One thing I would love to see is FDI in naval shipbuilding. It is clear America cannot build naval vessels in any meaningful way. We have an urgent need.
Excellent article - hopefully it will reach the right people in Japan. This type of analysis is your great strength. More of this economic analysis and less of domestic politics would be much appreciated.
Japan (and Taiwan too) have a cultural affinity to hardware, which one can see and touch (and the country has a history of being good at it). They can also get investment and funding. Whereas software is looked at with suspicion as not being “real”. (I have software entrepreneur friend founding companies there who complains such.
Do you think there is a kernel of truth to that belief? Noah himself has talked about the US having the opposite problem (our advantage has always been scaling up huge software companies, but we tend to struggle to attract talent to hardware industries).
My theory (without much data to back it up), is that in the west the financier calls the shot, and you can make a lot more $ leveraging with what you have in software, so you can make quicker fortune. Hardware require real investment that’s not just bits and bytes, and in the world $ don’t move as fast.
One reason that Japan has fewer programmers is that most programming languages are simplified versions of English, and the Japanese language and English are structurally very different. This is one of the reasons there are so many Indian programmers, because facility with English is widespread in India.
This a good set of policies that I hope she can get the government to do, but given the small number of seats and weak coalition (is it even) I don’t know how much of this can get done.
Many of the policies she ran on were on lowering costs to consumers by keeping consumption taxes low, removing the tax surcharge on gasoline and making food partially exempt from the tax. I don’t know how much of the consumption tax reduction is going to help with the defense buildup or the spending on American investments. And even though they are acting close, Trump can suddenly ruin things with temper tariffs if triggered by anything like he was by the Canadian Reagan ad.
You didn't mention geothermal energy. Given that Japan sits on thermally-active islands, this would seem to be an important opportunity for energy production.
1. If large Japanese companies are sitting on piles of cash and newer companies need funding to grow, why aren’t acquisitions a good solution? That seems to work for pharma.
2. With mountainous terrain and extensive coastline, why isn’t wind a good potential source of electricity for Japan?
According to ChatGPT (Pro/5-Thinking): fixed-bottom offshore wind is estimated at about ~¥15–18/kWh today, which is competitive with Japan’s wholesale power given Japan’s LNG-linked volatility. Floating will need policy support until costs fall further.
Onshore wind is cheaper. They have room for 144GW-250GW (depending on whether they build in forests.) National plans currently call for 30–40 GW of it in the next couple of decades. Japan's total nameplate electrical consumption is 310GW as of 2023.
Who will want more imports? Seems America doesn't for sure. It would make sense to replace Chinese supply with Japanese, but it's not Japan making the decision.
I’m a sv-based American software engineer who works for a large Japanese company. Part of my job is teaching the Japan-based counterpart to my org how to develop more effectively. Do you have any tips on understanding Japanese corporate culture as an American?
A bit late, but, as I've discussed before with you Noah, there's also the issue of Japanese and a reluctance to hire people with good English skills but not so great Japanese skills.
I think that Japanese companies could attract a lot more immigrants and highly skilled workers if they were willing to accept workers whose current Japanese isn't great (but can and should improve) but who speak fluent English. Correct me if I'm wrong, but wouldn't that be acceptable in other high income countries? Outside of English speaking countries?
The issue is that, aside from how useful JLPT is is in practice, requiring JLPT2 to hire is far too stringent. Why would a highly skilled worker, someone who's already spent considerable time and effort acquiring said skills, want to work in Japan for relatively low wages (even in a PPP basis) if they would have to first pass this barrier?
Japanese companies need to be more flexible this way.
These are all good suggestions and would seem to work, but I think Brad Glosserman had a good point when he opined that we have already seen Peak Japan. There seems to be some intangible factor, perhaps cultural, perhaps demographic, perhaps having lived with relative stagnation for so long, or a combination thereof, that seems to enervate a country during its period of relative decline. That seems to be happening to Japan. I have an intuitive sense that they won't be able to shake it off.
The Japan government needs to rethink its costly investments in the "Hydrogen Economy", which is likely to be a long term strategic mistake.
Japan has an impressive space industry that is in the early stage. It wouldn’t surprise me if, in the long run, it outperformed the EU space industry.
One thing I would love to see is FDI in naval shipbuilding. It is clear America cannot build naval vessels in any meaningful way. We have an urgent need.
Excellent article - hopefully it will reach the right people in Japan. This type of analysis is your great strength. More of this economic analysis and less of domestic politics would be much appreciated.
