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Super interesting, and definitely seems smart of SK to be that forward-thinking. Has anyone really ever dug into what happened to Japan's economy (i.e. what ca

Super interesting, and definitely seems smart of SK to be that forward-thinking. Has anyone really ever dug into what happened to Japan's economy (i.e. what caused the stagnation)? A cursory Google search returns a lot of well thought-out speculation, and I realize cause/effect is often difficult to establish with global economies, but curious if there's anything more rigorous out there.

mc32 8y ago
Japan's problem is multi-faceted. What the facets are and which one had more impact, I don't know. From the top of my head: Low pop growth, high savings-low domestic consumerism (low investment), reliance on exports, reliance on economic intermediaries (friction), relatively closed markets (reducing competitiveness), recent-graduate hiring system, private-public industry ties (misallocation), gender bias in labor (low labor part by one gender), political system which does not foster long-term strategies from gov't., etc.
- adventured 8y ago
  > high savings Japan has an extremely low savings rate. They had a high savings rate 20 years ago. The broader economic decline has coincided with their savings rate dropping to nearly zero. https://i.imgur.com/j4jZPIb.jpg https://i.imgur.com/j4jZPIb.jpg That's also why the Japanese Government had to shift to debasing the Yen instead of continually borrowing from domestic savings to fund their debt. There is no domestic savings to buy up the debt issuance. The whole process is resulting in the wipe out of the Japanese standard of living. It's their debt that is entirely responsible, it's plundering their ability to invest in the private economy effectively. There's no reason the Japanese shouldn't be capable of a GDP per capita on par with Sweden, the Netherlands or Denmark. Instead they're continually falling further behind. When all of your money is going to service debt, you can no longer properly invest into growth opportunities. We see this effect at the household level, at the corporate level, and at the national level. Japan already had nice infrastructure when they went on a debt-laden public works bonanza to try to prop up their flailing economic growth, so the return on that investment in real terms is plausibly extremely negative. Not only did they make the mistake of massively over-investing into infrastructure right when their population was set to begin declining, not only did they use debt to do it (which they'll never stop paying for), but now they have to try to maintain it. Put simply, they misallocated their wealth to extravagant public works spending that they didn't actually need, and did so at exactly the wrong time.
  - Camillo 8y ago
    Interesting post, thanks. Was the investment in infrastructure considered a Keynesian policy at the time?
graeme 8y ago
I think low population growth makes japan seem more stagnant than it is. You can have a recession with rising gdp per capita if your population is shrinking. Few articles on economic growth account for different population growth levels however.
mrb 8y ago
"Stagnation" in Japan is widely misunderstood and a consequence demographics. It's one of the only developed countries with a declining population: https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/24/20160227_japanpop.jpg https://www.zerohedge.com/sites/default/files/images/user5/i... So of course, with all else remaining equal, declining population = declining GDP. Duh! This does not imply anything is wrong with their economy. In fact, for a fairer comparison between countries, look at the GDP per capita: https://snbchf.com/wp-content/uploads/2013/11/GDP-Per-Capita-Developed-Nations.jpg https://snbchf.com/wp-content/uploads/2013/11/GDP-Per-Capita... We see that Japan is actually growing faster than the US, Canada, New Zealand, France, etc.
- trynumber9 8y ago
  Doesn't look so hot to me. From the world bank: Japan GDP per Capita: $34,808 (2003) to $38,424 (2017) US GDP per Capita: $39,677 (2003) to $59,531 (2017) https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2017&locations=JP-US-CA&start=2003 https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2017...
  - mrb 8y ago
    You're looking at the wrong data (nominal GDP instead of PPP.) PPP is what I meant and what matters, economically. Japan (+44%) and the USA (+50%) experienced very similar growth: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2017&locations=JP-US-CA&start=2003 https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2...
    - trynumber9 8y ago
      In that graph their GDP per capita is growing on par with the U.S. The US added 35 million people in that time frame and started from a higher base where you would expect growth to be more difficult. That meets my criteria of a relative decline, especially considering the Japan of the early 90s.
      - 8y ago
robdachshund 8y ago
Japan's big tech players were too proud to adapt and compete with new players in changing industries. There was little competition in most electronics categories from the 70s up to the 00s. If you wanted a decent stereo or crt you would go with sony, jvc, Panasonic, pioneer, sharp, or Toshiba. By the time the 00s rolled around, everyone was making lower quality crap in China, while still charging premiums over domestic brands (which were even lower quality). The Japanese companies did not look at the emerging LCD market logically. They assumed customers would remain loyal and didn't bat an eye at samsung or lg. They were caught off guard when American customers started buying Korean over Japanese. Their products were much more expensive despite no longer being manufactured in Japan. Additionally, I'm doubtful that many American customers understood that samsung was a Korean brand, and not Japanese. Samsung already had a good reputation for their cell phones, cameras, and CRTs before lcds took over. When consumers saw that they could buy affordable samsung lcds that in some cases were nicer than the Japanese models, they made the obvious choice. The lcd market alone pretty much killed all the big Japanese brands. The only remaining player is sony, and they still can't move lcds. Sony has survived mostly through their music industry holdings, as they purchased many major labels and are now one of the largest labels in the world. They squandered many great brands in their lineup, such as sony phones, portable cd and mp3 players, home audio, and their professional lines by refusing to innovate or improve quality. The ipod caught them off guard and killed cds and mini disc. Their home audio products were low-mid range at best. Their vaio computers were excellent, but often outdated and overpriced. Their phone deal with Ericsson was mismanaged, and they simply slapped their name on a long series of pretty but unreliable and boring android phones. Sony believed in their brand, not their products. That works when you are apple and try new things. It doesn't work when you are sony and refuse to acknowledge the times and the market. The other brands like jvc and Panasonic made arguably much better products for less money than sony. But they got pinned in the middle between the cheap Korean tech and the supposedly high end sony products. If they had tried to match samsung in price they probably could have stuck it out longer in the consumer market. Essentially, Sony carries much of the blame for ending Japanese dominance in the electronics industry. The only premium products they had were their CRTs, and many other Japanese brands had comparable lines in terms of quality. Sony was too stubborn to properly maintain their brands. Consumers caught on to the fact that sony products in general had not been truly high end since the 70s. The other brands got trapped in the middle between sony and samsung and had to pivot to specialized markets. The emergence of the lcd tv presented an opportunity for the Korean brands to strike and take control of the tv market. At the same time, the ipod and mp3s wiped out profitable markets in home audio. People stopped buying tape decks, cd players, and stereos, all of which supplemented the Japanese brands in addition to the crt market. They all believed too strongly in their brands when their actual products had diminished greatly in quality over the previous decades. The Japanese monoliths had become completely stagnant and arrogant, and got suckerpunched. I've got no tears for sony, but it makes me sad to see jvc and sharp hanging on by a thread. Those two brands made truly excellent products at a fair price, and tried their damndest to innovate where they could. They just didn't have the resources or brand recognition of sony. If you find an old jvc product, chances are it works just as it did when it was built, vs Sony's pathetic build quality in most of their "midrange" products.

