Japanese Economics: The Sun Never Set, The "Lost Decades" are a Myth, and Everything is Fine?

Remember the early 90s when Japan’s miraculous economic growth suddenly halted and the nation plunged into icky recession? It’s been minimal growth and lackluster asset performance since, right? Well, what if that that whole story is just a twisted economic fairytale?

• • •

The Tech Fit
Yes, admittedly, covering retrograde forensic analyses of early 1990s Japanese economic paradigms isn’t the usual AkihabaraNews fare. That being that, however, the subject does bear mentioning here - particularly as it relates to the following words: Sony; Sharp; Panasonic; Olympus; ummm, what else... semiconductors (those go in electronics, yeah?); electronic component manufacturing; industrial robotics... you know, all that tech stuff that in sum basically amounts to the fundamental pillars of the world's third largest, and arguably most advanced capitalist economy. Ever.

So, angling this in, digressing slightly to the four heavy-hitting electronics firms mentioned above, it’s no secret that they’ve been hitting a lot less heavily, their relative levels of innovation are kinda meh, and their bottom lines have gotten... bottomer. But all that happened long after the early 90s economic crisis in Japan, and until they all began sliding, they continued making obscene stacks of cash well into the 2000s. And they weren't alone.

How was that possible? Wasn’t Japan’s economy in a state of sorta ambient disarray?

Well, What if Everything You Know about J-Bubble Economics is Wrong?
Okay, so here’s the deal: according to the common economic knowledge, in the twenty-few years since Japan’s “Bubble Economy” burst, the so-called “Lost Decade(s),” macro-economically speaking, things over here have just been a mess. Hosed. Limp. Going all kinds of nowhere. Both here in Japan and abroad, that’s been the word on the street.

Everybody knows that. The post-1990 Japanese economic nosedive is widely cited as a cautionary sign along the freeway of modern, predominantly free-market capitalism. That unfortunate experience with Bubble Economics (バブル経済, “baa-bu-ru kei-zai,” for J-pronunciation fans) has become the poster child for what happens when everyone falls way too in love with their stuff, ridiculously overvalue a whole lot of it, and then one day, inevitably, receive a visit from The Market - who knocks on the door and is all like “Hey, guess what, thanks to your shenanigans, turns out your stuff is actually relatively worthless. Deal with it! KTHXBAI.”

What follows are large-scale, generally bad economic things. J-Bubble goes pop. Economy remains on life support for several decades, and eventually some technosnarky writer, who probably had a mullet at the time, takes up the issue in August of 2013 (intentionally using very general terms in order not to scare off readers, and also because economic jargon is supremely annoying).

But Wait, Not so Fast - What if the Sky Never Fell on Japan?!
There are contrary analyses; not everyone in the econosphere agrees on what happened after the pop. In fact, some say there was no nose-dive, but rather, a slight obligatory drop, a lateral shift and refocus, and a subsequent stabilization resulting in much more modest and realistic rates and patterns of growth and prosperity.

One guy in particular, perfectly named economist Eamonn Fingleton (very likely impossible for a name to scream “ECONOMIST” any louder), dismisses outright the whole concept of the Lost Decade(s). With exactly zero around-the-bush beating, he flatly states that Japan’s post-1990 economic debacle is largely a fabrication. And he’s got some interesting points.

According to Mr. Fingleton, who lived in Japan for 27 years, during the so-called Lost Decade(s) that followed Japaneconopocalypse, two factors stood out among a host of other points that are wildly inconsistent with an economy in hospice care:

1. “Japan has increased its net overseas assets by nearly $3 trillion - at a time when the United States’s net overseas LIABILITIES ballooned by $8 trillion.”

2. “...whereas the U.S. labor force increased by 23 percent between 1991 and 2012, Japan’s labor force increased by a mere 0.6 percent. Thus, adjusted to a per-worker basis, Japan’s output rose respectably. Indeed Japan’s growth was considerably faster than that of Germany, which is the current poster child of economic success.”

Curious, because most casual business and market observers, and serious economists with several letters after their names, would describe Japan’s economy over the past 20 years as moribund. Stagnant. Flaccid. Not that they’ve seriously investigated it - it’s just one of those things we all know. Right?

Well, let’s take a look at Japan’s widely cited-as-evidence stock market, the Nikkei 225 Stock Index Average thingy. It’s nowhere even remotely close to the levels it saw 22 years ago, yet in a something of a contradiction, Japanese society was then and has largely remained dominated by an overwhelmingly affluent middle class with very high savings rates - not exactly economic calamity. The American Dow Jones Industrial Average, on the other hand, is currently reaching all-time highs, yet individual American wealth has plummeted, real wages have truly stagnated (if not receded), savings rates are abysmal, and aggregate wealth has profoundly concentrated at the top of the economic pile.

Clearly the favorite refrain of economic doomsayers domestic and international, that whole pointing to stock markets as strict and accurate representations of economic well-being thing, is fraught with being... fraught with things. Could it be that, at least in the modern Japanese and American economies, the actual factual most useful features of stock markets are, in most cases, not so much related to the well-being of the populace, but simply games investors enjoy playing with each other? Probably not that simple, but it kinda has that stink to it.

Meanwhile, for those watching the watchers watch, rather than divining infallible meaning from their behavior, more attention toward other factors like “Are everyday people better or worse off, or are things the same?” seems much more warranted. Because like, you know, the captains of industry don’t row their own boats, as the kids say.

Mr. Eamonn Fingleconomist goes on:

Though they rarely say so publicly, the Chinese are, of course, privately under no illusion about whose economic model - America’s or Japan’s - is better. This is surely implicit in the pattern of their trade. After all they have long bought vastly more from Japan than from the United States - at last count about 40 percent more. And this despite the fact that Japan’s workforce is little more than one-third of America’s. What they buy from Japan moreover consists almost entirely of high-tech goods - specifically the advanced materials, components, and production equipment needed by Chinese factories to make the world’s consumer goods.”

So, things are not always as they seem - or at the very least not so cut and dried and packaged as economic gospel, case in point. The uber-appropriately named author of the referenced piece provides an intriguing insight into our (mis)perceptions of Japan’s modern economic history, and his comments & analysis are well worth a read. Jump through to Forbes below to really dig in.

The Let’s Take a Moment to Make Fun of and be Thankful for Economists Addendum:
First, isn’t it kinda awesome how economists always look exactly like economists should? Kinda like the Tuba Paradigm; you know, where like, in any culture anywhere on earth, junior high and high school kids who play the tuba are pretty much all shaped identically and have essentially identical social anxieties. Not that any of that’s true, but it’s like totally true.

Also worthy of ridicule is the source of economists’ power - their matrix of leadership, their arc reactor, their dilithium crystals: their jargon! While an understanding of the principles of economics is essential for the modern human, economist-speak is largely useless to 99.99% of all living, thinking mammals. The minutiae of said jargon, combined with economists’ apparent aversion to simile and accessible metaphor (Freakonomics and a few celebrity economists do get a pass here), in concert with what seems at best a shrugging indifference toward being like, you now, understood by anyone other than your econodorky peers, leaves economists huddled amongst themselves, hiding their playbooks, and ultimately serving not much purpose for the everyday citizen.

So, economists of the world - you’ve got so much to share - do better with the human communication!

Oh yeah - the second part: why should we be thankful for economists? Well, think about it: aside from homo economis, who really wants to suffer learning all that jargon only to be required, as one might say, to play the tuba?

Unless it’s jazz tuba.
That could be interesting.

• • •

Image: AkihabaraNews