Richness of America
"Do you know what is America's richness? In America people can get a product and service in reasonable price. Which means everybody has opportunities to try diverse things easily. The abundant opportunities are sauce of the America's richness" I often heard the words when I was there.
Meanwhile Japan was in bubble economy, early 90s. A capital of vanity.
College students brought "LV" marked clutch bag in campus. Consumers
Price was high, salary was high too. I went to US for study from such a
bubbling country. So when I heard the description about Richness of America,
to tell the truth, I couldn't make sense with reality.
When I actually understand the meaning was, ironically, in the time Japanese
economy had shrunk and got into recession.
Deregulation was advanced and foreign capitals got into Japanese market. Japanese consumer price were declined. In many areas, it got closer to world average. Eventually we got being able to more products and service with same amount of money than before.
Air fare must be good example. We used to pay $800 for Tokyo-Okinawa R/T.
But now it downs to $200. With $800 you could get Tokyo-Okinawa R/T, Tokyo-Sapporo
R/T and one more R/T between Tokyo-Okinawa. You still say Japanese became
poor with deflation? "Opening up the market and underselling competition
give a bad effect to the economy" is the words by big companies and
politicians who has got benefit for long time in the closed old system.
If you can travel to Okinawa for $200, maybe you can spend extra money
for other consumption. Such low profit and quick return, and free competition
has improved capitalistic economy, hasn't it?
One more important point about the richness of America in 90s is the fact
that it based on high average income and low consumer prices. The more
the margin between income and expense getting wider, the more people become
rich. Meanwhile Japan in deflation period, we could not feel rich. Beside
the lowering consumer prices, the income was diminished neither. To be
rich means keep the consumer price low and raise the income.
However in Japan, somewhere down the line, it has been said "Deflation is the cause of depression. And a key for economic recovery is making an inflation" But I think the theory is wrong. There are lot of irreversible things in the world. Growing economy makes inflation might be possible. But I hardly believe inflation takes a growing economy. A fire occurs so a fire-engine dispatches. A fire-engine dispatches so a fire occurs? A little confusion of cause and result.
The reason Japanese cabinet and the Bank of Japan intense the anti-deflation
theory is not making people rich, but their benefit. They want lead people's
complain for the depression to the deflation, not their fault in economic
Promising "getting out from deflation" might be quite easy for the cabinet. Lead the foreign exchange market to the yen lowering trend. Raising consumer tax rate is extra. It pushes up consumer prices higher.Deflation turns into inflation as their public commitment. A Japanese company's balance, which based on US dollar, can increase. As a result, with the lowering Yen and recovery of company's balance gives more pleasant "appearance" of Japanese economy. So what? Remember the "appearance" is often more important than substance for Japanese, especially politician.
The Bank of Japan is also busy for keep the pleasant appearance of Japanese
economy. "Increasing consumer tax doesn't give bad effect to Japanese
economy" "No reason for strong yen" "Japanese economy
is securely recovering" Of course, they never say negative things.
Traders already knows BOJ's speak is just performance. So the market unaffected
by the make shift performance any more. In the end, Nikkei 225 index is
affected by only exchange rate and outer event. Expectation for the "substance",
policy of Japanese government, gives no effect on Japanese market. After
all, It never exist substantial effect of prime minister Abe's "Abenomics".
Which moving the ball is just a "gravity" and "wind".
The Nikkei index was often shown in media and is regarded as a barometer
of Japanese economic recovery. Therefore BOJ makes a best effort for keeping
it a good appearance. It's a biggest advert for the cabinet too to show
up their political performance.
For instance, making a yen selling trend, at least during Tokyo market
opening hours, can be one of many ways with saving the cost and time. Control
the FX market and make the customer, of course themselves too, win in stock
market. "See Japanese stock market is such a profitable. So why don't
you invest on it" Salute for the co-directed theater play by Japanese
cabinet and the central bank.
However think about it once again. Even if 225 Japan's major stocks of Nikkei index is soaring high, there are no insurance it makes us being better off.
It's like a newly opened Pachinko-slot machine parlor which keeps high
jack-pot rate for a while to attract customers. The parlor is booming.
But meanwhile how's a community around the shop. Are they booming too?
Maybe not. Worse, most of the customer are betting it from another countries
Here one more thing which relate with the "appearance". Abenomics
(maybe take after the Reganomics), Unprecedented monetary easing (or Monetary
easing in different dimension), ALPS(Radio active water purifier in Fukushima)
and SPEEDI(System for Prediction of Environmental Emergency Dose Information,
which didn't give information after Fukushima), Japanese likes eye catch
naming. But contrary to the big name, it has poor substance. Once I was
interested to know how PM Abe's "Monetary easing in deferent dimension"
translate in foreign language. So I looked up. Well, it was turned into
just "Monetary easing".
The government often presents profitable data for them. "Last month
the index grew 0.01%. It's 7 months consecutive growth" Do you really
think 0.01% is notable gain? However for the government, it's a big difference
presenting "No change for last 7month" and "7 months consecutive
growth" Let's round up 0.00001% to 0.01%. "See? Japanese economy
is recovering by our effective stimulation!" I really respect their
scissors & paste works.
Same for resent Japan's consumer tax raising. I believe it gave a bad effect to economic recovery. Although the government took an example of less effected industry first, like a monthly sales of department store in central Tokyo. But how many percentage of Japanese go shopping for expensive department store in Ginza, Tokyo. As a conclusion, the government said it doesn't matter for one step further tax raising.
Careful person would wonder if it's a fraud or cheat. Although for most of people who innocently trust Japanese media report may believe making a patience in the heavier tax and inflation is best way to bring them a bright future. Because Japanese media itself, in most just follow what government said without doubt.
On the very day of Lehman Bros. bankruptcy (Sep.15 2008), I was in Beijing. Watching Japanese channel TV in hotel room. In the monitor, the Japan's PM of those days, Taro Aso was making a speech. "Don't worry. Even US economy catch a cold, the Japanese will never take after them!" Nevertheless when I look back last several years, Japanese economy got much heavier slick than the US and has not recovered from it yet. The ex-PM is current financial minister. And takes a command of Japan's economic strategy. Ridiculous country ...
In US disparity has been widen under the economic stimulation policy. I
heard stories of people who spilled over and felt to the poor from hand
cap of the government's policy. Maybe you know what's happen in US in the
Now Japan is once again taking after the US. First of all, stimulate consumption
by the rich. Then expect dripping down to the middle and poor. Will it
bring different result from the US? For me, it may not. Most of Japanese
can fall down to be poor along with the policy.
If I ask American people "What's the richness of America?" now, what they answer. More over, if I ask "What is Japan's richness?", how many people can make a clear answer for it?