mc32 8y ago

Japan's problem is multi-faceted. What the facets are and which one had more impact, I don't know. From the top of my head: Low pop growth, high savings-low domestic consumerism (low investment), reliance on exports, reliance on economic intermediaries (friction), relatively closed markets (reducing competitiveness), recent-graduate hiring system, private-public industry ties (misallocation), gender bias in labor (low labor part by one gender), political system which does not foster long-term strategies from gov't., etc.

adventured 8y ago
> high savings Japan has an extremely low savings rate. They had a high savings rate 20 years ago. The broader economic decline has coincided with their savings rate dropping to nearly zero. https://i.imgur.com/j4jZPIb.jpg https://i.imgur.com/j4jZPIb.jpg That's also why the Japanese Government had to shift to debasing the Yen instead of continually borrowing from domestic savings to fund their debt. There is no domestic savings to buy up the debt issuance. The whole process is resulting in the wipe out of the Japanese standard of living. It's their debt that is entirely responsible, it's plundering their ability to invest in the private economy effectively. There's no reason the Japanese shouldn't be capable of a GDP per capita on par with Sweden, the Netherlands or Denmark. Instead they're continually falling further behind. When all of your money is going to service debt, you can no longer properly invest into growth opportunities. We see this effect at the household level, at the corporate level, and at the national level. Japan already had nice infrastructure when they went on a debt-laden public works bonanza to try to prop up their flailing economic growth, so the return on that investment in real terms is plausibly extremely negative. Not only did they make the mistake of massively over-investing into infrastructure right when their population was set to begin declining, not only did they use debt to do it (which they'll never stop paying for), but now they have to try to maintain it. Put simply, they misallocated their wealth to extravagant public works spending that they didn't actually need, and did so at exactly the wrong time.
- Camillo 8y ago
  Interesting post, thanks. Was the investment in infrastructure considered a Keynesian policy at the time?

graeme 8y ago

I think low population growth makes japan seem more stagnant than it is. You can have a recession with rising gdp per capita if your population is shrinking. Few articles on economic growth account for different population growth levels however.

