Three Reasons Japan’s Economic Pain Is Getting Worse
From Bloomberg, by Jared Diamond
Japan’s economic problems are serious and getting worse. Foremost among them is the crushing burden of government debt.
Japan’s ratio of government debt to gross domestic product, currently about 2.28, is by far the highest in the industrial world, almost double that of even Greece and Italy, and steadily growing. Already, the combined costs of interest on that debt and social security are approximately equal to total government tax revenue.
Japan’s trade balance is about to go negative for the first time since 1980. Land values and Nikkei stock values have fallen to about 30 percent of 1989 levels. Now, educated young Japanese women are emigrating, Japanese companies are shifting production overseas (even to the U.S.), national politics are in gridlock (six prime ministers in the past five years), and last year Japan experienced its first mass street protests in decades.
The economic troubles are symptoms of at least three sets of deeper social problems. Regardless of what policies Japan now adopts, its troubles can only increase unless those social problems are solved. While all three of these also beset other industrial societies, certain local attitudes make them more severe in Japan.
Marriage and Babies
Throughout the industrial world, birth rates are falling, and fewer people are marrying. Japan’s rate (7.31 births per year per 1,000 people), already the world’s lowest, is still dropping. If its rate of decrease over the past two years is extrapolated, it reaches zero by 2017. Naturally, this dire outcome won’t actually happen, but the calculation does emphasize that the problem is increasing.
In the U.S. and most European countries, in contrast, birth rates are still more than 10 per year per 1,000 people, and in Nigeria and Tanzania, they are more than 40.
Japan’s marriage rate is low, too, even by industrial-world standards: 5.8 marriages per year per 1,000 people, compared with 9.8 in the U.S. The average age of marriage in Japan is now 31, and 18 percent of Japanese women 35 to 39 have never been married.
These numbers don’t reveal whether the reluctance to marry and to have children is on the part of men, women or both. In the absence of rigorous sociological polling, I’ll summarize interviews that Japanese friends have conducted for me. They report that most single adult Japanese still live with their parents, because it’s comfortable to live at home and expensive to leave.
Young Japanese feel more comfortable communicating with each other electronically than by phone or in person. “Over the years that the formerly widespread practice of arranged marriage almost completely disappeared,” one person explained to me, “the digital revolution made it increasingly difficult for Japanese to develop the social skills necessary to woo a potential spouse themselves.” Among men, the biggest reasons given for not marrying are worries about their economic future and their ability to bear the responsibility for a family.
Married women tend to manage the household finances and take care of both their own and their husbands’ parents, and many of them now swear they will be the last generation to be saddled with those burdens. Career women, who find strength in their education, jobs and earning power, are capable of supporting themselves in the style to which they aspire, and are buying condominiums and planning for their own retirements. If they do want to marry, they find that their age is an obstacle, because Japanese men over the age of 40 want much younger women. If they do want children, Japanese societal support for working mothers is low. Hence they either forgo children, or leave the workforce or even leave Japan, and that represents a big loss of human capital for the country.
Much of what I have just said about marriage and babies applies to some degree around the industrial world. Why should these issues be acute in Japan? In most other countries, women’s new opportunities are creating tension between men and women, but it has been manageable because male society has made some accommodation. Japan is the industrial country where women’s roles were, until recently, most stereotyped; hence male resistance to women’s expectations is still the greatest there.
Old People, Immigrants
Again throughout the industrial world, falling birth rates and improved medical care have resulted in aging populations, making it harder to fund retirement systems over the long term. Those trends reach their extreme in Japan because of its record-low birth rate and relatively healthy lifestyles. It is the country with the largest share of population (22 percent) over 65 years of age. Except for Monaco, it also has the longest life expectancy, 84 years.
But numbers alone don’t indicate the extent of the problems. After all, the percentage of the population over 65 in other First World countries is between 14 percent and 20 percent. What makes the problem so serious in Japan is the country’s refusal to do what other countries have done: admit massive immigration of younger people from overseas. It is very difficult to immigrate to Japan, and (having immigrated) even harder to obtain citizenship. Japan is the world’s most homogeneous large country.
This rejection of immigration not only bodes ill for the future of Japan’s retirement system, but also deprives the country of the pool of workers, artists, scientists and inventors that immigrants represent for the U.S., Western Europe and Australia. Many notable Americans have been immigrants or their children. The long list includes, in recent times, Albert Einstein, Sergei Rachmaninoff, Vladimir Nabokov, Wernher von Braun, Henry Kissinger and our current president. Differences in immigration policies contribute directly to the big gap between the U.S. and Japan in Nobel Prizes. The U.S. leads the world in those awards, while Japan wins few despite high government outlays for science.
