Authored by Andrew McKillop,
The Sickly Giant
Japan has the the world's third-biggest economy and was only recently pushed into this third place by China - but it remains world No 1, and by far, as measured by its sovereign debt-to-GNP ratio. Its new Liberal Democratic Party-LDP government, no different from LDP governments which have almost exclusively ruled since 1955, is setting out with a proud (in fact desperate) task: to end deflation by pushing down the world value of the JPY (yen) to a theoretical point where "inflation of 2% or 3% a year" will be possible.
The return of inflation, in official Japanese liberal newspeak, will make the economy less sickly even if the strategy "has risks". One of these is war with China, if only as a (Japanese) crowd pleaser, and another is selling off Japan's over-one-trillion dollar holding of US Federal debt at exactly the right psychological moment to implode the US economy, already teetering on the brink of its fiscal cliff.
The sickly Japanese economy can look quite healthy on cursory first glance. Probing deeper shows it is much, much worse than most Japanese either know or non-Japanese want to know. One reason that "nobody wants to know" is because Japan is the world leader in Neoliberal economic decline, having run the gamut of New Economy fads and foibles over more than 20 years. It has blown them up one by one, and slumped ever further into permanent and probably terminal decline. To be sure, firebrand Free Marketeers will contest this picture, saying that Japan is an entitlement strangled, over-developed monoculture with indelible cultural barriers to "the open economy" that however in no way prevent the country technologically innovating at a rapid pace, and having much more than a random selection of thriving world-class multinationals.
Debt And Deficit
25% of Japan's annual state and local government budgets go to servicing debt. Interestingly enough, the very first stock market scams - France's Mississippi Company scam of 1719-1721 and its 'sister scam" in England, the South Sea Bubble - were driven by greedy and incompetent monarchs (the 18th century equivalent of Big Brother government) running up massive debts. Scraping around for a quick fix, the "finance sector professionals" advising the greedy monarchs soon hit on cranking up an asset scam, Facebook or Apple-style, and siphoning quick and fraudulent profits from this to the monarchs. After a short while, of course, the scam went 'Madoff the wall'. The asset mountain imploded leaving nothing but paper promises, popular rage, and more debt.
Japan can in no way be criticized for being ahead of the Neoliberal pack in running up its sovereign debt to delirious extremes and, much later on, panicking about it. This is what Neoliberal Freedom is all about - called "laisser faire"!
The incoming, recycled LDP stalwart Shinzo Abe – once again destined to be Japan’s prime minister by Japan's No Alternative political machine – lost no time in undertaking to flood the economy with money until inflation reaches at least 2%. The critical point is that Japan is the country where deflation has been a "permanent" fixture, a spinoff from its permanent decline and despite its incredible debt and now impressively huge trade deficits, and a list of other no-no things for the trader fraternity hunched over their playstation consoles. Apparently, Abe and his LDP Old Guard imagine that "gaijin", including the Chinese, are awed by the risks this sets for the world economy and will not react.
Foreigners will not show disrespect to Japanese bonds, but will obediently hold them. They will also, in very orderly fashion, only moderately sell off the JPY, by exactly the amount needed to get the magic 2.5%-a-year inflation rate that Japan's new (in fact old) bosses pine for. Japan is by definition “too big to fail” – but unfortunately Japan's liberal and neoliberal Apprentice Sorcerors are dreaming.
For outsiders, whether we call them gaijin, Martians or Wall Street Journal editorialists, Japan seems to be struck by a strange curse. It’s population is shrinking rather fast, surviving Japanese are therefore rapidly ageing, consumer attitudes and behaviour go from bad to worse - Japanese will not consume - Japanese savings are "ridiculously" high with bank deposits bringing 0% per year interest, taxes are high, the country makes only the faintest attempt to attract talent, ideas or products and services from the rest of the world. Its agriculture is a nightmare of low productivity and high subsidies, its uncompetitive rural industries are cosseted by the government to the point of absurdity. Its reaction to the Fukushima disaster - abandoning nuclear power - appeared 'unrealistic' to some, and its theatrical bellicosity in response to China's theatrical bellicosity over the disputed South China Sea islands (Senkakus in Nippon-go, not in Chinese) seems unrealistic to most and outright dangerous to most.
Gaijin criticism of Japan however faces all kinds of problems: Japan has solved the conundrum of "progress without growth", but this has made Japan "unadapted" or out of synch with the present real world and what at present is the only slowly dissolving and dispersing global economy. The Senkakus issue is of course "only symbolic" but the problem is that War and Circuses are a liberal trick dating back almost as far as the Mississippi Co. crash, if not further.
For Marie Antoinette and her quack doctor Francois Quesnay (called "a founding father of liberal economics"), Bread and Circuses seemed the right way to fool the crowd at the gates of the Bastille but in her case this was a fatal error: she literally lost her head, by guillotine, not so much later on. War and Circuses can be called the hard-edged, stout-lipped ultimate and final version of liberal mindwarp, to be used only after the economy has been sucked dry by bottom feeders and imploded by liberal burger-nothings spouting idiot-friendly one-liners.
Today's Japan, after too many decades of New Economy fooling around, has the government we might expect or fear. Shinzo Abe's LDP has a sure and certain ally in parliament in the shape of the far-right Japan Restoration Party (JRP), led by Japan’s 80-year-old version of Dick Cheney, Ishihara Shintaro. His plan for the disputed islands is for Tokyo's city government to purchase them from their private Japanese owner, and station “civil servants” on them, which is Japanese coded language for Japanese SDF, Self Defence Force, personnel. Even "SDF" now has special meanings, because Japan's "self-defence" navy now boasts roughly four times more major battle-class ships than Britain's Royal Navy. Placing these "civil servants" on the disputed islands can only draw one possible reaction from China, which in absolutely no way would allow this provocation to slide.
Japan can be called the nation that even if it did not go the fastest, certainly went the furthest with nuclear power, that is so-called "civil" nuclear power.
Japanese in March 2011 were able to witness the simultanous meltdown of at least 3 (possibly 4) reactors on primetime TV, along with hundreds of millions of non-Japanese. Probable cost - to the state of course, not Tepco the owner and operator of the reactors - of clean up and economic recovery operations will probably be more than $500 billion, even if this is peanuts compared with Japanese sovereign debt! Much more important and proving again, if needed, that "civil" uranium fuelled reactors are only good for making nuclear weapons and generating expensive electricity, the JRP regularly crows that Japan is a "single screwdriver turn" from nuclear weapons capability and can at any time start production at an initial rate of four Hiroshima-equivalent weapons-per-week. In total, the JRP goes on to boast, Japan can have fully functional nuclear weapons in at most two months from getting the green light - from Shinzo Abe's governing party.
The US 'Foreign Policy' magazine, described as "administration friendly", suggests that the lure for Japan to go nuclear, despite Hiroshima and Nagasaki, despite Fukushima, may be too tempting for its current War and Circuses, career liberal politicians with retrograde and spurious nationalist credentials. 'Foreign Policy' goes on to imply that the White House, if not Americans at large would appreciate this – because it would tend to neutralises the Chinese nuclear threat in the region, and "reset the game" of regional geopolitics at a highly belligerent zero.
Japan's endgame flirt with Neoliberal mindwarp, what we can call the "slogan based economy", has brought about a situation where War and Circuses is surely on the Japanese political agenda, along with Japan's threats to sabotage the global economy. The inventors of kamikaze suicide war now have an Old Guard of political deciders who are prepared to pilot the economy straight into the ground, while bleating about "national pride". After these have-beens have been dumped in the trashcan of History, however, the Japanese nation will really re-emerge and be proud to do it.