mrb 8y ago

"Stagnation" in Japan is widely misunderstood and a consequence demographics. It's one of the only developed countries with a declining population: https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/24/20160227_japanpop.jpg https://www.zerohedge.com/sites/default/files/images/user5/i... So of course, with all else remaining equal, declining population = declining GDP. Duh! This does not imply anything is wrong with their economy. In fact, for a fairer comparison between countries, look at the GDP per capita: https://snbchf.com/wp-content/uploads/2013/11/GDP-Per-Capita-Developed-Nations.jpg https://snbchf.com/wp-content/uploads/2013/11/GDP-Per-Capita... We see that Japan is actually growing faster than the US, Canada, New Zealand, France, etc.

trynumber9 8y ago
Doesn't look so hot to me. From the world bank: Japan GDP per Capita: $34,808 (2003) to $38,424 (2017) US GDP per Capita: $39,677 (2003) to $59,531 (2017) https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2017&locations=JP-US-CA&start=2003 https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2017...
- mrb 8y ago
  You're looking at the wrong data (nominal GDP instead of PPP.) PPP is what I meant and what matters, economically. Japan (+44%) and the USA (+50%) experienced very similar growth: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2017&locations=JP-US-CA&start=2003 https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2...
  - trynumber9 8y ago
    In that graph their GDP per capita is growing on par with the U.S. The US added 35 million people in that time frame and started from a higher base where you would expect growth to be more difficult. That meets my criteria of a relative decline, especially considering the Japan of the early 90s.
    - 8y ago

robdachshund 8y ago

Japan's big tech players were too proud to adapt and compete with new players in changing industries. There was little competition in most electronics categories from the 70s up to the 00s. If you wanted a decent stereo or crt you would go with sony, jvc, Panasonic, pioneer, sharp, or Toshiba. By the time the 00s rolled around, everyone was making lower quality crap in China, while still charging premiums over domestic brands (which were even lower quality). The Japanese companies did not look at the emerging LCD market logically. They assumed customers would remain loyal and didn't bat an eye at samsung or lg. They were caught off guard when American customers started buying Korean over Japanese. Their products were much more expensive despite no longer being manufactured in Japan. Additionally, I'm doubtful that many American customers understood that samsung was a Korean brand, and not Japanese. Samsung already had a good reputation for their cell phones, cameras, and CRTs before lcds took over. When consumers saw that they could buy affordable samsung lcds that in some cases were nicer than the Japanese models, they made the obvious choice. The lcd market alone pretty much killed all the big Japanese brands. The only remaining player is sony, and they still can't move lcds. Sony has survived mostly through their music industry holdings, as they purchased many major labels and are now one of the largest labels in the world. They squandered many great brands in their lineup, such as sony phones, portable cd and mp3 players, home audio, and their professional lines by refusing to innovate or improve quality. The ipod caught them off guard and killed cds and mini disc. Their home audio products were low-mid range at best. Their vaio computers were excellent, but often outdated and overpriced. Their phone deal with Ericsson was mismanaged, and they simply slapped their name on a long series of pretty but unreliable and boring android phones. Sony believed in their brand, not their products. That works when you are apple and try new things. It doesn't work when you are sony and refuse to acknowledge the times and the market. The other brands like jvc and Panasonic made arguably much better products for less money than sony. But they got pinned in the middle between the cheap Korean tech and the supposedly high end sony products. If they had tried to match samsung in price they probably could have stuck it out longer in the consumer market. Essentially, Sony carries much of the blame for ending Japanese dominance in the electronics industry. The only premium products they had were their CRTs, and many other Japanese brands had comparable lines in terms of quality. Sony was too stubborn to properly maintain their brands. Consumers caught on to the fact that sony products in general had not been truly high end since the 70s. The other brands got trapped in the middle between sony and samsung and had to pivot to specialized markets. The emergence of the lcd tv presented an opportunity for the Korean brands to strike and take control of the tv market. At the same time, the ipod and mp3s wiped out profitable markets in home audio. People stopped buying tape decks, cd players, and stereos, all of which supplemented the Japanese brands in addition to the crt market. They all believed too strongly in their brands when their actual products had diminished greatly in quality over the previous decades. The Japanese monoliths had become completely stagnant and arrogant, and got suckerpunched. I've got no tears for sony, but it makes me sad to see jvc and sharp hanging on by a thread. Those two brands made truly excellent products at a fair price, and tried their damndest to innovate where they could. They just didn't have the resources or brand recognition of sony. If you find an old jvc product, chances are it works just as it did when it was built, vs Sony's pathetic build quality in most of their "midrange" products.