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Open Markets and the “Deflation Spiral” in Japan
Wolf Richter www.testosteronepit.com
Ever since Toyotas and Hondas were forcing Detroit to shape up the hard way, the US government has pushed Japan to open up its markets, particularly its automotive market, and the fact that it’s still pushing shows how little success it has had. Back in the 90s, the cited reason for the near non-existence of US-branded cars in Japan was that they weren't of the quality Japanese consumers wanted. OK, but today?
"The US government urges Japan to address the full range of barriers in Japan's automotive market," pleaded the Office of the US Trade Representative in its just released 2012 National Trade Estimate Report on Foreign Trade Barriers. Indeed, the Japanese automotive market remains largely sealed off to US automakers through nontariff barriers such as lack of transparency, standards and certification issues, and impediments in building distribution and service networks.
It’s not just cars. The racket to protect Japan’s pork producers is almost silly—and very costly to the hapless Japanese consumer. Imported pork whose price exceeds the government-set reference price will get away with a 4.3% ad valorem tax. Any pork imported at a price below the reference price is slapped with an additional duty that brings its price up to the reference price. Hence, there are no lower-priced imports of pork, and pork is expensive in Japan.
And beef. The base tariff is 38.5%. But it jumps to 50% when import volume rises by more than 17% from prior year. Japan also uses health concerns as fig leaf for blocking imports entirely. In December 2003, a cow in the US that had been imported from Canada was discovered to have Bovine Spongiform Encephalopathy (BSE or Mad Cow Disease). Japan immediately blocked all imports of beef from the US. December 2005, under intense US pressure, Japan reopened its market to US beef, but with strict safeguards. When one single exporter violated one single rule a month later (it had shipped a forbidden vertebral column), Japan closed its market to all US beef for seven months.
The arm-wrestling continued. February 2011, Japan blocked beef imports from a packer in Nebraska that couldn’t prove, as the rules required, that the intestines in one shipment were from cattle no older than 20 months. It took till today, to get the ban lifted. Beef jerky, which has quite a following in Japan but doesn't have much of a lobby in the US, and other processed beef products are still blocked. Meanwhile, Japan had 26 BSE cases so far in its own herds (compared to 3 in the US). And now some of its cows are radioactive.
Tariffs impact a whole slew of items: citrus, apples, wine, cookies, wheat, wood products, shoes, leather, shredded mozzarella.... In addition, nontariff restrictions and entanglements, such as legendary customs processing, keep imports out or make them more expensive. However, fear of imports does not translate to luxury goods for which Japan used to be—until China jumped into that slot—the world's number one market. Cognac, dresses, handbags ... Ferraris. (Life, even for Ferrari owners in Japan, goes on in its own manner: a convoy of 20 supercars sped down the Chugoku Expressway, entered a left-hand bend at 90–100 mph. Speed limit was 50 mph. The highway was wet. And the rest was very expensive.... Superlative Supercar Pileup, with video of the aftermath.)
And then there is rice, the sacred crop. Of the 1.63 million farmers in Japan, 80 percent are part-timers who make 90% of their income from other sources. Farmed on small plots, rice is Japan’s most inefficient crop and absorbs most of the agricultural subsidies. And it’s expensive in grocery stores—a 5 kg (11 lbs.) bag of the cheapest rice costs ¥1,650 or $20. A 5 kg bag of Koshihikari from Niigata Prefecture will set you back ¥2,299 or $28. And now that fears of contamination are added to the price, imports have become very popular.
Alas, imported rice gets whacked with a tariff of ... 778%! Ouch! Only 682,000 metric tons of rice may be imported tariff-free, most of which is acquired by the government for stock and released later for animal feed. Only about 100,000 tons can be imported tariff-free as food—merely 1.25% of domestic production of 8 million tons. Hence, even imported rice is outrageously expensive.
The latest excuse for blocking imports: Takeshi Nakano, associate professor at Kyoto University and ex-finance-ministry official, one of the media poster boys of protectionism, said that cheaper imports would aggravate deflation.
Ah yes, there it is, the reason for deflation—though he used it in a twisted manner. In 1996, when I went there the first time, Japan was a shockingly expensive country, even in mundane things. Trade liberalization gradually opened up the market to imports and forced domestic producers to become more efficient and competitive. Eventually, this will even impact rice farming: some people will give up their hobbie to make room for more efficient farms. As doors are being pried open, prices will ease further to approach international levels. And in the mayhem of Japan’s unspeakable fiscal woes and tough economy, this is a bit of good news for the consumer.
While the Japanese were already struggling with their nuclear energy conundrum in the wake of the Fukushima disaster, new revelations seeped out about how Japan’s nuclear industry squashed regulations that would have prevented numerous casualties. For a debacle that shocked even the Japanese, read.... A Revolt, the Quiet Japanese Way.
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Yes, the Yakuza did prefer big, American cars, but don't know about current times. Also, a barrier to US automakers, were their arrogant attitude to force Japanese drivers to drive left side steering wheels and would not change to the right side that Japanese drivers use.
I've talked to Europeans and Asians and both say that American food is inferior in taste with theirs.
In Japanese history with the foreign invasion and the Tokugawa Shogunate period, kicked out the foreigners and put a chain around Japan.
The Japanese remain mercantilist economic animals and the most racist population anywhere on the globe. Even now, with problems of a declining and ageing population looking them right in the face, they still won't allow immigration to dilute their sacred racial purity and social harmony. The US seems to be adopting the Japanese model of zombie Banks and a debt slave population living in boxes, told what to do in the best interests of the Corporations and the politicians who serve them,
And, incidentally, a cup of coffee in a hotel in Tokyo (Typical hotel coffee not a Starbucks Latte) still costs 10 Dollars after all these years of deflation.
Still impossible to understand the inscrutible little buggers.
Dude you, sorry but sound like a racist.
Fuck you, you tiresome fruit...
Gordon, cut the crap and make a useful comment or STFU
"useful"?
like a clone?
you sound like lizzie
but i appreciate the implied humor that your moronic post is "useful"
pms? smoke some of this...