I happened to catch that New York Times piece earlier this week, and the commentary on Debito about it. (Debito’s comment thread is moving more to an argument about building standards in Japan than what Martin Fackler had to say in his article, but it’s worth a visit just to see what Debito said.)
Fackler just wrote the same damn article that has been written about Japan for at least the last 15 years. Post-bubble, that Japan has simply been running in place. It usually has to do with big mortgages, the social contract breaking down, people having to make do with less, people scamming to get by. With a lot of the same topics being prominent in America right now, you can see how dusting off the same article would get you a pass.
The portion that caught my attention, similar to Debito, was how somebody is getting around a huge underwater position in their mortgage by selling their house to a relative, and then renting the house back from them. It implied that there is no such thing as a mortgage lien in property here. That surprised me, because it doesn’t make any sense.
The person featured in the story had a condo, which they had purchased for $500,000 in 1995. They sold it to a relative for $185,000, but still owe $110,000 on the original loan. It sounds like the relative owns the house free and clear, without a lien from the bank. The person is contemplating whether to do a bankruptcy on the $110k.
This is what the foreclosure lawyers in America are trying to do—get people who are underwater out from under the lien, so that the worst they have is an unsecured debt in place of whatever they owe the lender. Apparently, lawyers in Japan have perfected the technique.
Eido Inoue points out at Debito, though, that the conclusions the article makes from one man’s story of price deflation are a bit of a stretch. He links to Eamonn Fingleton at Unsustainable.org, who can usually be counted on to give a more level-headed analysis of major trends in this part of the world. Fingleton says the whole “lost decades” thesis is bogus, and that Japan has been chugging along just fine since 1990, helping China to hollow out American manufacturing and monopolizing key producer products industries like semiconductors.
I’ve read Fingleton before, and he’s been on the mark about several things, so I’m more inclined to agree that one area where the Japanese are not in decline is in making high-end stuff. Also, that people in this part of the Pacific region realize that there is no “financial economy”, only a real economy. While America spent the last 30 years (40 years?) downsizing, hollowing, financially-engineering and praising guys in suits whose contributions to society were mostly just these money tricks, the people in far East Asia have focused on building solid economies.
The problem with Japan is that in recent times nobody running it has bothered to take care of the rest of the people who aren’t involved in the cutting edge of the world economy. Like in America, the top guys have been busy taking care of themselves, and so the rot is starting to set in in the places that the power people have conveniently forgotten.
Too much of it is, “well, that’s just your problem,” which is then what gets reported back in the States. In the foreigner community, the same theme gets played, and this is what you read as it reverberates around the tiny expat blog community. Sure, it’s of course anti-foreigner sentiment, (technically, it’s a failure of Japan to guarantee equal protection of the laws), but it’s masked in the larger woes of the various ma-ke inus of post-Bubble Japan.
I don’t enjoy reading the same stupid articles about the demise of Japan, usually built on one or two extreme anecdotes. (They did the same thing when Japan was on the way up in the ’60’s and ’70’s.) But I’m not sure Fingleton’s got it right that Japan is firmly in control of its destiny. I think the rot is setting in, but it’s slow rot, so it’s not going to hit Japan in the face one fine day. It’s going to be of the nature where problems were identified, but nobody did anything about them. People going back to proposals that were fleshed out at least ten, twenty years before. Ignored the first time, people will later say, “well, we should have done that.” (Basically, it will happen when this country is a giant retirement village in the mid-century.)
When it’s things like the news, moseying along isn’t news. “Hey, we’re just doing our own thing at our own pace” isn’t really a headline grabber. There’s either got to be the downward spiral, or the secret scheming for world domination in the shadows. Now that’s news!
Japan goes to the next day, then the next week, then the next month. Like that. I think the people try to grab opportunities where they can, and some people are actually very creative in getting by or doing well. But a lot of Japanese thinking is simply trying to get other people to give you your way in constant negotiating about who-is-who, who-stands-where, and who-should-get-what. Most people find this unseemly, so they just (or inevitably) cave. It’s easier that way.
I see that a lot more (and what fits history here), than I do the other stuff that’s being printed, purporting to explain Japan.