Since December last Japan has had a new prime minister, their fourth in three years, their seventeenth since the start of the Heisei Period (Google it) and, well, does anybody really care anymore? Prime ministers here are a type of political
kaiten sushi.
The newest incumbent is Shinzo Abe. He is what we political pundits like to call "an arse" as in "complete and utter". He has form too. He was prime minster before for exactly one year from September 2006 to 2007, a term of office that is commonly hailed as an utter debacle. Despite the myriad of problems besetting Japan at the time (all of which have metastasized in the intervening years), he spent much of his 12 months in power banging his own personal patriotic revisionist gong, tired as he said "of all that Chinese whingeing about the bloody war", or words to that effect. Sample quote: "There is a problem as to how to define aggressive wars; we cannot say it is decided academically".
Since his re-election Abe has focused first and foremost on economic matters as he has belatedly realized that full-blooded samurai patriotism isn't going to put rice on the table. His thinking (if we can for the moment charitably ascribe this ability to him despite all evidence too the contrary) on matters economic has been termed 'Abenomics'. Basically what this amounts to is coercing the Japanese central bank into setting an official inflation target of 2% and keep printing Yen until that target is reached.
This though isn't sound economic policy; it is in fact a fairy tale.
I know this because (a) I got a B in economics in my Leaving Cert; and (b) this kind of publicly financed pump-priming has been tried in various forms over the past two decades since the end of the Bubble Era and it has never, ever succeeded.
The fiscal fairy magic is meant to work something like this: press 'start' on the printing press and flood the nation's banks with cheap money who in turn will invest in and/or lend that money to businesses. Then Sammy Sony and Tommy Toyota will in turn use this influx of money to invest in new capital stock which in turn will have a knock on effect on other sectors of the economy. While all this is going on the Government will also embark on one of those patented public spending blowouts on roads, bridges, beaches - anything that can be concreted basically - that Japan does so well. It is essentially a form of social welfare as the jobs created are temporary, low-skilled and completely dependent on (a) state largesse; and (b) finding enough things to cover in concrete.
Anyway all this extra Yen circulating will stimulate demand for everything, naturally leading to an across the board increase in prices. This in turn will push up sales and profits in companies which will, thanks to the paternalistic beneficence of enlightened leaders of commerce, be passed on to their grateful employees in the form of wage increases. As opposed to being either hoarded or paid out in dividends.
Said grateful employees will then take themselves down to their nearest
Best Denki where they will loose the run of themselves buying robot floor cleaners and Louis Vuitton handbags. All this consumption will further stimulate the economy ultimately resulting in a virtuous spiral where consumer demand continuously spurs industrial supply and everybody lives happily ever after.
Like I said, a fairy tale.
And from the point of view of many up here in Hokkaido, not a particularly enjoyable fairytale either. In 2007 the average interest rate being charged for a business loan by the banks was 2.2%. Last year that had fallen to 1.7%, yet total lending remained the same as five years previously. Why? Because companies don't want to borrow. Another why? Because demand for their products and services isn't there, hasn't been there for a long time now. Which leads us to the final why? Because of demographics. I know, I know, I am pounding this particular drum a lot, but the beat remains the same.
There was a very good article in a recent edition of the London Review of Books (Cian lent me his copy) which you can read
here about the crippling effects long term demographic changes have wrought on Russia. Especially interesting is how such changes take a long time to manifest themselves and even longer to alter. They are like those huge oil tankers that measure their stopping and turning distances in miles. It is the same here in Japan. All inflation targets and increased public spending do is slow the ship down a bit; they do nothing to alter its course.
And that course is looking increasingly Greek (if I am not stretching the metaphor too far). By the end of March government debt is estimated to be 234% of GDP.
Which basically means...well, nothing really. It's a couple of numbers and letters. So how about figures then. It will be a thousand trillion yen. Which still doesn't really do the figure justice. So how about this: ¥1,000,000,000,000,000.
Now compare it to this: 128,000,000. That's the population of Japan.
Which means that each and everyone of us - me, Sanae and Cian (though mainly Cian) and the other 127,999,997 owe a whopping ¥7,812,500 per person. For my foreign friends that's €64,648 or $86,384. Plus interest. By comparison, Ireland's debt per person is just under half that amount at €31,208. And at least the folks back home have made some progress in trying to reduce it. Here we just keep adding to the amount in what is quickly turning out to be the biggest (and potentially most catastrophic) financial gamble in human history.
Right now the government can get away with it as 90% of its debt is financed domestically. But that remaining 10% is foreign owned (mostly, I am guessing, by the Chinese, just waiting in the long grass, biding their time...) and increasing annually. Johnny foreigner is going to want something more for his money than just concrete, i.e. increased yields on the debt. This will in turn push up interest rates and then your inflation turns into hyperinflation and we're back to food riots, totalitarian dictatorships and world wars.
Don't say you weren't warned.
