A DIVINE WIND BLOWS NO GOOD

Japanese sun in overcast world (Martin Hutchinson, 7/25/2003, UPI)

Shortly after The Economist magazine first produced its signature Big Mac index, in 1989, the Japanese yen, at 145 yen to the dollar was 38 percent overvalued against the dollar, by the index; a Big Mac cost 38 percent more in Tokyo than in New York. This overvaluation increased to 100 percent by 1995, at which point the yen touched its all time high of 80 yen to the dollar. Today, at 119 yen to the dollar, it is by the Big Mac index 19 percent undervalued compared to the dollar; a Big Mac is 19 percent cheaper in Tokyo than in New York.

At first sight, this is very strange. The yen has appreciated by about 18 percent against the dollar since 1989, at a time when inflation in both countries has been modest, yet a Big Mac has moved from being 38 percent more expensive in Tokyo to 19 percent less expensive.

The explanation for it is not the alleged evil monster of deflation, or at least it is only deflation in the purely technical sense of prices dropping. The Japanese distribution system was in 1989 the most inefficient in the developed world, particularly for foreign goods, with layer upon layer of importers and wholesalers each charging a markup on the goods that moved through their hands, and price competition at the retail level being hopelessly restricted by the highly protectionist Large Scale Retail Store Law. Consequently, an item such as the Big Mac, which was partly imported, partly sourced from inefficient Japanese agriculture, and wholly distributed to the consumer through retail outlets, was far more expensive in Tokyo than it needed to be. Any foreign visitor paying a Japanese restaurant bill in the 1980s will confirm this; the place was outrageously costly, through excessive costs at all levels including and notoriously the real estate on which the restaurant rested, which was so expensive that the Emperor's palace grounds in central Tokyo were in 1989 worth more than the entire state of California.

All that has now changed. [...]

The Japanese economy is now poised to move forward. By U.S. standards, its rate of GDP growth may appear unexciting, for demographic reasons -- unlike the U.S., whose population is growing by about 1.2 percent per annum, thorough births and immigration, Japan's is shrinking, by about one percent per annum, because of tight immigration policies and a low birth rate. But for the Japanese people, this is a good thing; it means that a 2 percent per annum growth rate in the Japanese economy can in the long run translate into a 3 percent per annum improvement in Japanese living standards. And of course, with low immigration, the social tensions of immigration are also very largely absent, with violent crime rates in Japan far lower than those in the U.S. or Western Europe

According to current projections, 1 in 2.8 Japanese will be over 65 years old by 2050. Just 8% of the population will be under 15 years old. Big Macs could cost a nickel and it wouldn't change the fact that Japan will literally be a dying society.


MORE:
Japan sinks under rising crime rates (Hiroshi Osedo, 26nov02, Courier & Mail)

A JAPANESE Government white paper on crime released last week has demolished the myth that Japan is the safest country in the world.

According to the document compiled by the Justice Ministry, the number of criminal cases in 2001 was a post-war record.

Excluding traffic offences, the number of crimes rose to 2.73 million, up 12 per cent from the previous year.

The white paper attributed the rise in violent crime to moral degeneration among Japanese people and to decline in the crime prevention functions traditionally provided by the family, schools and local communities.

Posted by Orrin Judd at July 28, 2003 10:26 PM