Nov 24, 2022·edited Nov 24, 2022Liked by Noah Smith
I agree it's weird. Back in early 2000s when I first went to live and work in Japan I picked the place because it was (still) seen as cool and cutting edge. The newest technology, the craziest big city culture, anime, video games, movies, J-Pop. And then all that stopped sometime in last 5-15 years. I still remember being kinda shocked realizing circa 2007-08 that Samsung now made better TVs than Sony. Part of this is I agree due to poor corporate culture (it should not be forgotten that a lot of the corporate titans of post-war Japan were led by mavericks, and the system subsequently put in place of lifetime employment, seniority based promotion system, hierarchical desirability ranking of companies from big to small etc. really made repeating that trick very difficult). My own experience working at the R&D center of one of their big electronics conglomerates made it very clear very quickly that despite the vast resources being deployed no real innovation was ever going to come out of there.
But what about something like J-Pop (cool in early 2000s) being utterly supplanted in global consciousness by K-Pop? Even if K-Pop is arguably more an industrial than an artistic product and so maybe also subject to corporate culture differences, am still befuddled by why latter overtook former so completely.
Interestingly, there is now exactly one cool J-pop artist again (Ado) and instead of the industry ignoring her they're successfully using her to export anime via One Piece movie tie-ins.
But One Piece itself is about to end, and there's a large gap in popularity between it and any other IP coming out of Japan at the moment. Korea and China have finally successfully gotten large "anime-like" IPs off the ground, and their software and mobile game designs are more interesting too.
Not sure about Korea on the software front - the Western consensus seems to be that Samsung's software is an albatross around the neck of their hardware division, both on phones and in televisions. Likewise, in the gaming space, a lot of KR games tend to have limited appeal outside KR due to a persistent tendency to conflate "grind" with "desirability." The Japanese tendency seems to be to more often to conflate "systemic complexity" with "fun" but this neither universally true (nor as heavily indulged in) and, whether operating with or against this paradigm, Japanese companies frequently produce some really outside-the-box stuff either creatively or mechanically (or both) that has a lot of cross-continent appeal. [ETA: this is more on desktop than mobile. I mostly choose to ignore the existence of mobile game designs as having devolved into a form of cynical parasitism from its desktop and console origins that has some regrettable feedback effects in terms of desktop monetization schemes.]
For a foreign fan in the last decade jpop was very hard to access because companies feared piracy while kpop was very inviting as a result of korean national industrial policy that sees kpop and the entire Korean Wave as means of gaining both profits and soft power.
Jpop was extremally hostile to posting content on Youtube until recently because fears that it will hurt CD sales. It's only in the last few years that jpop started moving towards streaming and are posting stuff on youtube.
On the contrary kpop was quick to embrace foreign audiences and the state encouraged those companies and acts that achieved international success. Music videos are regularly posted on Youtube since around 2010. Variety shows are posted with english subtitles from the beginning. Companies buy lots of youtube ads to promote their music. Kpop festivals are regularly held overseas as a promotional tool etc.
hmm, would you say you have experienced a sufficiently large sample from both to make this statement? and how long have you been following both? It's hard for me to tell because the J-Pop i know is mostly from 20 years ago, while the K-Pop i know is like 2017 onwards if that. I don't get the impression you get but am also comparing offerings from two different eras.
I will mention one other thing that just occurred to me - there are a decent number of K-Pop groups that have foreigner members - Japanese (e.g. the three that are on Twice), Chinese/Taiwanese (say Ningning), the odd Korean-American (Nancy). That's something that at least back in the days would have been hard to imagine happening in Japan, and probably helps significantly with export popularity of Kpop.
Could the timing of the 'Japan coolness cliff' be due to demographic trends?
It looks like the fall off in Japan's TFR started in earnest after ~1972. They would have had a decent sized 20- and 30-something cohort coming of age in the 90s and early 00s, and then the young adult share of the population would have dropped off steadily afterwards.
Excellent article. There was a section on a lack of Japan bringing their products to other nations to promote exports. I have worked in the Sourcing departments of major US manufacturers (industrial goods, pharma, and medical device) for the past 10 years. My job is to find manufacturers of items we need. For large US businesses, demand for parts and finished goods is a process of seeking out vendors to make custom items. In my experience, Japanese companies were absent or not focused on the main marketing platforms for international business-to-business sales (Alibaba, Thomasnet, Pharmacompass). When you can find a Japanese company online, more than 75% do not have an English version of their webpage which makes getting an idea of a companies technical prowess dependent on Google Translate. This is opposite of Chinese companies. They are hyper present on these platforms and they have English versions of their websites. This makes it super easy to do business with Chinese companies.
