JAPANESE GROWTH RATES: THE ONLY PLACE IN THE WORLD NOSTALGIC FOR THE ‘70s

6/17/13

Japanese Prime Minister Shinzo Abe, speaking the other day in defense of his three pronged stimulus plan (See my 6/14/13 post, JAPAN:  THE MARKETS DETECT A PAPERING OVER OPERATION), said

“There is no reason whatsoever why achievable growth in Japan in the 1970s and 1980s isn’t achievable now.”

Hmm…

“…no reason whatsoever” why Japan can’t grow like it did in decades past?  I’ll give you several reasons, to wit,

• Demographics; Japan’s population is now the oldest in the developed, and probably the entire, world
• Japanese wages are far higher than they were in the past; Japan is now a high wage nation by any measure.
• Japan’s former role as preeminent Asian exporter has been assumed by China, and a whole host of other Asian nations have become export powerhouses.
• Japan’s massive debt; its public debt/GDP ratio, at 220%, is the highest in the developed, and probably the entire, world.
• Japan’s savings rate is down to Americanesque levels from the 44% level seen as recently as 1990; consequently, Japan will have to soon import not only raw materials but also capital to finance its brobdingnagian debts.

All the printing and spending of money (two legs of Mr. Abe’s three-legged plan) in the world won’t solve the above problems.

This is not to say that Japan cannot shake off its economic doldrums and resume its proper role as one of the world’s economic great powers if it undergoes the serious fundamental economic restructurings such resurgence would require.   But the growth rates of the ‘70s and ‘80s, when we were forced to read such tomes as Ezra Vogel’s Japan as Number One: Lessons for America in business school are not coming back.