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It's important to realize that this article is by Eamonn Fingleton, who has been pushing a fixed idea for decades now: that Japan is secretly a terrifying power

It's important to realize that this article is by Eamonn Fingleton, who has been pushing a fixed idea for decades now: that Japan is secretly a terrifying power. He has written several books that touch (in whole or in part) on this theme: http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=Eamonn%20Fingleton http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3D... I read Blindside back in 1996 and I thought his argument was interesting for that time. However, when you read him, it is important to remember that he has not changed his opinion in 20 years, and there are new facts to be accounted for. At that time he seemed certain that Japan would be the worlds #1 economy by the year 2000. His prediction was wrong, but he has not much changed his opinion: he still believes Japan is an important success story. Japan suffered a long depression in the 1990s. That is not fiction. That is a fact. However, it is also true that some of the stagnation of the period 1990-2013 should be attributed to demographic change. Paul Krugman offered a partial counter-argument to Eamonn Fingleton here: http://krugman.blogs.nytimes.com/2012/01/09/japan-reconsidered-2/ http://krugman.blogs.nytimes.com/2012/01/09/japan-reconsider... Also, it is worth noting that for the last 20 years Fingleton has constantly harped on the fact that Japan has a trade surplus, sometimes a very large trade surplus, and he thinks this represents economic strength. Numerous economists have made the point that a large trade surplus can be a sign of economic weakness: perpetual insufficient demand at home in the domestic market. Fingleton has rarely taken this view into account.