From where I sit, Japan's export problem is even worse than you make it out to be. Basically, the Japanese don't make _anything_ any more. My Sony cameras and lenses? All made in China. Sharp is owned by a Taiwanese company, and LG has won the TV/PC monitor wars. The Omron blood pressure gizmo at hand was made in China. Of everything* I've bought in the last 10 years, only my manual focus (camera otaku) camera lenses (Cosina. But no one other than camera otakus have ever heard of them) were actually made in Japan. Peecees are all China. Etc. Etc. Etc. (And Japan lost the semiconductor wars years ago. (Renessais (or however it's spelled) is still running their ancient Japanese fab lines, but all their new technology stuff is fabbed in Taiwan.))
*: Truth in advertising: the Tanita bathroom scale we just bought claims to be made in Japan!
So what happened? Dunno, but I think that the enoumous profits that the trading companies have been making of late _may_ have something to do with it. This year's corporate profit results (announced in March and April, prior to the Yen crash) were at record highs, by large amounts. So the sectors of (and actors in) the economy that the folks in the government are most interested in (i.e., their corporate friends), are doing just fine, thank you. Frog in boiling water syndrome: they can't notice that there's a problem until it's too late. And the LDP folks simply aren't very smart: the only thing they can think to do with the cheap Yen is tourism. Which is a horrific industry in terms of labor productivity: except for management, it's pretty much all minimimum wage labor. (Employment in Japan has always been a scam: Japanese labor laws only apply to companies with over 300 employees, so the protections (such as they are) provided labor don't apply to the majority of the labor force. The LDP has been promissing to increase wages, but they're only talking about wages at the large companies, again, leaving most Japanese workers out in the cold. (Minimum wage is pitifully low and there's no talk of raising it. There's a disaster lurking here in that a lot of Japanese minimum-wage labor is by immigrants (like Qatar!), but with the yen at 140 to the dollar and the wages so low, it doesn't make sense for folks from Sri Lanka or Nepal to come, or even stay. From agriculture to construction to retail, Japan's day-to-day operation is quite dependent on foreign labor, and Japan hasn't realized that this is going to stop working in the near, if not immediate, future. (Again, the LDP's friends are all big company management, and they hate paying wages, so they've been increasing the number of low-wage foreign workers of late.))
And this is in a context where median income has been falling for the last 25 years, while every other industrialized country has seen rising median incomes.
"I think that the enormous profits that the trading companies have been making of late _may_ have something to do with it. This year's corporate profit results (announced in March and April, prior to the Yen crash) were at record highs, by large amounts. So the sectors of (and actors in) the economy that the folks in the government are most interested in (i.e., their corporate friends), are doing just fine, thank you."
This almost looks like an issue similar to some of those elsewhere (the UK and US, among others), where the problem is 'financialization' of the economy. So long as profits remain high, there is no recognition of a problem.
So what happened. The Yen’s dramatic appreciation in the mid 1980’s triggered a trend in outward foreign direct investment that continued after the bubble burst. The ratio of investment made in foreign affiliates, as compared to investment at home by domestic firms, increased 10-fold between 1985 and 2013. Japanese companies owned around 4000 overseas affiliates in 1987. That rose to around 12,600 by 1998 and to 25,000 in 2018. This info comes from Japan’s Ministry of Economy, Trade and Industry, METI. ( I read about this in The Great Demographic Reversal by Goodhart and Pradhan.)
Is this why Japanese companies are profitable? This is not a bad way to run an economy, off overseas investments, though in the long run it seems unstable, as other counties have an incentive to disfavor these investments.
"as other counties have an incentive to disfavor these investments."
I'm not sure how true this is. I think the US and Indian approaches are much more oriented towards an openness to foreign capital employed in the form of domestic production and domestic wages -- Toyotas and Hondas being build on US soil, iPhones built in India, that sort of thing -- without any particular animus to profits being realized by foreign capitalists because the political focus is much more on job creation.
The US median income is not falling but has gone up 10% in 20 years. And 2/3 of that gain has been between 2017 and 2019, which seems peculiar to me. Did anyone notice an increase in standard of living then? Perhaps Trumps protectionist economic policies worked?
