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« Trivia Tidbit Of The Day: Part 250 -- Generosity Index. | WILLisms.com | Pundit Roundtable Open Mic »

Trivia Tidbit Of The Day: Part 251 -- Japan's Economy.

Miracle, Malaise, Miracle-

Japan's economy has been in the news a bit this month. The Nikkei took a substantial tumble, then made an even more substantial rally. Overall, the Nikkei is up meaningfully over the past year:


And there's finally reason for optimism about Japan's economy, after a slump that just wouldn't go away for more than a decade.

Prime Minister Junichiro Koizumi is serious about privatization of Japan's economy, now heavily tilted toward the public sector. Think America's government is a leviathan? Try Japan:

Koizumi came to power in 2001, and his reformist policies - including the privatisation of Japan's 3.5 trillion dollar postal service - have been credited with bringing life back into the stagnant economy.

Takenaka said Japan has been facing major problems due to an aging population and a drop in births and said that in order to reduce the tax burden, a smaller administration must be created.

Takenaka, who is also responsible for the privatisation of the Japanese postal service, said the government would dispose off some of its assets.

"The total asset size of the Japanese government is five times that of the US. "We will sell some of this in the market," he said.

And it's a good thing Japan is embarking on this project now, rather than waiting. Japan is a demographic bomb just waiting to detonate:

By 2025, 28% of Japan's population is expected to be over 65 compared to 12% in the United States.

While "privatization" of Social Security in the U.S. was railroaded largely by a dedicated socialist media campaign, Koizumi (who really should be one of your favorite world leaders) took his plan straight to the people, and won, bigtime:

Privatization of Japan's massive postal savings system, which holds savings and insurance assets valued at $3 trillion for 85% of Japan's population, is set to take place over the next 12 years. The proposal, overwhelmingly endorsed by voters in a September special election, will shift a mountain of assets from government control to private markets.

But those of us who follow Japan's economic recovery have other reasons for optimism. Compare some key indicators from 1995 to 2003:


Notice that Japan actually got worse in the "Flexibility in Hiring and Firing" department. This is a cultural thing in many ways. Japanese people, especially men, take unemployment very hard:

From 1953 to 2003, each 1 percentage point increase in the cyclical component of the male unemployment rate led to a 5.39 percentage point increase in the cyclical component of the male suicide rate. This effect is 38 times larger for Japan than for the United States. The link holds for women in Japan, although it is much weaker, at 1.38 percentage point. There is no significant relationship between female suicide and unemployment rates in the United States.

The strong link between unemployment and suicide probably reflects two aspects of Japanese society. First, the Japanese are more likely to interpret losing a job as a personal failure, rather than the normal working of the economic system. Second, they may be more pessimistic about finding new employment in an economy that doesn’t feature robust job creation.

Thus, cumbersome restrictions on firing remain in place. Great, right?

Wrong. When it is hard to fire someone, it's much harder to hire anyone. Why take the risk of hiring someone, paying their health insurance and salary, matching their retirement plan and Social Security contributions, training them, and so on, if there's little chance of being able to fire them if it doesn't work out?

Japan still has a long way to go to fully rejuvenate its economy. A thriving Japanese economy, once the bane of America's economic existence (from the late 1970s to the early 1990s), now is imperative for the United States. A strong Japan means a strong ally in a rapidly changing Asia. Let's root for reform's success in Japan. Maybe our worthless media and our do-nothing Democrats will even learn something from the Japanese economic resurgence before it's too late.


Previous Trivia Tidbit: Generosity Index.

Posted by Will Franklin · 28 January 2006 10:47 PM


One trend in Japan is to use part-time workers instead of full employees. So while it may indeed be harder to hire and fire full employees, that's less important, since more work overall is being done by part-timers (who may not show up in the statistics you're using).

Posted by: Gaijin Biker at January 29, 2006 10:42 AM