, particularly those who have children, who are old, or who don’t have a moneyed background to support them. It’s all very quaint to make your own flour out of acorns, when you have a degree from Harvard and know you can instantly get a paying job the moment you want one.
Squanto said:
"Another thing is that space is at a premium in Japan. Most homes are small. People don't have space for a lot of 'stuff' are therefore tend to be less inclined to consume stuff than Americans."
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Anyone interested in Japan in the post-zombie banks era should check out Alex Kerr's "Dogs & Demons". It's a fascinating alternate take on some of the commonly repeated "facts" about post-modern Japan.
Kerr attempt to debunk the legendary "Japan is small and therefore has a premimum on real estate" issue as a propaganda-induced myth.
More importantly, he presents a broad and incisive critique of the so-called out of control "construction state", of a zombie banking culture of fraud, and of a misinformed and confused population.
I make Kerr sound harsher than he is – it is clear he dearly loves his adopted country. I'm not a Japan expert by any means but I found this book engrossing and deeply chilling, especially considering the US is currently going down the Japan path financially.
– StewPDX
And Thoreau was a first-rate engineer.
I highly recommend Henry Petroski’s
“The Pencil: A History of Design and Circumstance”, part of which relates the history of the Thoreau family’s pencil company, and Thoreau’s contributions to its great success.
Take this very seriously, because it’s happening to us right now–we’re just about to lose our auto industry, and China’s about to burp in a big way. As Ronald Reagan used to say, “You ain’t seen nothin’ yet.”
jm,
it was late for me as well. (I keep wondering on which schedule Yves is on the right coast.) My apologies for being so engaged, I was upset about revisionism that I suspected. It still amazes me that the US, which seems to be the source of many of today’s problems, is so far affected the least. And still, some people here see themselves as victims (of the evil foreigners). Zugzwang for everyone involved, I guess.
The Japanese case confirms that both crisis ( Japanese and US / Global) are related to the emerging inequality in income distribution . The economy is able to produce, but machines and people are idle since there are no consumers around : Most of the economic progress during the last 30 years went to very few hands while the vast majority of the citizens had to rely on credit just to keep afloat. This magic circle was broken and the only way to restore the economic progress is through a major redistibution of wealth and incomes. It’s clear that the “economic” measures taken by governments are just a mean to avoid this issue to the future : If you analyze fiscal or monetary exapnsions in terms of debts and obligations , governments are just playing with the same cards or creating a major debt buble, this time public in stead of private.
As one poster pointed out, Japan does indeed have a national pension system, called “nenkin”. Domestic spouses qualify based upon the other’s work, just like the U.S. Even ex-pats pay into, and can qualify for benefits, given enough years. And if you move back home, you can reclaim up to three years worth of payments (last I knew).
Further, middle and larger size companies offer pensions, especially those in manufacturing.
Also, 401Ks have been spreading in japan for some years now.
Japan offers economic support for single parents too, usually female, and the indigent elderly.
Throw in a national healthcare system and Japan is a more secure society in which to live and grow old than the U.S.
Japan has a better system, IMO, at least partly because of their homogeneity. It’s far easier to ‘see oneself’ in one’s neighbor, and empathize, when the neighbor is so much like oneself. It’s easier to imagine their difficult circumstances becoming your own.
The Japanese save more because of the culture, not because of fear (lacking safety net). The Post-war period also reinforced the notion of frugality, as times were difficult all the way into the 1970s.
If Americans had had such recent experience with rebuilding their country– literally!– perhaps we would still be savers.
Sara – Quite funny to learn that Thoreau had him Mommy do his laundry. 8-)
I’m not putting him on a Zen Master pedestal – just comparing his observation that the simplest essentials of life have the most meaning, a point that is lost on our consumerism-addicted culture, much to our culture’s loss (and psychopathology). The consumerist obsession we’ve stimulated for decades will create emotional havoc as we run out of purchasing power and shift to a long lowered degree of consumption. Post-Bubble Traumatic Syndrome, someone above said – I like that.
True, Thoreau was a bit of a dilletante, but he turns a lovely phrase, doesn’t he?
