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Japan’s Slow-Motion Tsunami

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com

What got lost in the escalating Japan-China scuffle was an unassuming national holiday in Japan on Monday that symbolizes in the most respectful manner the slow-motion economic tsunami rolling over the country: “Respect for the Aged Day.”

The day is always preceded by a flurry of announcements related to aging. On Friday, the Ministry of Health, Labor, and Welfare released the latest data points of a trend that has persisted for 42 years: the growing number of Japanese over 100 years old. It was gradual at first. In 1963, when the data series was started, there were only 163 centenarians. It took 35 years—to 1998—to add 10,000. Then it accelerated, taking five years to add the next 10,000, four years to add another 10,000, and two years to add the next, bringing the total to 40,000 centenarians by 2009. As of this weekend, there were 51,376 centenarians—3,620 more than last year.

And this despite the earthquake and tsunami that killed 15,870 people; 2,814 remain unaccounted for. The tsunami, responsible for the vast majority of the fatalities, had hit the elderly the worst: 56% of those who died were 65 or older; three-quarters of those missing were over 60—the generation left behind in small towns and fishing villages along the coast as young people had migrated to the cities. The victims hadn’t been able to flee or hadn’t been quick enough.

Due to the devastating impact of the tsunami on the elderly, life expectancy dropped in 2011: for women by 0.4 years to 85.9 years, pushing them down to second place behind Hong Kong; and for men by a notch to 79.4 years, equal to Italy and just below Switzerland. By now, 24.1% of the population is over 65. In 1965, 9.1 workers supported each retiree. By 2050, there will be one worker for each retiree.

These demographic trends are on collision course with a peerless debt nightmare. By March 2013, the end of the current fiscal year, gross national debt will surpass one quadrillion yen, or $14 trillion, a mind-boggling 240% of GDP. Of its current outlays, 56% have to be borrowed. Budget cuts? Nope. The budget increased. Largest item: Social Security, at 29%.

Sole heroic effort to address the problem? The unpopular consumption tax increase from the current 5% to 8% by April 2014 and to 10% by October 2015. Alas, it’s a joke; it won’t kick in unless GDP grows at least 2% per year—and that has, given the current economic malaise and declining population, practically no chance of happening.

So why does the government run up these gigantic deficits to subsidize Japan, Inc. and to fund the welfare state, boondoggles, bridges to nowhere, and worthwhile infrastructure projects? Because it can.

Borrowing at near zero cost has been its hallmark for years. Due to Japan’s institutional setup and cohesive insular psychology, the government has been able to sell 95% of its debt within Japan. Individuals directly or indirectly hold over 50%. Government-owned or controlled institutions hold over 40%. Among them: the Government Pension Investment Fund, one of the largest pension funds in the world; the government-owned Post Bank, the largest deposit holder in the world; and financial institutions the government can lean on. Then there is the busy Bank of Japan. Foreigners hold only 5%, for decorative purposes. This system hermetically protects the government from any discipline that credit markets could otherwise impose.

But in Japan, you see groomed streets and gleaming public transportation infrastructure. You see innovation, energy, packed trains, and crowds milling around. You see urban renewal where whole city blocks of dilapidated buildings were replaced with new structures. Debt funding is a great thing. For a while. As long as the Japanese believe that the government can meet its obligations, and for as long as the country doesn’t run low on investors.

Which is about to happen. The younger generations are less numerous and earn less, and thus pay less in taxes, than their predecessor generations. They buy fewer houses, and when they buy, it’s later in life. They have to work harder for less. They have no money to save, and they no longer have any illusions that the pension system will be there for them.

Unlike booms and busts, demographic changes advance at a glacial pace. But the first waves of that slow-motion tsunami have already reached the land. This time, it’s the younger generations who are paying the price. But it remains uncertain for how long and to what extent they’re willing and able to pay it—to prop up the system and allow their elders to enjoy their long retirement years.