Japan (and Taiwan too) have a cultural affinity to hardware, which one can see and touch (and the country has a history of being good at it). They can also get investment and funding. Whereas software is looked at with suspicion as not being “real”. (I have software entrepreneur friend founding companies there who complains such.
Do you think there is a kernel of truth to that belief? Noah himself has talked about the US having the opposite problem (our advantage has always been scaling up huge software companies, but we tend to struggle to attract talent to hardware industries).
My theory (without much data to back it up), is that in the west the financier calls the shot, and you can make a lot more $ leveraging with what you have in software, so you can make quicker fortune. Hardware require real investment that’s not just bits and bytes, and in the world $ don’t move as fast.
One reason that Japan has fewer programmers is that most programming languages are simplified versions of English, and the Japanese language and English are structurally very different. This is one of the reasons there are so many Indian programmers, because facility with English is widespread in India.
I will be impressed if she kills fax machines.
They died long ago
The one time I’ve used a fax machine 7 years living in Japan was to vote in US elections.
This a good set of policies that I hope she can get the government to do, but given the small number of seats and weak coalition (is it even) I don’t know how much of this can get done.
Many of the policies she ran on were on lowering costs to consumers by keeping consumption taxes low, removing the tax surcharge on gasoline and making food partially exempt from the tax. I don’t know how much of the consumption tax reduction is going to help with the defense buildup or the spending on American investments. And even though they are acting close, Trump can suddenly ruin things with temper tariffs if triggered by anything like he was by the Canadian Reagan ad.
You didn't mention geothermal energy. Given that Japan sits on thermally-active islands, this would seem to be an important opportunity for energy production.
Japan now has a heavy metal drummer for a prime minister.
I’m letting it sink in just how awesome that sounds.
Two questions:
1. If large Japanese companies are sitting on piles of cash and newer companies need funding to grow, why aren’t acquisitions a good solution? That seems to work for pharma.
2. With mountainous terrain and extensive coastline, why isn’t wind a good potential source of electricity for Japan?
Aha!
1. They're doing tons of acquisitions actually
2. Offshore wind is really expensive. Land-based wind is fine, but the acreage required is vast.
They are planning to build 10 GW off offshore wind by 2030 and 30 to 45 GW by 2040. Source: https://www.enecho.meti.go.jp/en/category/special/article/detail_208.html?utm_source=chatgpt.com
According to ChatGPT (Pro/5-Thinking): fixed-bottom offshore wind is estimated at about ~¥15–18/kWh today, which is competitive with Japan’s wholesale power given Japan’s LNG-linked volatility. Floating will need policy support until costs fall further.
Onshore wind is cheaper. They have room for 144GW-250GW (depending on whether they build in forests.) National plans currently call for 30–40 GW of it in the next couple of decades. Japan's total nameplate electrical consumption is 310GW as of 2023.
Who will want more imports? Seems America doesn't for sure. It would make sense to replace Chinese supply with Japanese, but it's not Japan making the decision.
I’m a sv-based American software engineer who works for a large Japanese company. Part of my job is teaching the Japan-based counterpart to my org how to develop more effectively. Do you have any tips on understanding Japanese corporate culture as an American?
A bit late, but, as I've discussed before with you Noah, there's also the issue of Japanese and a reluctance to hire people with good English skills but not so great Japanese skills.
I think that Japanese companies could attract a lot more immigrants and highly skilled workers if they were willing to accept workers whose current Japanese isn't great (but can and should improve) but who speak fluent English. Correct me if I'm wrong, but wouldn't that be acceptable in other high income countries? Outside of English speaking countries?
The issue is that, aside from how useful JLPT is is in practice, requiring JLPT2 to hire is far too stringent. Why would a highly skilled worker, someone who's already spent considerable time and effort acquiring said skills, want to work in Japan for relatively low wages (even in a PPP basis) if they would have to first pass this barrier?
Japanese companies need to be more flexible this way.
These are all good suggestions and would seem to work, but I think Brad Glosserman had a good point when he opined that we have already seen Peak Japan. There seems to be some intangible factor, perhaps cultural, perhaps demographic, perhaps having lived with relative stagnation for so long, or a combination thereof, that seems to enervate a country during its period of relative decline. That seems to be happening to Japan. I have an intuitive sense that they won't be able to shake it off.
https://press.georgetown.edu/Book/Peak-Japan
What countries and industries are likely to be the source of the Greenfield FDI? Don’t you think tariffs and nationalism would make any FDI slow down?