Guest Post: Thoughts On Japan

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Thoughts on Japan

I suspect the consequences of Japan's massive earthquake will be much more transformational than most now imagine.

Long-time readers know that I studied Japanese language, culture, literature and geography in college, and that we have many friends there.

Thus it is not just an academic exercise for me to ponder the longer term consequences for Japan and
the world as the full extent of the damage is toted up. Emails are trickling in from our friends in Japan, and so far everyone is OK. (Here's a photo of me and one of our Japanese friends during a camping trip to Big Sur.)

Photos of Japan always spark memories of our extensive travels there. As those of you who have visited Japan know, it is incredibly rich in scenery, and though it may appear small on a world map it is quite "large" visually.

I have also studied Korea and China for decades, both formally in university and informally, and we have traveled extensively in both China and Korea and have many friends in each country. So it is with some "on the ground" knowledge, personal friendships and formal study that I say that though all East Asian societies share characteristics drawn from China's ancient culture, each is unique in many ways.

From the Western perspective, Asian cultures offer up numerous paradoxes (or apparent paradoxes). For example, in extremely polite Japan you might yourself rudely crammed into a train. The refinement of the Japanese aesthetic visible in everything from architecture to furniture to gift-wrapping vanishes in the visually manic page layouts of magazines and adverts. A stable, basically conservative society is also the breeding ground for the most absurd and extreme fads in clothing, gadgets, etc.

A relentlessly high-tech economy remains firmly rooted in agricultural and food-related traditions. Here is a photo of

drying persimmons (kaki) I took in our friends' home in Nagano.

A key feature of Asian culture is the distinction between public "face" and private lives. Thus the Japanese appear stoic in public, as one's private emotions are reserved for life beyond the public eye (unless one gets drunk, of course, and behavior while drunk is set aside in a special category. I have seen drunks shouting and pushing police in Japan--behavior that would get them tasered or shot in the U.S. The cops just calm the guy down; after all, he's just drunk.)

But this stoicism also reflects the deep reserves of resilience built into Japanese culture. People endure: shoganai, it can't be helped.

Japan is a wealthy nation, with deep reserves of finance, talent and determination. It is impossible to say who works harder and longer, the Chinese, Japanese or Koreans: all three societies demand workloads that would crush most Americans and other Westerners. Much of the "economic miracles" wrought by each of these countries results from this tremendous work ethic.

If you watch many films from China and Japan, you will note that sacrifice is often a theme: individuals sacrificing for the family (children or parents) or for the nation.

Here is a photo of our friend's delightful nieces, before they blossomed into young teens.

Despite the many strengths of Japanese society and culture, and the tremendous reserves of talent, dedication and self-sacrifice of its people, my gut feeling is that this series of devastating earthquakes will have more enduring consequences on the world economy than most observers seem to expect.

Japan has managed to sustain a 20-year Keynesian experiment in central government borrowing and spending "stimulus" rather than force the insolvency of its vast banking and insurance sectors. What allowed this endless piling up of debt is the people's willingness (channeled by regulations and limitations on other investments, of course) to buy low-yield Japanese bonds.

But Japan's demographics are changing. The Baby Boom generation which sunk their prodigious savings into bonds is retiring, and instead of buying more bonds they are selling assets to fund their retirements and healthcare.

On the surface--in public--Japan appears to be entirely stable financially. It's as if the national debt, currently about 200% of GDP, could rise to 300% or 400% or 1,000% without any consequence or breakdown. But demographics changes all sorts of things, and the added financial burdens of funding trillions of yen in rebuilding costs could push Japan's public finances over some unseen edge.

Should Japan be unable to self-fund its ever-rising debt, then it would have to compete globally for bond buyers. Interest rates would have to rise, and that would eventually trigger a collapse in public finances, as the costs of servicing that rising debt exceeds the government's ability to borrow money.

Japan's Status Quo--its "Establishment"--has clung on to various structural imbalances for the past two decades, refusing to threaten powerful financial and political fiefdoms with fundamental reforms. The Status Quo has played "extend and pretend" on a vast scale for an entire generation, and this has pushed Japan to a financial precipice.

All this makes me wonder if the initial "let's work together, it can't be helped" stoicism and self-sacrifice will erode at some point and trigger a social earthquake: a sudden demand for real reforms rather than more facsimiles of reform that change nothing in the power structures of the economy and government.

Some analysts have reckoned that Japan will consume less oil and resources in the wake of the quake, but if we look out a bit further, we see that rebuilding will require monumental amounts of energy and materials. Japan's consumption of commodities will rise, not fall.

Though China gets all the media attention, Japan is still a critical supplier of numerous high-tech parts in the global supply chain. The Japanese global corporations have learned from experience that anything they make in China will soon be pirated, so they have withdrawn all the really high-tech manufacturing to the home islands.