Another country sinking ever deeper into a fiscal and economic quagmire is Argentina, whose policies are taking on desperate and ugly forms. Read.... Not An Effective Capital Control, Import Control, Or Tax Measure – But An Effective People Control, by stilettos-on-the-ground economist Bianca Fernet.

And here is my book about Japan—a “funny as hell nonfiction book about wanderlust and traveling abroad,” a reader tweeted. “Great read ... what a fantastic finish,” another reader tweeted. Read the first few chapters for free.... BIG LIKE: CASCADE INTO AN ODYSSEY, at Amazon.

 

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Tue, 09/18/2012 - 12:17 | 2807343 rustymason
rustymason's picture

I see no problem here. Just keep soaking it.

Tue, 09/18/2012 - 12:14 | 2807313 rustymason
rustymason's picture

OK, so mass democracy and liberalism were indeed stupid ideas. Who knew? Well, here we go back to smaller, constantly warring tribes and nation-states, whether we want to or not. Brush up on your ancient history to see how much fun that is.

Wed, 09/19/2012 - 02:58 | 2809997 AnAnonymous
AnAnonymous's picture

mass democracy and liberalism were indeed stupid ideas.
_______________________

Mass democracy? What is that? In the US, less than 50pc of voters put an actual vote in the voting booth.

Is it what 'americans' call mass democracy? Probably.

What is around right now is 'americanism'.

Wed, 09/19/2012 - 02:46 | 2809989 Zero Govt
Zero Govt's picture

yes there's 2 tribes going at it in Somalia

but the 80 year long farce of Isreal-Palestinme puts to bed anyones idiotiic delusion Govt is a peace provider

what could possibly be worse than Govt, the most inept, ignorant, corrupt and destructive institution in history ?

Tue, 09/18/2012 - 11:38 | 2807134 GreatUncle
GreatUncle's picture

Japan is interesting the debt is held within Japan and that means no selling it around the world to turn a profit. In theory by holding it this way they can just re-evaluate the Yen by knocking off 3 0's then it don't look so bad. The number just got smaller although it is the same amount of debt.

The worst thing to do is tie your debt to another country as to do so means you are expected to perform for the holder of the debt. That is Greece and potentially Spains position and reckon a few other nations are not telling the truth on this.

Now if a country takes a turn for the worst and holds your debt they may use what that debt represents to try and stabilise their own economy. That would be exploitation would it not?

So a question?

What 1st world nation has not really has a recession since the 70's? Demands 100% employment as a must and tries to exploit anything it can in the world to make their own economic system hold up.

Leave you to answer that one as the pieces of the puzzle start to fall into place.

Tue, 09/18/2012 - 07:53 | 2806407 billwilson
billwilson's picture

Get the married women back into the labor force. Would be a huge boost to the economy. They do have latent ammunition, but refuse to use it, or don't even relaize it is there.

Tue, 09/18/2012 - 08:25 | 2806474 LawsofPhysics
LawsofPhysics's picture

Doing what?  What product or service will they be providing that the world wants or needs?

Tue, 09/18/2012 - 11:28 | 2807100 GreatUncle
GreatUncle's picture

That is the same scenario for all nations globally and if anything as contractions occur around the world demand for anthing is likely to fall.

You cannot export yourself out this as the global economy is a single trader with no customers unless you seen little green men from mars somewhere.

Tue, 09/18/2012 - 06:31 | 2806289 egoist
egoist's picture

I wouldn't be too quick to trust the claims about the number of centenarians. Per a news story I heard a couple of years ago, the reporting of the dead to the government is very archaic and unverified. And, the welfare checks keep coming to the family, so long as mum lives to 160 years.

You can start justifying all kinds of census data mandates, when everything ties back to a welfare check.

Tue, 09/18/2012 - 05:18 | 2806249 falak pema
falak pema's picture

Here is a good article that cuts to the bacon on this issue : Asian infighting over South China Sea - Business Insider

This is the hidden face of South China Sea Helen that has launched a thousand chinese ships! 

