IN THE SHORT TERM, THEY'LL ALL BE DEAD:

Nation Of Misers: Japan's worried consumers just won't do what the world wants them to: buy. (Christian Caryl, 12/27/04, Newsweek International)

Japan has long been legendary for its tightfisted consumers, whose stubborn refusal to get out and spend has plagued the economy like a lingering nightmare. Yet this was the year that was supposed to change all that. The optimists had plenty of weighty arguments on their side. Corporate profits were reaching new highs. Employment was moving steadily upward. And Japan's once astronomical savings rate was showing signs of descending to earthly levels. In May consumer confidence hit its highest level in 13 years. Well-wishers prayed that newly adventurous consumers would lift the world's second largest economy out of the doldrums of deflation.

They're still waiting. Consumer spending grew at a mere 0.9 percent in the third quarter, much worse than the government's own projection of 3.7 percent—undoubtedly a major reason third-quarter growth dwindled to an uninspiring 0.2 percent. And a closer look at the figures during the best part of the year reveals that much of the growth in GDP was driven by exports. If the past few months have shown anything, it's that Japanese consumers' reluctance to spend might have deeper roots than some analyses have allowed for.

Stingy consumers in Japan are bad news for the rest of the world. Most analysts are now predicting 1.9 percent GDP growth in 2005, down from 2.5 percent in 2004. If they're right, Japan's public debt will remain high and Japan will continue to buy U.S. treasuries to finance its trade surplus with the United States. [...]

Surveys suggest that consumers remain confident about the short-term, but pessimistic about their long-term prospects. More than a decade of recession, and a pension system that is groaning under the weight of government debt and a graying population, have left people with a deep sense of insecurity about the future.

We have a future. They don't.

Posted by Orrin Judd at December 21, 2004 3:13 PM