neutrino23

Zen and the Japanese Economy

I lived in Japan for nine years and pretty much agree. It is not that Japan is irrational or anything like that. It is just organized so differently that our shortcuts, our rules of thumb, that we use to help us understand something as complex as an economy don't apply.

I've heard they have passed a milestone recently in that 50% of those of a certain age (forgot the number) let's say 35 are unmarried. Big change for Japan.

Another tidbit is that there is a "back to the land" movement going on. Because of unemployment in the big cities young people are moving back to the family farm and becoming farmers. It may not make much money but they can eat and they have a roof over their heads. And now with broadband internet reach more places they can keep in touch with the larger world. For those without family farm to return to small towns are encouraging young people to take over unused farms for little or no money.

Learning from the Japanese Experience

Wow, where to start? Japan is a very complex society and one very much different from almost anywhere else in the world. You are trying to draw inferences from a very narrow view of Japanese life and I don't think it works.

Yes, lifetime employment exists in Japan, but not as much as before. If you read the article you linked to it says that about $624 million was spent per year by the government paying workers without productive jobs. Per capita that would be about $2Bn in the US. Just as an example, compare that with the $19Bn or so we spend yearly on the so called "war on drugs". How much productivity gain are we getting from that boondoggle? Given the economic multiplier of paying wages this is probably not a bad investment for the Japanese government and pretty small money anyway.

Yes, lifetime employment is probably hurting the Japanese economy somewhat. On the other hand employers do have a lot of flexibility in paying yearly wages that we don't have in the US. The article briefly mentions that companies may cut bonuses. In the US, unless you work for a financial institution, bonuses may amount to a few per cent of income and are a nice reward for work well done and are considered optional. In Japan bonuses are standard if the company is doing at all well and are structured to be something like 2, 3 or 4 months salary. In hard times the "bonus" may be eliminated amounting to the rough equivalent of a 25% cut in head count. There is also the case of the temporary workers who, as here, can be hired and fired at will.

If you want to pick on Japan there are other more interesting things to look at. Like how they are extremely reliant on exports. Like how they are heavily restricted by red tape. This both protects large companies and makes it very hard for start ups to break into the market and how hard it is for start ups to gain financing. Like how they heavily protect their domestic market.

My point is that there are hundreds of differences between the US and Japan. To point to just lifetime employment is meaningless.

Interest Rates Cannot Go Lower Than Zero

Just a theoretical point but why can't rates go lower than zero? Instead of a contract to repay principal plus alpha after some period of time you write a contract to repay principal minus alpha after some period of time. Basically you pay people to borrow money.