1000 Chinese Boats Set Sail Towards The Disputed Islands - Business Insider

Tue, 09/18/2012 - 00:15 | 2806074 Vlad Tepid
Vlad Tepid's picture

I don't see the crisis.  At some point, they will simply default (or hyperinflate) and the whole stack will come down.  Living standards, especially for those on fixed incomes, will go down, and they'll pick up the pieces and start over again.  This is the only possible outcome for EVERY country facing this problem.  The big difference is, Japan is less likely to immediately turn feral on their neighbor and demanding a pound of flesh while moaning for brains and forming pillage bands.

This demographic tsunami nonsense is just that - nonsense.  The aging population of the industrialized world (indeed all of the world) is a foregone conclusion.  The long-term reaction to it is what will malke the difference.  Europe and the US have decided that by importing Third World coolies to nursemaid their eldery and then turn the keys over to them and their culture, religions and traditions is the way to go.  Japan has said "We'll keep our polity, thank you very much, even if there will be fewer of us to enjoy the company.  Keep your tired, poor and oppressed.  Send your huddled masses to Australia, Los Angeles, and the banileues."

Tue, 09/18/2012 - 07:17 | 2806332 falak pema
falak pema's picture

So Vlad you don't believe in the migratory flows that populated Europe and USA?

Wherever the fertile lands become unstaked the natural trend was for people to come in. The Celts, the Huns, the Visigoths, the Franks. What's to stop that from recommenicng if the indigent population starts dying off?

We have created artificial barriers, nation-states, whose viability is now questioned by those who run the world and want mobility to make money. That the new global empire. 

 Entropy is a bitch. And Life is what it is; its people on the move. And the Oligarchy power structure is all for it.

When Caesar and mother nature agree on the same agenda it becomes Pax Romana. 

First world has to decide if its in or out of what the new rulers have brought about. Can't have your cake and eat it! 

Tue, 09/18/2012 - 02:58 | 2806186 AnAnonymous
AnAnonymous's picture

Or more precisely, 'Americans' are more likely to turn a blind eye to Japan's doings.

It takes an 'american' to coldy declare that Japan is less likely to turn feral on their neighbour when this site has two articles the other day on Japan trying to land grab on China.

Hey, US citizenism is as US citizen does.

Tue, 09/18/2012 - 13:15 | 2807559 akak
akak's picture

It takes a Chinese Citizenism citizen to coldly declare that Japan is more likely to turn fecal than their neighbor when Chinese Citizenism citizens daily cover their roadsides in their own foul waste.

Hey, Chinese Citizenism shit is Chinese Citizenism deng.

Wed, 09/19/2012 - 03:01 | 2809999 AnAnonymous
AnAnonymous's picture

As shown constanty, it takes again 'americans'

It takes 'americans' to indulge into the fantasy of chinese citizenism in order to avoid facing 'americanism' reality.

Djeee, 'americans' are everywhere these days...

Wed, 09/19/2012 - 03:38 | 2810034 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Djeee, 'americans' are everywhere these days...

Djeee, funny to hear such sanctimony from one who blobbed up, up, and away and landed in France. The French people have enough problems as it is, yet you force them to endure the new world odor of your roadside smellatio.

The cruel olfactory nature of AnAnonymousitizenism is eternal.

Wed, 09/19/2012 - 14:49 | 2812246 akak
akak's picture

 

The cruel olfactory nature of AnAnonymousitizenism is eternal.

Much like the raging anti-American prejudice and algebraic coconutterly hypocritizenism of the Chinese Citizenism roadside-shitting troll.

Mon, 09/17/2012 - 23:59 | 2806049 lasvegaspersona
lasvegaspersona's picture

Stuck

I think you are only half right.