Scientific advances are essential to a technology-based economy. Thus, while immigration creates big problems, lack of it creates bigger ones.
No industrialized country is self-sufficient in renewable natural resources, especially forest products and seafood. Some must be imported.
If the world’s forests and fisheries were well managed, forest products and seafood could be harvested sustainably in perpetuity. Unfortunately, most harvesting is destructive and non-sustainable. Most of the world’s major fisheries are declining or have already collapsed.
Hence many government agencies and nongovernmental organizations around the world are working toward sustainability. One might naively predict that Japan, a small country that is one of the most dependent on resource imports, would be the world’s leading promoter of sustainability. But the reverse is true: Japan may be the First World country most opposed to sustainable policies. Its imports of illegally sourced and unsustainably harvested forest products are much higher than those of the U.S. or European Union countries, whether calculated on a per-capita basis or as a percentage of total forest product imports.
And Japan is a world leader in opposing prudent regulation of fishing and whaling. Incredibly, in 2010, Japan saw it as a great diplomatic triumph that it blocked international protection for Atlantic/Mediterranean bluefin tuna – even though the fish, whose stocks are declining, is especially prized and widely consumed in Japan.
Even my Japanese friends are puzzled by this stance.
They suggest three explanations.
First, Japanese people see themselves as living in harmony with nature, and until recently they did expertly manage their own forests — though not the overseas forests and fisheries that they exploit. Second, national pride causes the Japanese to dislike bowing to international pressure. The country especially does not want to give in to the anti-whaling campaign of the Sea Shepherd conservation organization, even though few Japanese eat whale meat; the whaling industry operates at a big loss; and tsunami relief funds have had to be diverted to subsidize whaling escort ships.
Finally, because Japan is aware of its own limited home resources, it has for the past 140 years maintained at all costs, as the core of its national security, its right of unrestricted access to the world’s natural resources. In today’s times of declining availability, that insistence is no longer viable.
To an outside admirer of Japan like me, its opposition to sustainable resource use seems sad and self-destructive. Unrealistic quests for resources drove the country to self- destructive behavior once before, when it made war simultaneously on China, the U.S., the U.K., Australia, New Zealand and the Netherlands. Defeat today is as inevitable as it was then — this time, not by military conquest, but by exhaustion of both renewable and nonrenewable natural resources. If I were the evil dictator of another country who hated Japan and wanted to ruin it without resort to war, I would do exactly what Japan is now doing to itself: destroy the overseas resource bases on which it depends.
Since Japan’s economic problems result from its social problems, their solution will require changes in Japanese attitudes toward women’s roles, immigration and sustainable resource use. Can Japan undertake the painful reappraisals this will require?
One cause for cautious optimism is the country’s history. Twice in modern times, Japan has accomplished selective change. The most drastic example came with the Meiji Restoration that began in 1868. The forced opening of ports by Commodore Perry in 1853-54 raised the specter that Japan might be taken over by Western powers. But the country saved itself with a crash program: It ended its isolation from the outside world and jettisoned its shogun leader, its samurai class, its feudal land system and its ban on guns. It adopted a constitution, a cabinet government, a national army, industrialization, a European-style banking system, a new school system and much Western clothing, food and music.
At the same time, it retained its emperor, language, writing system and most of its culture. Japan thereby not only preserved its independence, but also became the first non- Western country to rival the West in wealth and power.
Again, after World War II, Japan made drastic selective changes, abandoning its military tradition and its notion of a divine emperor in favor of adopting democracy and developing an export economy.
Once again, Japan can selectively reappraise its core values, let go of those that no longer make sense, and retain the ones that still do and that give the country strength.
So far, however, this doesn’t seem to be happening.
Dr. Pinna says:
The above article describes the social problem of Japan. But it is also the social problem of other great Asian countries such as China and India.
The underlying destructive force is over-population.
Japan and many other Asian countries have exceeded the carrying-capacity of their land. For the last century, Japan has gone abroad to seek the material needs of its population. It has also gone into the future in the form of loans for money to pay for these needs.
Today, it is faced with an enormous debt and a dying population.
Contrary to what this author believes, immigration would only exacerbate Japan’s problem. Japan needs less people, not more people.
It will take Japan at least a century and a lot of hard work until the population is small enough to subsist on its territory.