tezza 13y ago
Not to mention yet other signs of Japans wrecked economy: * Zombie giant banks, addicted to bailouts * Currency pushed and pulled by Yen carry trade * Complete efficiency collapse. Workers work very long hours accomplishing little * Eye watering debt ( worlds largest on many measures )
- fnordfnordfnord 13y ago
  Kyle Bass is pretty bearish on the Japanese economy; has been for several years. If he turns out to be right, the Japanese are in for a bad time. I get the impression that a lot of it is due in part to the demographics (lots of elderly, at least they are healthy). 04/08/2013 - http://thecommonsensecapitalist.com/2013/04/08/kyle-bass-on-japan/ http://thecommonsensecapitalist.com/2013/04/08/kyle-bass-on-... 06/31/2013 - http://seekingalpha.com/article/1473301-should-we-allow-kyle-bass-to-bet-on-the-economic-implosion-of-japan http://seekingalpha.com/article/1473301-should-we-allow-kyle... 01/21/2013 - http://www.forbes.com/sites/stephenharner/2013/01/21/whither-japan-stocks-and-bonds-are-kyle-bass-and-martin-feldstein-right-is-market-collapse-ahead/ http://www.forbes.com/sites/stephenharner/2013/01/21/whither... 05/23/2013 - http://www.bloomberg.com/news/2013-05-23/boj-bond-buying-to-be-overwhelmed-by-investor-sales-bass-says.html http://www.bloomberg.com/news/2013-05-23/boj-bond-buying-to-...
  - chrisgd 13y ago
    Kyle Bass believes the Japanese will default, despite their ability to print their own currency. He was successful in shorting MBS, but his Japan fund has never been correct.
  - mathattack 13y ago
    Kyle Bass is credible because he has a lot of money on the line too. He's not just selling books.
  - kaonashi 13y ago
    Kyle Bass advocates shorting Japanese debt. A trade colloquially known as the 'Widowmaker'.
- mathattack 13y ago
  I hear you. Add in the loss of good employment, and the make-work in the public sector. Per capita GDP doesn't help if there are not enough new entrants in the workforce to replace departing workers. With no immigration, there won't be enough people to carry the load. I love Japan, and the deflation made it cheaper to visit, but it's a cultural attraction more than anything else.
calibraxis 13y ago
We should maybe be a bit careful with competitive nationalist rhetoric. Japan has US military bases; it is in some loose sense an occupied nation. It's doing reasonably ok because we let it. (Imagine if the US had Chinese military bases, for "protection".) Japan is naturally kept from being too independent, but may be treated fine if obedient. (http://en.wikipedia.org/wiki/United_States_Forces_Japan http://en.wikipedia.org/wiki/United_States_Forces_Japan) On the dissident end, it's common knowledge that Japan's weakness has been overstated. Left Business Observer interviewed Fingleton (http://www.leftbusinessobserver.com/Radio.html#S130530 http://www.leftbusinessobserver.com/Radio.html#S130530), and Chomsky often mentions it. (Never dug into the motivation though.)
- impendia 13y ago
  > It's doing reasonably ok because we let it. That's a rather startling claim, especially since the original argument is with respect to economic rather than military power. Care to back this up?
  - calibraxis 13y ago
    What would you like me to expand upon? I think the common-sense notion is that forms of power are interlinked. (Economics means ability to produce; military means capacity to inflict violence.) Cambridge economist Ha-Joon Chang discusses the problems when we try to draw artificial, ideological boundaries between politics and economics; the analysis also applies to military. (http://ineteconomics.org/blog/institute/ha-joon-chang-and-mariana-mazzucato-rethinking-state http://ineteconomics.org/blog/institute/ha-joon-chang-and-ma...) And when the economic sanctions in Iraq caused a US journalist to ask Madeline Albright, "We have heard that half a million children have died. I mean, that's more children than died in Hiroshima. And, you know, is the price worth it?" we see that economics can accomplish military objectives. (http://en.wikipedia.org/wiki/Sanctions_against_Iraq#Albright_interview http://en.wikipedia.org/wiki/Sanctions_against_Iraq#Albright...)
    - impendia 13y ago
      > What would you like me to expand upon? Suppose we immediately moved all of our military bases out of Japan. Are you predicting that the country would collapse, economically or otherwise? Is Japan otherwise dependent on us, except insofar as we are a large market for Japanese-made goods?
gadders 13y ago
Michael Crichton was excellent for identifying the latest "worry" that was making the US anxious (sexual harrassment, nano-technology etc) and writing a novel about them. Rising Sun was written when a lot of people were worried that Japan would overtake the US as an economic power. We all know how that turned out. It's also why I'm sceptical when people talk about China being the next economic superpower.
- yardie 13y ago
  I have no doubt China will become an economic superpower. They are investing heavily in the African continent and central and South America. Those are long term, strategic investments.
  - lukifer 13y ago
    It's a little disturbing to think that autocratic China at least seems to be able to plan decades ahead, while free America is largely stuck in quarterly business cycles and two-year political cycles. An oversimplification in both cases to be sure, but our culture could definitely learn some things about being patient and thinking ahead.
    - jotm 13y ago
      Today's champions are tomorrow's losers, that's the way it is... Maybe in a few decades we'll all have to learn Mandarin if we want to start a successful business :-)
    - enko 13y ago
      If you look around a bit you'll find a lot of people who are rather bearish on democracy as practised in the first world west - professional politicians with no real world experience, being voted in by the cynical, uninformed masses, propagandised by bought and paid for mass media. Democracy has collided with the middle class and a free press concerned only with their own interests and come off second best - bitter, entrenched political paralysis at best. Like unions, it was a wonderful idea at the time, but now the cure is basically worse than the disease. Frankly, the age of democracy is over, and we now have the age of the permanent civil service. The good news is, it is almost certainly an improvement. China, Japan and Singapore are run exclusively by their civil services (democracy in the latter two is an irrelevant sideshow), and they are run much better than most western countries, or at least with more long term strategy. In fact, pretty much everything wrong with Japan can be blamed on the idiot government trying to save face by not admitting reality. The USA would be pretty well served, IMO, by taking control of budget away from congress and giving it to - well, almost anyone. The GAO, maybe. The Fed, the SEC, the commerce dept, anyone, so long as they're not elected. Being accountable to the electorate turns out to be the worst idea ever for people who are actually trying to do their jobs. It means never being able to admit you're wrong. I don't mind if they keep parliament/congress around for show but they're going to go the way of the Queen of England - a figurehead, kind of a sounding board for the people, a super-ombudsman. A hundred years from now we're going to look back and wonder how we ever could have been so mad to think that giving politicians the reigns of power could ever have been a good idea.
gwern 13y ago
Reminds me of http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fingleton/ http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fin...
cenhyperion 13y ago
It's also important to note that this isn't a forbes article, it's a blog on their site that anyone can write for.
- snowwrestler 13y ago
  It is not true that anyone can create a blog of Forbes.com. Their bloggers are all approved by the Forbes editorial staff, and the blog will be killed if it fails to meet standards for timeliness and quality.
kaonashi 13y ago
>Numerous economists have made the point that a large trade surplus can be a sign of economic weakness Exports are real costs, imports are real benefits. A trade surplus can help you keep net government spending low, but there's nothing positive about that in and of itself. This is a good read about the real problems, lack of aggregate demand. Everytime government spending gets high enough to lift GDP, they pull the rug out from under the economy by raising taxes. A process they're looking to continue. http://www.inginvestment.com/idc/groups/commentary/documents/investor_education/064554.pdf http://www.inginvestment.com/idc/groups/commentary/documents... > Ordinarily, a decline in working-age population — and, thus, a decline in the supply of workers — would tighten the labor market and cause the unemployment rate to fall; in Japan’s case, however, the gradual rise in the unemployment rate and tepid job growth is occurring in spite of these demographic shifts, reflecting economic stagnation and weakness in aggregate demand.