In 1960 Belgian/American economist Robert triffin observed that to continue to be the worlds reserve currency (and by implication get its currency to the rest of the world) the USA would have to run constant trade deficits...and HAS it!! For 37 straight years the USA has had a trade deficit. The exportation overseas of our manufacturing was the price we paid to get the 'extraordinary privilege' of having the reserve currency. This arrangement has allowed us to get our net imports for nothing more that the cost of the paper on which the treasury is printed. We have enjoyed a 40% discount on the stuff we trade for compared to every other country. This has been paid for with the jobs of the workers of America.

When this comes to an end, as it is...we will see a huge increase in import costs and a return of jobs. Before that happens however many other events must come first. We will see the end of the dollar as the reserve currency then the end of the dollar. When that happens the entire world will have to recalibrate as they use our dollar as their reserve...ooops...resetus maximus...yup it will be big, better stand a bit further back when this puppy blows.

Tue, 09/18/2012 - 03:03 | 2806191 AnAnonymous
AnAnonymous's picture

In 'American' economics, outsourcing (at all levels, not only transnational level) has to happen to afford more consumption.

The 40pc discount has allowed the US to increase the number of better paid jobs.

If ever the currency reserve status is lost, it will impact down every type of consumption.
Work is consumption.

Less inputs due to the incapability of postponing their payment (money used as debt) will mean less work capacity in the US.

Mon, 09/17/2012 - 23:51 | 2806039 q99x2
q99x2's picture

As long as there is oil off the coast of Japan's newly acquired islands and the US will fight China so Japan can keep them they'll be ok. They seem to survive radiation pretty well.

 

Tue, 09/18/2012 - 11:02 | 2806980 Precious
Precious's picture

Definitive maps, even from historical archives of China, prove that Senkaku Islands were always Japan's.  They're simply a geological extention of the same archipelago.

Mon, 09/17/2012 - 23:27 | 2805989 Stuck on Zero
Stuck on Zero's picture

Japan has been able to continue their policies for forty years because they are destroying the youth.  American youth.  Japan has no natural advantages in manufacture but it has bribed every American politician to avoid having to trade fairly.  We just suck it up.  Tens of millions of Americans have lost high-paying jobs to the mercantilist rascals.  It is literally impossible for U.S. manufacturers to sell product in Japan.  Lets turn the tables for once and see how they like it. See how many Americans buy a Toyota when we apply the same trade restrictions to Japanese products as they do to ours.  How about $75,000 for a Prius?

 

Tue, 09/18/2012 - 03:05 | 2806194 AnAnonymous
AnAnonymous's picture

The 'American' middle class wants to consume.

The scheme as depicted allows more consumption for the 'american' middle class residing in the US.

Tue, 09/18/2012 - 13:08 | 2807541 akak
akak's picture

Nowhere on earth is per capita consumption growing faster than in China.

Face it, troll: it is YOUR people who are the blobber-uppers extraordinaire.

Wed, 09/19/2012 - 03:05 | 2810004 AnAnonymous
AnAnonymous's picture

My people? Quite a laughter for sure.

Nope. 'Americans' are shifting the mass of their consumption on to other people.

Chinese do not consume for themselves, they consume to enable 'americans' around the world into their 'american' way of life.

The more 'americans' outsource, the more they consume and the more they shift part of that consumption onto other people.

Chinese per capita consumption is something like 2/3 'american' driven.

'American' consumption everywhere...

Indeed, as 'americanism' is spreading in China, well, 'american' chinese are waiting for their share of consumption on the side lines.

In the end, it will only add to the pool of 'american' consumption.

'Americanism', the best thing to ever happen to humanity. At least, that is what 'americans' claim...

Wed, 09/19/2012 - 03:25 | 2810021 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

My people? Quite a laughter for sure.

Indeed they are. However, in reading your comments, we understand their greatest shame and are not without pity.