Trump tax cuts & post-2008 recovery cycle & Fed constantly pumping money into the economy finally made unemployment low enough that real wages started rising
the protectionist policies worked against this
and of course the tax cuts mean even more deficit spending (which is dumb if the ROI on it is <1)
Cosina also makes white-label lenses for other brands (Zeiss, Voigtländer) though the business can't be that big, and China also has companies like Venus Optics.
Well, manufacturing isn't everything when you have design. Sony continues to design most all phone camera sensors for instance.
> And this is in a context where median income has been falling for the last 25 years, while every other industrialized country has seen rising median incomes.
The UK's real wages have been doing pretty badly too.
I thought Thailand, too, but the ones I checked were China. (Even the (getting ancient by now) tiny pocket one I just pulled out of the back of the drawer says China. So that's four for four being China.) Maybe it's Nikon that mfrs in Thailand.
Good point on sensors: I don't know where they are fabbed, but Sony has dominated the image sensor universe for an age. (I used to translate spec sheets for them back in the day...)
UK's real wages have been bad, I'd guess, since Brexit, but Japan's have been a mess since the bubble burst.
UK did a more-extreme version of the US reaction to the Global Financial Crisis: very loose fiscal/monetary policy in 2008-2010, then a much tighter fiscal policy from there onwards, which did a number on real after-tax wages. Loose monetary policy meant that GDP and corporate profits did OK, but employment never got back to 2007/8 levels and it takes a very tight labour market to lift up wages at the bottom end in the UK these days - and there never was one.
Workers blaming this on competition from EU immigrants was one of the causes of Brexit.
"Germany, whose economy is almost as big as Japan’s, sits at a whopping 47.5%"
Is this a fair comparison? Like, I'm sure that if you looked at, say, California, and counted what it "exports to" and "imports from" the rest of the US, the size of its trade flows would be enormous. Japan doesn't have the kind of closely integrated relationship with _anyone_ that Germany has with other parts of the Eurozone, or that CA has with the rest of the US.
Good article with some reasonable theories about why Japan is failing to export as much as before. The hydrogen car thing is mostly Toyota and Honda as chief promoters. I think part of this is that for the domestic market, battery electric cars are a hard sell. In cities most dwellings are large multi story buildings whose parking garages aren’t suited for overnight charging, and in the countryside most houses have less than 100amp service (central heating or even central hot water is not common (many use natural gas and electric water heaters are mostly tankless, mainly for the bath and a smaller one for the kitchen) so a high load car charging station would be hard to accommodate. As far as roadside chargers the space required is not available in urban areas, gas stations can accommodate only a few cars at once and if they had to each remain for 20 - 40 minutes each it would not work. With hybrids or hydrogen vehicles these problems go away. I guess the Galapagos syndrome prevented them from considering that many export markets don’t have this same issue.
Noah does it again -- the Japanese version of the amazing Sri Lanka article, thank you for the clarity. Couple of questions; 1. ‘unlike the U.S., which was pretty much fine running large trade deficit’ - why? 2. Germans huge export as % of GDP, do they run a large trade surplus? If so, assuming this is advantageous but not in times increasingly isolationist/war times.
The US doesn’t need to import two of the most needed categories: food and petroleum which as was stated in the article Japan does. The US dollar is also the global reserve currency which many global commodities are priced in so exchange rates are less of an issue. Unless one believes like Trump that a trade deficit is “losing” or that China pays tariffs (that actually importers pay) then by comparative advantage importing things that are more cheaply made overseas is better than trying to build a trade surplus.
You can buy weapons, oil, and American suburban tract homes for dollars. All the things anyone could need!
I’m not really joking, either. Dollars are secured by $40T in US residential property. Which is a very liquid market, and ownership is also immediately useful, since roughly everyone dreams of living here or having family members do so.