I suspect most analysts are complacent about the possible global ripple effects of these quakes, simply because Kansai and Tokyo were largely spared.

Given its great stability and wealth, Japan seems an unlikely candidate for social or financial changes triggered by a natural disaster. I am not so sure it is immune to these forces, given the fragility of its central State and local government finances and its sclerotic Power Elites and political machinery.

The quiet stoicism of the next few months may give way to more systemic and possibly transformational forces than most observers believe possible.

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Armchair Bear's picture

sorry but persimmons are yucky!!

My prayers go out to the people of Japan.  Let's all hope they will be recovering quickly from this.  The web bot reports indicate that Japan will be switching their productive capacity to preparing for the upcoming 2012 earth changes.  This seems a likely catalyst.

Michael's picture

Am I bad to feel it would have been better if it happened to New York City or San Francisco, for those cities I wouldn't have felt so bad?

Read the words interlaced in this video, too funny.

Talking Heads - (Nothing But) Flowers

snowball777's picture

No, just incredibly fucking stupid. As always.

Mark McGoldrick's picture

So you wish the earthquake/tradegy occurred in NY or San Franscisco instead?

Let me guess....  you're a doomer, whacked-out libertarian?

You remind me of another sick libertarian who prayed for a repeat 9/11 style terrorist attack to occur on the 9/11 anniversary last September, or the obnoxiously huge number of libertarians who took so much amusement and satisfaction in the Tucson tragedy.    

You guys are sick to the fucking core. Seriously.


Michael's picture

When you've been repeatedly raped for 50 years by those guys, you get a bit numb to touchy feely thought when it comes them.

Scottj88's picture

Very well written...

Thank you for your comments.

A small recap + other things going on in the world...

Michael's picture

I was reading the Charles Hugh Smith blog since the early days of the housing bubble.

Run Ron Paul!

Video: Rand Paul EPIC rant at Energy Committee Hearing: "You restrict my choices!"

ZeroPower's picture

Some analysts have reckoned that Japan will consume less oil and resources in the wake of the quake, but if we look out a bit further, we see that rebuilding will require monumental amounts of energy and materials. Japan's consumption of commodities will rise, not fall.


Agreed. And whowever thinks the initial reaction of a higher JPY after the news hit friday was the right reaction, well, lets be forward looking for a week, a month, even a year. No way it stays at these high levels.

JNM's picture

I concur.

Ok, next few DAYS, they will consume less, but the insurance checks are going to be a stimulus.  Then, after the insurance money enters the system, Japan will come out more competitive within a year or two.

The $81B trade surplus, on $820B in exports, is likely to take a major hit for the next 6 to 12 months, but that means other economies will pick up the slack.  The other countries will obviously, be less effecient than Japan.  Which means more inputs will be consumed in production.

What I'm saying is, Japan might not directly consume commodities, but other countries will in their place as they move to compensate for Japan's (likely to decline) trade surplus.

...I think! All of the above, is just my $0.02, there are a ton of variables to consider, IMHO.

KickIce's picture

Financial aid typically disappears due to corrupt politicians.

The insurance companies have pay limits.

$0.02, sounds like this will be the insurance companies per person liability.

Of course our broke asses will be over there as our leaders continue to push the Cloward/Pivens agenda.  (Just to clarify, I have no problem with the charity and my heart goes out to the Jaanese - but we are broke)

rocker's picture

No Worry. The Bernanke Will print for this too !!!

Guy Fawkes Mulder's picture (90k missing 24 hrs ago, unconfirmed)

I wonder just what the death toll will be, when all is said and done.

Arch Duke Ferdinand's picture

""I wonder just what the death toll will be, when all is said and done.""

...But Mt Fuji needs to blow it's top first...

Id fight Gandhi's picture

I just shake my head to hear the mindless euphoric talking heads say that the global economy and stock markets can handle the Japanese quake on top of all other distresses. BTFD right? Second, third largest economy in the world comes to a halt and it's just business as usual.

The insanity just never ends.

Atomizer's picture

The insanity just never ends.


Don't let the tinfoil MSM TV get you down. This insanity is coming to an end. Mark my words.

Troll Magnet's picture

too bad these financial terrorists can't naked short mother nature.

Id fight Gandhi's picture

US markets still flee to the "safety" of momo stocks. Whole world is falling apart and fed printed money is getting stuffed into Netflix, chipole etc.

Oh and the news out of mena is at a trickle, but Yemen, Libya are heating up big time.

reader2010's picture

They will have the need for the new world currency that's designed by the Party Six. Watch out because this tragic event is just the start.