tezza 13y ago

Not to mention yet other signs of Japans wrecked economy: * Zombie giant banks, addicted to bailouts * Currency pushed and pulled by Yen carry trade * Complete efficiency collapse. Workers work very long hours accomplishing little * Eye watering debt ( worlds largest on many measures )

fnordfnordfnord 13y ago
Kyle Bass is pretty bearish on the Japanese economy; has been for several years. If he turns out to be right, the Japanese are in for a bad time. I get the impression that a lot of it is due in part to the demographics (lots of elderly, at least they are healthy). 04/08/2013 - http://thecommonsensecapitalist.com/2013/04/08/kyle-bass-on-japan/ http://thecommonsensecapitalist.com/2013/04/08/kyle-bass-on-... 06/31/2013 - http://seekingalpha.com/article/1473301-should-we-allow-kyle-bass-to-bet-on-the-economic-implosion-of-japan http://seekingalpha.com/article/1473301-should-we-allow-kyle... 01/21/2013 - http://www.forbes.com/sites/stephenharner/2013/01/21/whither-japan-stocks-and-bonds-are-kyle-bass-and-martin-feldstein-right-is-market-collapse-ahead/ http://www.forbes.com/sites/stephenharner/2013/01/21/whither... 05/23/2013 - http://www.bloomberg.com/news/2013-05-23/boj-bond-buying-to-be-overwhelmed-by-investor-sales-bass-says.html http://www.bloomberg.com/news/2013-05-23/boj-bond-buying-to-...
- chrisgd 13y ago
  Kyle Bass believes the Japanese will default, despite their ability to print their own currency. He was successful in shorting MBS, but his Japan fund has never been correct.
- mathattack 13y ago
  Kyle Bass is credible because he has a lot of money on the line too. He's not just selling books.
- kaonashi 13y ago
  Kyle Bass advocates shorting Japanese debt. A trade colloquially known as the 'Widowmaker'.
mathattack 13y ago
I hear you. Add in the loss of good employment, and the make-work in the public sector. Per capita GDP doesn't help if there are not enough new entrants in the workforce to replace departing workers. With no immigration, there won't be enough people to carry the load. I love Japan, and the deflation made it cheaper to visit, but it's a cultural attraction more than anything else.

calibraxis 13y ago

We should maybe be a bit careful with competitive nationalist rhetoric. Japan has US military bases; it is in some loose sense an occupied nation. It's doing reasonably ok because we let it. (Imagine if the US had Chinese military bases, for "protection".) Japan is naturally kept from being too independent, but may be treated fine if obedient. (http://en.wikipedia.org/wiki/United_States_Forces_Japan http://en.wikipedia.org/wiki/United_States_Forces_Japan) On the dissident end, it's common knowledge that Japan's weakness has been overstated. Left Business Observer interviewed Fingleton (http://www.leftbusinessobserver.com/Radio.html#S130530 http://www.leftbusinessobserver.com/Radio.html#S130530), and Chomsky often mentions it. (Never dug into the motivation though.)

