Japan Watching: Society, Politics, Culture, Economy, Environment, And the World

A short while after I left Japan, I was interviewed on various aspects of the Japanese economy. 

Here are my answers: 

Over the past two decades, as Japan has gradually slipped down the OECD ladder in terms of GDP per capita, Korea has progressively climbed the same ladder.  It's just a matter of time before Korea overtakes its neighbor.

How could this happen?

Japan's future looked pretty bleak even before it was struck down by the triple crisis of earthquake, tsunami and nuclear disaster.  Right now, its future looks even more bleak.

But in the darkest hour, there is always a light at the end of the tunnel.  This is the moment to forge ahead and create a full fledged East Asian Economic Community which has the potential to create a much brighter future for Japan and the rest of East Asia.

Let's examine the situation.

Foreign exchange markets pushed the yen up in the immediate aftermath of Japan's triple disaster of earthquake, tsunami and nuclear problems.

We believe that the yen should go down, not up, in the face of these problems.

This year Japan is playing host to the meetings of the Asia Pacific Economic Cooperation group.  APEC is of course the region’s leading talk shop for trade and investment.  One big problem: Japan is increasingly letting itself be bypassed in regional trade deals.

In all the gloom about the Japanese economy, our current account surplus is usually cited as one of our strong points.  But is that true?

Economists have lots of theories on exchange rate movements.  But none of them manage to explain exchange movements very well.  Economic research shows that exchange movements follow a “random walk” pattern more than any theory. 

So let’s see if there is any logic in the strength of the yen which is now at a 15 year high against the dollar.  It is surprising at first blush in light of Japan’s towering public debt, revolving door of prime ministers, sluggish economic growth, low interest rates and ageing population. 

Are we Japanese efficient, innovative and entrepreneurial?  Tough question.  But here are a few anecdotes which shed some light. 

The origin of Japan’s financial crisis is a thriller, or perhaps a horror story, as penned by Gillian Tett in her book “Saving the Sun”. 

The Land of the Rising Sun is now drenched in ‘Japo-pessimism’.  It should not be.  Asia’s new emerging middle class provides an excellent growth market for Japan’s exports -- not only manufactures, but also agricultural products and various services.