Atomizer's picture

new world currency that's designed by the Party Six


IMHO, it won't happen. Have you and others noticed how they have ratcheted up crisis media news? Complete sign of desperation in their attempt to control. Everything ends once the WH is disinfected by means of unconstitutional laws. The more they create a crisis mode (kill/loot), the easier to remove them under US Patriot Act laws. In the near future, you will witness an entire new game of blaming others. The snake eating its tails will have second rounds at the buffet. Just watch :)

duo's picture

Do you think the Bernank, Geithner, et al would trade 100,000 lives for $20 cheaper oil?  You bet.  When you have the deflation, you can have more QE.

lolmao500's picture

Well if the coming change in status quo can stop the censoring of their porn, I'm all for it.  :)

I am more equal than others's picture

Though China gets all the media attention, Japan is still a critical supplier of numerous high-tech parts in the global supply chain. The Japanese global corporations have learned from experience that anything they make in China will soon be pirated, so they have withdrawn all the really high-tech manufacturing to the home islands.

Japan did the same thing to the US - now history is repeating itself.  That's funny. I wonder what would have happened if the US took the same precautions post WWII as Japan is now doing with China. 

velobabe's picture

mr smith, so enjoyed reading your little story about your life and all things japanese and asian. my first bicycle was a Shogan, made in japan. it took me to my next life. i had always hoped on having enough resources to visit japan one day. i hope i can still obtain this dream. i think a lot more americans have japanese DNA in them. i think the founders, who built this great island, knew they were venerable. the temples, japanese archways to shinto shrines, and paper walls. glad to hear your friends are ok. i hope everybody else is, as well.

reader2010's picture

NHK has a series on the Meiji Restoration of 1860s, and it talked about how they successfully learned (stole) technologies from England.

billwilson's picture

Enjoyable read and informative.


Looks like time for some yen printing. It will keep rates down and the yen low, while helping maintain a trade surplus. Definitely tough times ahead.

Seasmoke's picture

China, Japan, Hong Kong , Taiwan......what the difference

reader2010's picture

A major difference is that the Chinese hate/distrust each other while worship the westerners. The Japanese respect/trust each other but distrust westerners. The Koreans are somewhere in between the Chinese and the Japanese. 

Mr. Denny Kneel's picture

Nice work. Agreed on most points. I think many will be surprised by the kindness and unity that the Japanese culture will display in the coming weeks and months.

Depending on where recovery monies originate, this could be stimulative to the stagnating economy there. But definitely depends on where monies come from.

Do you have any info on the impacts on high tech. manufacturing from a destabilsed electric grid?

rolypolyfishhead's picture

An informative read, and a perspective I haven't seen anywhere else.


Thank you

Muir's picture

"Should Japan be unable to self-fund its ever-rising debt, then it would have to compete globally for bond buyers. Interest rates would have to rise, and that would eventually trigger a collapse in public finances, as the costs of servicing that rising debt exceeds the government's ability to borrow money."


No QE1 for the yen?



RockyRacoon's picture

There are lessons to be learned from this catastrophe.   California and/or the New Madrid fault are ripe for harvest.

chindit13's picture

In the ten years I lived in Japan I often used to fly around up north near yesterday's epicenter, landing at the various small to medium sized airports to refuel or get the thousand yen bowl of ramen. It was an odd and eerie sight to watch Sendai Airport now under water. I remember having to leave my shoes at the outside door, don a pair of way too small slippers, and make my way upstairs to the flight control center and weather office for permits and condition reports.

The cities and towns up there are admittedly mostly forgettable, one almost indistinguishable from the other, at least in terms of the homes and structures. Very narrow roads often have telephone poles intruding on to the pavement so much that two-way passage of vehicles becomes difficult. Lots of gray buildings, sprinkled with the occasional Denny's or Yoshinoya or Lawsons, weakly define each town. Despite the clutter, the streets are almost universally spotless, everybody sweeping the area in front of his own home or business daily.

Where Japan's simple beauty evidences itself is in the incredible order and uniformity of the agricultural fields, as if they were aligned by laser and etched with machine tool precision on to the earth. They're mostly rice, but there's also various fruits and vegetables, only the most perfect of which make their way to a store shelf. No grain of sand is out of place, as if each one was placed in a specific position only after considerable thought.

The debris-filled muddly waters from the tsunami are the absolute antithesis of everything the fields were lovingly and painstakingly groomed to be. As the waves moved across the land yesterday it was a visual yin and yang on a grand and horrific scale.

Japanese being Japanese, however, a year from now the people will have taken back their land completely, without complaint, but with memories of the human and monetary losses hidden behind their typical stoic mien.

Mark McGoldrick's picture

Nice post.

In Japan, one finds so much beauty and thoughtfulness in the most unexpected places; they take such pride and care in the smallest things, almost to the point of obsession.  

dwdollar's picture

I wonder if this event will demonstrate to the Japanese people the need for a true military force.

The rise of Japanese nationalism?