Interesting reading… But, as always on these intellectual sites, there’s a serious lack of understanding about what the majority of REAL people will do when things “get tough”. As most of us on here are NOT the REAL people, we don’t know.
Personally, as I’ve got to work with the REAL people everyday, (and listen to their uninformed banter seeping through the cubicle walls) I’d hazard a guess that as things “get worse” in America, the REAL people will make THE most stupid decisions possable, as they always have. American prosperity has covered-up this democratic stupidity so far. Let’s hope we can survive another round. At least survive until I can get out of here.
IF,
Thanks for the apology. Humbly accepted. I can understand why you were upset. It was an awful blunder on my part. It’s never more important to avoid haste than when tired, but alas the ephemeral nature of blog threads spurs one on.
But in regard to the “evil foreigner” concept, I do in fact believe that the major underlying cause of the current problems is vendor financing fraud on a Brobingnagian scale by Asian governments. The massive mercantilist falsification of pricing signals and interest rates by Asian nations either pegging their currencies against the dollar (e.g., China) or manipulating their exchange rates by forcing/supporting carry trades (e.g., Japan) has undermined market mechanisms throughout the world, making comparative advantage appear present where in fact it is not, creating massive distortion and suboptimality in resource allocations both in Asia and the West.
Because much of the Chinese trade surplus is in fact an additional Japanese trade surplus component in disguise — high-value-added components from Japan passing through China for low-value-added assembly on their way to the US — I place much of the blame for this on the Japan, which has consistently failed to follow policies that might wean its economy off its excessive export dependence.
Although the “strong dollar” policy of Robert Rubin and his successors and the willingness of the US government and citizenry to accumulate excessive debt also deserve much blame, the fundamental enabler has been Asian vendor financing fraud cycling dollars back to the US. I call this vendor financing fraud because it is utterly obvious that the US will never be able to repay the loans with goods and services of value equal to those it has received.
“The shorter tenures have been used more by employees to optimize their situation than it has been used by employers to keep efficiency up.”
That’s a very quaint picture of employment in the USA. No longer true. It is said you can’t get Americans to quit their jobs now. Indeed I am of the same cloth. My boss is a lying s.o.b. but the only one I can get at the moment and I am already more or less self employed but needing the work he’s sending my way. I’d love to quit my job…just need another job to replace of comparable pay. Ain’t happening for awhile.
For one, I think Japan and it’s Lost Decade is a victim of an American Propaganda hit. Japan’s unemployment rate was and is lower than ours even in it’s darkest hours. Unfortunately, the temp. thing, the FreeAgency thing, that’s an American thing too. The young and the old are getting screwed here just the same way they are in Japan. With most jobs drifting towards Walmart pay rates we’re All Japanese now. The few at the top will again have it even more better than before with job insecurity benefitting them with increased “productivity” (Sweat!) coming from that.
But loyalty? Our companies and ceo’s will never get it back and don’t deserve it.
I live in Japan and I think the NY Times article demonstrates a lack of understanding of Japan and Japanese people.
Firstly, cars are mentioned twice in the article. Why would anyone in Japan buy a car when the public transport system works so well and is so affordable? It may sound alien to not have a car in the vast expanse of the United States but this should be a model for the more environmentally minded. No one takes time off in Japan so the government supplies lots of national holidays and everyone travels at these times, congesting highways.
Secondly, Japanese people are naturally conservative with resources. They use bath water to wash their clothes because it doesn’t waste water and it saves money. This makes sense. This is not a sign of economic hardship. The bathing routine is different and the water is not dirty and is put in the washing machine. Wastefulness is repellent to Japanese people.
The NYT journalist should have questioned Mrs. Takigasaki further. If (s)he had, he would have found that her husband works hours that would be considered insane in any other country. Fujitsu is famous for this and cases of karoshi have been reported. When does Mr. Takigasaki have time to spend and consume?
Japanese people are extremely risk averse. This is why they save so much. They worry far more than western people. Many Japanese do not want risk, responsibility, instability and unpredictability. The highly competitive and (even naked) form of capitalism and individualism in the west is not natural to the Japanese. They are at heart highly community oriented.