impendia 13y ago
> It's doing reasonably ok because we let it. That's a rather startling claim, especially since the original argument is with respect to economic rather than military power. Care to back this up?
- calibraxis 13y ago
  What would you like me to expand upon? I think the common-sense notion is that forms of power are interlinked. (Economics means ability to produce; military means capacity to inflict violence.) Cambridge economist Ha-Joon Chang discusses the problems when we try to draw artificial, ideological boundaries between politics and economics; the analysis also applies to military. (http://ineteconomics.org/blog/institute/ha-joon-chang-and-mariana-mazzucato-rethinking-state http://ineteconomics.org/blog/institute/ha-joon-chang-and-ma...) And when the economic sanctions in Iraq caused a US journalist to ask Madeline Albright, "We have heard that half a million children have died. I mean, that's more children than died in Hiroshima. And, you know, is the price worth it?" we see that economics can accomplish military objectives. (http://en.wikipedia.org/wiki/Sanctions_against_Iraq#Albright_interview http://en.wikipedia.org/wiki/Sanctions_against_Iraq#Albright...)
  - impendia 13y ago
    > What would you like me to expand upon? Suppose we immediately moved all of our military bases out of Japan. Are you predicting that the country would collapse, economically or otherwise? Is Japan otherwise dependent on us, except insofar as we are a large market for Japanese-made goods?

gadders 13y ago

Michael Crichton was excellent for identifying the latest "worry" that was making the US anxious (sexual harrassment, nano-technology etc) and writing a novel about them. Rising Sun was written when a lot of people were worried that Japan would overtake the US as an economic power. We all know how that turned out. It's also why I'm sceptical when people talk about China being the next economic superpower.

yardie 13y ago
I have no doubt China will become an economic superpower. They are investing heavily in the African continent and central and South America. Those are long term, strategic investments.
- lukifer 13y ago
  It's a little disturbing to think that autocratic China at least seems to be able to plan decades ahead, while free America is largely stuck in quarterly business cycles and two-year political cycles. An oversimplification in both cases to be sure, but our culture could definitely learn some things about being patient and thinking ahead.
  - jotm 13y ago
    Today's champions are tomorrow's losers, that's the way it is... Maybe in a few decades we'll all have to learn Mandarin if we want to start a successful business :-)
  - enko 13y ago
    If you look around a bit you'll find a lot of people who are rather bearish on democracy as practised in the first world west - professional politicians with no real world experience, being voted in by the cynical, uninformed masses, propagandised by bought and paid for mass media. Democracy has collided with the middle class and a free press concerned only with their own interests and come off second best - bitter, entrenched political paralysis at best. Like unions, it was a wonderful idea at the time, but now the cure is basically worse than the disease. Frankly, the age of democracy is over, and we now have the age of the permanent civil service. The good news is, it is almost certainly an improvement. China, Japan and Singapore are run exclusively by their civil services (democracy in the latter two is an irrelevant sideshow), and they are run much better than most western countries, or at least with more long term strategy. In fact, pretty much everything wrong with Japan can be blamed on the idiot government trying to save face by not admitting reality. The USA would be pretty well served, IMO, by taking control of budget away from congress and giving it to - well, almost anyone. The GAO, maybe. The Fed, the SEC, the commerce dept, anyone, so long as they're not elected. Being accountable to the electorate turns out to be the worst idea ever for people who are actually trying to do their jobs. It means never being able to admit you're wrong. I don't mind if they keep parliament/congress around for show but they're going to go the way of the Queen of England - a figurehead, kind of a sounding board for the people, a super-ombudsman. A hundred years from now we're going to look back and wonder how we ever could have been so mad to think that giving politicians the reigns of power could ever have been a good idea.

gwern 13y ago

Reminds me of http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fingleton/ http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fin...

cenhyperion 13y ago

It's also important to note that this isn't a forbes article, it's a blog on their site that anyone can write for.

snowwrestler 13y ago
It is not true that anyone can create a blog of Forbes.com. Their bloggers are all approved by the Forbes editorial staff, and the blog will be killed if it fails to meet standards for timeliness and quality.

kaonashi 13y ago

>Numerous economists have made the point that a large trade surplus can be a sign of economic weakness Exports are real costs, imports are real benefits. A trade surplus can help you keep net government spending low, but there's nothing positive about that in and of itself. This is a good read about the real problems, lack of aggregate demand. Everytime government spending gets high enough to lift GDP, they pull the rug out from under the economy by raising taxes. A process they're looking to continue. http://www.inginvestment.com/idc/groups/commentary/documents/investor_education/064554.pdf http://www.inginvestment.com/idc/groups/commentary/documents... > Ordinarily, a decline in working-age population — and, thus, a decline in the supply of workers — would tighten the labor market and cause the unemployment rate to fall; in Japan’s case, however, the gradual rise in the unemployment rate and tepid job growth is occurring in spite of these demographic shifts, reflecting economic stagnation and weakness in aggregate demand.