BlakeFelix's picture

An anti-earthquake military force?  In case the reactor melts down and awakens Godzilla?  They are better off with the money I think...

Hammurabi's picture

thank you TD for the beautiful article,

dearth vader's picture

Interesting piece, CHS, thank you.

As to the images, I was most fascinated watching those neat fields which 'chindit13' so aptly descibes, gobbled up, metre by metre, by the rolling slush. Fascinated, and sorrowful.

JackES's picture

I don't care at all.

US equity market is going higher.

TriggerFinger's picture

tongue in cheek?  or ethnocentric buffoon?  either way, revel in your ignorance   

Atomizer's picture

The more you dig into this manufactured crisis, you will begin to understand slated plans.

February 2011 -- Vienna

Rusty Shorts's picture

"IWAKI, Japan – Cooling systems failed at another nuclear reactor on Japan's devastated coast Sunday, hours after an explosion at a nearby unit made leaking radiation, or even outright meltdown, the central threat to the country following a catastrophic earthquake and tsunami."

Vlad Tepid's picture

TD, this was a reallygreat article that put a lot of things in perspective for people (except Michael. He's beyond help.)  I'd like to see more analysis about Japan from this author going forward into the recovery months ahead.  

chindit13's picture

My earlier post notwithstanding, there is an aspect of the Japanese character that is evidencing itself with regards to the nuclear reactor event, which is that people will do or say---or avoid doing---almost anything to save face.  In addition, the Confucian ethic often prevents knowledgeable, albeit less senior people from voicing concerns or offering advice to a senior, especially if that senior is acting as if he is on top of things.  Respect for authority and all that.

Obviously much of the scattered and conflicting information is due to the disaster itself and the difficulty of moving about and communicating, but much might also stem from what outsiders might call the peculiarities and idiosyncracies of the people.  There is a tendency to do what has always been done rather than adjust to changing or new circumstances, and a tendency to avoid "unpleasantness", which often means hiding from reality.  Ten people might be absolutely certain of the answer, but if the boss has his own answer, that will be what is followed, even if everyone else knows it to be wrong.

Japan had a nuclear accident several years ago, the details of which I cannot recall, except for that authorities refrained for hours from sharing information they knew to be critical, either out of shame or in order to spare "unpleasantness".  At least one plant worker, who had been carrying radioaactive liquids in a plastic bucket, died.

In another matter, related to Mad Cow disease, Japan used to peridocially test animals coming to processing plants for evidence of the disease if animals showed evidence of ill health.  After the autopsies, almost all of which were negative, the test facilities followed procedure and sold the carcass to a feed processing plant.  On one occasion several animals tested positive for Mad Cow, yet the normal procedure was followed and the diseased carcasses were still sold to a feed processing plant.  The Mad Cow prions ended up in the feed that was eaten by cows all across Japan, which is one of the prime means of transmission.  This is different from incompetence;  this is the result for the penchant for, or obsession with following procedure above all else.  These traits or characteristics certainly have advantages and for the most part have served the people and the country well, but there are times when they become a burden or an obstacle.

dearth vader's picture

Hi chindit13

"There is a tendency to do what has always been done rather than adjust to changing or new circumstances, and a tendency to avoid "unpleasantness", which often means hiding from reality."

Well put, but is this typical for the Japanese? It's exactly this same attitude which Kunstler, in his latest post, throws in the face of the American people and politicos for dreaming the American Dream with their eyes wide open, in disregard of the new reality.

YHC-FTSE's picture

Beautifully written, but I am not sure I share your fears. Even disregarding the cultural paradoxes, human beings have a natural tendency to band closer together for cooperation during times of turmoil. I realize American culture regards itself as the vanguard of the individual, but imo, only the paranoid, selfish, and psychologically damaged forget what we are first and foremost: Social animals. The manic empty pursuit of hedonism dressed up as individuality is, imo, sub-human behaviour and most often expressed in criminals. I would suggest you take a good hard look at your society first, before projecting the worst aspects of it to others. 

locinvestor's picture

I lived in central Japan between '91 and '02. I was lucky enough to extensively travel from Tokyo down to Kyushu (the southernmost island). I've also been to all of the affected areas that are in the news.

In some ways, Japan is similiar to the States. One example: the slowness of the "good old boy" network (keiretsu in Japanese). Will this meltdown affect the global markets? I'm not sure.

However, this means that the propagnada battle between environmentalists and nuclear power firms is on again. We'll see lots of screaming head "debates" on the news channels that won't accomplish anything.

Will this affect stocks? To a certain extent, yes. As for other things (bonds, commodities and more), it's too early to see.



ebworthen's picture


What about Japan and China (and Korea)?

Long time combatants - what are their relations now?  How would they side with the West?

I see conflict building in the Pacific - with China asserting themselves as a naval power.