Eamonn Fingleton, “The Myth of Japan’s Failure”, in the Sunday New York Times.

Or the Saturday afternoon version, here.

You might know Eamonn Fingleton from his blog, Unsustainable.org, which he now posts as Fingleton.net. (New blog, same author and themes.)

What makes Fingleton great is that he has been telling the story of a highly successful Japan in the “Lost Decades” era of the Post Bubble (1990-current). This is obviously the contrarian viewpoint, that Japan really hasn’t stopped getting better and better since the 1980’s, but, it is a hard sell. I like it, because a lot of the “plus” factors that Fingleton is pointing out are true. Things are not so hardscrabble if you are in the Kantou region. It’s nonsense that unemployment is “only 4.2%”, of course, because the statistic is manipulated by the government to exclude all sorts of unemployment. (A more honest figure would probably be the same 9% or so unemployed and 18% underemployed as in America.) The people in Japan who DO have jobs, though, are doing remarkably well, considering. (I know I am going to get mail for that statement.)

Why play poor? Fingleton suspects that this is just a tactical move by a country that likes to run manufacturing trade surpluses, and that wants to be able to manipulate its currency to take advantage of business opportunities as they develop in both the Western trading partnership and also Far East Asia.

If you notice, ever since the yen was required to appreciate in the Plaza Hotel Accord of 1985, the issue of Japan’s trade balance with America has steadily declined. People here who follow Japan “feel” that 77 yen to the dollar is really high. But what no one “feels” is the fact that America’s prices are twice what they were in 1985, while Japan has had either deflation or modest rises, and so 0% change since then. The 77 yen is really more like 77 yen that’s really only buying a dollar that’s worth 50 cents compared to 1985. (So 154 yen to the 1985 dollar.) But the number makes people think that Japan has done all it can on the trade issue. This sad sack story of “poor us, we cannot even make one sacrifice on our end in order to balance an unbalanced trade relation!” also benefits the flunky American expats in Japan, who have a ready-made excuse when they either screw over fellow Americans (via multinational corporate downsizings in Japan); or can’t make sales targets (because they really have no ‘ins’ or leads in the economy to sell to—I saw that as well.)

For an Irishman, Fingleton definitely has an eye on issues that affect America in its policies with Japan—the kind of critical eye that more people in the state department should have. His blog is definitely worth a read, even if you don’t agree with his general premise.

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9 comments

  1. Brian · January 8, 2012

    > It’s nonsense that unemployment is “only 4.2%”, of course, because the statistic is manipulated by the government to exclude all sorts of unemployment. (A more honest figure would probably be the same 9% or so unemployed and 18% underemployed as in America.)

    He addressed this on his blog:
    “He suggests that Japanese unemployment figures are understated. Wrong. The figures I used have been adjusted by the U.S. Bureau of Labor Statistics to be fully comparable with U.S. statistics.”

    http://www.fingleton.net/japans-lost-decades-the-sophistry-continues/

    • hoofin · January 8, 2012

      Thanks for the correction. I had read from a third source that the 4.2% number is bogus, and it’s consistent with what I saw around Tokyo. There are a lot of self-employeds and small family operations in Japan, compared to America. In a sense, we all work, don’t we?

      [Update: Now that I’ve looked at the link, it’s Fingleton responding to another blogger, it seems. I suppose my beef, then, is with the U.S. Labor Department standards. To me, a lot of “jobs” around Tokyo seemed like make-work to keep people at stands and in desks. Big question, still, is where the money comes from to pay them . . . ]

  2. Matt · January 9, 2012

    I did read the editorial with interest, but much of what the author bases his argument on seems to be anecdotal, not quantitative.

    The Japanese are better dressed than Americans, yes. But then this has a lot to do with culture, where dressing well is a face-saving measure in Japan while doing the same in the United States is simply not as important. I refuse to buy the argument that dressing well has something to do with the prosperity of two respective nations – last time I checked, Mark Zuckerberg wasn’t particularly fashionable, and Egyptian demonstrators in Cairo actually seemed better dressed.

    The Japanese infrastructure is also better than it is in America. No doubt about it. But has the author forgotten that Japan is 15 times more heavily populated than the US? Good infrastructure is easier to get if you have more taxpayers crowding the same plot of land. And Fingleton does not seem to consider that those are the same infrastructures that helped to put Japan deep into debt in the first place.

    The author also mentions that the American economic data might be tweaked to make things look better for the US. Maybe. But then why does he not assume the same for Japan? Every government has incentives to play with statistics, and I would assume that the Japanese government is subject to the same level of bias, if not greater, than their American counterparts. I would like to see what research Fingleton has done on the issue to conclusively state that only the American economic data are biased upwards.

    In the end, prevailing wisdom is not prevalent for nothing. The Japanese government now uses half of its budget just to service the interest on its massive government debt. And an aging population, I can assure you, is an economic disaster. No amount of incredibly facile bantering about how it’s going to help Japan’s food security will hide that fact. Japan is said to satisfy about 25% of its food consumption with domestic produce – so does that mean that Japan should decrease its population to 30 million? Good luck getting there without a nuclear war. The author tries so hard to make it seem as if the Japanese stagnation is a result of subtly wise policy choices, but it is not.

    • hoofin · January 10, 2012

      I appreciate your insight. What do you think about the fact that virtually all of the “heavy burden” of Japanese government debt is either held by other units of the same government, or by the wealthiest 1% in Japan?

      Doesn’t it really mean that this 200%-of-GDP debt is really just table chips or IOUs that can always be eliminated by taxes or by an accounting entry?

      It’s not Japan owes it to people overseas. It’s owed within Japan. Right?

      You’re correct that an aging population can present difficulties. This is happening all over the developed world AND even in places like China.

      • Matt · January 10, 2012

        Hmm.. I am by no means an expert on the composition of Japanese debt to say anything with conviction, so all I can offer is a layman’s personal opinion.

        I do realize that the vast majority of Japan’s gross government debt is owed within Japan, and as a true sovereign, Japan can just print money anyway to pay off its debt.

        Having said that, isn’t Japan’s Dankai generation already retiring en masse? I’d imagine that they need to finance their retirement by selling off their investments, government bonds included. Can we assume that Japan’s fiscal obligation will remain stable over the years? I am by no means a fiscal hawk, but Japan’s debt situation does worry me.

  3. Spike 1 Fingleton nil · January 18, 2012

    For a scathing rebuttal of Fingleton you should read the Spike Japan blog.
    http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fingleton/

  4. Marc McDonald · June 9, 2012

    re:
    >>The author also mentions that the American economic data might be tweaked to make
    >>things look better for the US. Maybe. But then why does he not assume the same for
    >>Japan?

    Actually, I believe Fingleton has made it clear that Japan’s leadership does tweak data. However, he notes, they’re doing it for the opposite reason that the U.S. does it. They’re doing it to make Japan’s prospects look dimmer than they really are. There are many reasons for doing so. One is to help diminish U.S. scrutiny of the massive Japanese current account surplus. At one time (in the 1980s) this was setting off alarm bells in Washington. Today, the whole issue has bizarrely faded from America’s radar screen (even though Japan’s current account surplus today is vastly larger than it ever was in the “booming” 1980s, when the Japanese juggernaut was feared in the West to be taking over the world).

    • jane grey · June 9, 2012

      ‘Japan’s current account surplus today is vastly larger than it ever was in the “booming” 1980s’
      Got a source for that please?

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