Wed, 09/19/2012 - 03:17 | 2810011 Intoxicologist
Intoxicologist's picture

Apparently, Porta Potties haven't yet been outsourced to China.

Waiting on the sidelines sounds like a messy ordeal.

Tue, 09/18/2012 - 00:07 | 2806062 Vlad Tepid
Vlad Tepid's picture

Japan has you preempted in that they build most of the cars sold in the US, in the US.  To spite them, we'd have to cut off our own face (even further.)

Also, the Japanese consumer generally has a thing for "quality" which is why American cars have not grabbed the market.  If you think a silly little (huge) tariff is going to stop a flight to quality or even a perception of quality, you have not been to they buy-a-thons in the Prada and Hermes stores in Ginza.

Tue, 09/18/2012 - 10:22 | 2806844 Stuck on Zero
Stuck on Zero's picture

You just contradicted yourself. If the cars were built here tarriffs would have no effect.  At the same time why aren't U.S. built Japanese cars sent to Japan?  In all cases it comes down to mercantilism.  The mercantilist countries will never, ever permit fair trade.  The U.S. should slam the door on dealing with them or we will become a third world nation soon enough.

Tue, 09/18/2012 - 11:59 | 2807232 Meremortal
Meremortal's picture

You would have fit right with the economic elites of 1930.

Tue, 09/18/2012 - 10:55 | 2806974 Precious
Precious's picture

If you knew anything at all, you would know that the US is constantly getting the better end of the bargain with Japan.

Tue, 09/18/2012 - 11:09 | 2807032 suteibu
suteibu's picture

Indeed. As former State Dept employee, Kevin Maher, said (and was removed from Okinawa because of this and similar statements), the US has a very "sweet deal" with the Japanese.

As for the autos, there are only restrictions on safety and emmissions, not dissimilar to California (and, of course the right side driver) for American automakers.  As has been pointed out, the Japanese will buy a BMW or Mercedes because of the quality issue but see US autos as inferior to their national brands.  The government does nothing to prevent US auto sales in Japan.  The US has the same problem in South Korea which just signed a FTA with the Americans.  Still, Koreans buy Hyundai.

Mon, 09/17/2012 - 23:03 | 2805951 Peter Pan
Peter Pan's picture

If there are two factors that will crucify economic revival it's terrible demographics in combination with unfunded liabilities. Even Europe is facing this challenge, so how they propose to drag the world out of the economic abyss we are headed towards is beyond me.

Mon, 09/17/2012 - 23:37 | 2806009 kliguy38
kliguy38's picture

Simple solution.....just rearrange the demographics......pick your instrument ......thermonuclear....bio......etc.......works everytime

Tue, 09/18/2012 - 02:27 | 2806170 putaipan
putaipan's picture

as i was qouted saying over on the chinese rehypothocated/vaporized steel post- "bring on the rinky dink holograms of the maitreya!"

Mon, 09/17/2012 - 22:54 | 2805932 Son of Loki
Son of Loki's picture

Japan is in a Depression of mega proportion:

 

http://www.bloomberg.com/news/2012-06-04/japan-s-debt-sustains-a-deflati...

 

They are desperate.

Tue, 09/18/2012 - 11:00 | 2806991 Precious
Precious's picture

When in the entire history of Japan, have they not been desperate.  The place is a rain forest on some rocks in the middle of nowhere.  There's not even room for a decent backyard swimming pool.  Japanese are by nature desperate and therefore frugal. As long as no one drops atomic bombs or sells them defective nuclear plants, they will probably survive somehow.

Tue, 09/18/2012 - 07:22 | 2806339 JPM Hater001
JPM Hater001's picture

And yet one has to wonder, "When it's all over will they have learned their lesson?"

Mon, 09/17/2012 - 22:09 | 2805865 km4
km4's picture

RT @Stratfor Protests have broken out in 85+ Chinese cities over the Japanese govt's decision to buy 3 of the #Diaoyu/Senkaku Islands...

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