"a weak currency can be a big opportunity for a country,"
I remember in the early aughts every time it looked like the economy was heading into trouble and finally Howard was going to be held electorally responsible for his terrible Govt we would see the Aussie Dollar dip down towards 50cents and our mining exports would boom & Howard would have enough money in the budget to keep the surplus and hand out some goodies
While this was obviously good for the country it used to drive me nuts as it was Paul Keating as Treasurer of a Labor Govt who took the brave decision early in the 80s to go to a floating exchange rate (and Central Bank independence) and here was the economic plan working perfectly but to help a Liberal Govt and this after the independent Central Bank made back to back mistakes with interest rates in the last 80s (fear of the 87 Stock Market crash meant they kept interest rates too low for too long which caused some inflation which forced them into putting interest rates to 17% in the early 90s where they then kept it there too long and both these mistakes ended up hurting the reputation of the Hawke/Keating Govt despite the fact we have proof that Keating after the 87 crash did say that he thought that interest rates should go up before the Reserve Bank actually did it, so he was right but got held politically responsible for the mistakes the Reserve Bank made in the Australian political memory)
It feels like a series of interrelated and self-reinforcing problems that is holding Japan back. The aging population is likely the prime agent and that without it, none of the others are possible.
The corporate culture is a driven in no small part by the relative lack of political clout of Japan’s (tiny) younger generation.
Lack of immigration feeds the small young population and promotes an insular society among those most likely to adopt change, international standards, etc.
A shrinking talent pool means top firms have to dip lower and lower on the talent ladder, preventing the chaotic rebirth that has been the hallmark of my many startup stories in the US.
Population. If Japan wants to grow, it needs to GROW.
Anecdotal, but traveling around Japan for the last two weeks I’ve noticed a larger number of mothers and couples with new babies, possibly a result of the pandemic ( not so much lockdowns but less after-work drinking parties and other outside social activities may have increased at home social activities). Increasing the birth rate would help, but immigration would be a faster way out. I heard reports of more younger workers being allowed in, but given how long it took the government to allow tourists and non-resident visitors in after the covid restrictions (only opening up a few weeks ago) there still seems to be public support for continued isolation. This may also be Covid fear, I notice greater than 95% of people walking outside wearing masks and most stores and hotels have hand sanitizer stations at the entrances and many hotels have automated body temperature scanners at the entrances, while hotels buffets require donning plastic gloves as well as mask wearing.
Possible explanation :capital account surplus is going down because of an ageing population plus high infrastructure spending, and that drives a falling trade account surplus.
Thanks Noah, this is such a insightful and easy to follow article.
I found it particularly interesting how Japanese car manufacturers have fallen behind in terms of battery technology, given their push towards hydrogen technology. I do wonder though if it could prove beneficial long term, even if hydrogen cars continue to be a flop. The technology seems promising none the less, so it could be worth watching the space especially in terms of renewables etc.
I agree it's weird. Back in early 2000s when I first went to live and work in Japan I picked the place because it was (still) seen as cool and cutting edge. The newest technology, the craziest big city culture, anime, video games, movies, J-Pop. And then all that stopped sometime in last 5-15 years. I still remember being kinda shocked realizing circa 2007-08 that Samsung now made better TVs than Sony. Part of this is I agree due to poor corporate culture (it should not be forgotten that a lot of the corporate titans of post-war Japan were led by mavericks, and the system subsequently put in place of lifetime employment, seniority based promotion system, hierarchical desirability ranking of companies from big to small etc. really made repeating that trick very difficult). My own experience working at the R&D center of one of their big electronics conglomerates made it very clear very quickly that despite the vast resources being deployed no real innovation was ever going to come out of there.
But what about something like J-Pop (cool in early 2000s) being utterly supplanted in global consciousness by K-Pop? Even if K-Pop is arguably more an industrial than an artistic product and so maybe also subject to corporate culture differences, am still befuddled by why latter overtook former so completely.
Interestingly, there is now exactly one cool J-pop artist again (Ado) and instead of the industry ignoring her they're successfully using her to export anime via One Piece movie tie-ins.
But One Piece itself is about to end, and there's a large gap in popularity between it and any other IP coming out of Japan at the moment. Korea and China have finally successfully gotten large "anime-like" IPs off the ground, and their software and mobile game designs are more interesting too.
Not sure about Korea on the software front - the Western consensus seems to be that Samsung's software is an albatross around the neck of their hardware division, both on phones and in televisions. Likewise, in the gaming space, a lot of KR games tend to have limited appeal outside KR due to a persistent tendency to conflate "grind" with "desirability." The Japanese tendency seems to be to more often to conflate "systemic complexity" with "fun" but this neither universally true (nor as heavily indulged in) and, whether operating with or against this paradigm, Japanese companies frequently produce some really outside-the-box stuff either creatively or mechanically (or both) that has a lot of cross-continent appeal. [ETA: this is more on desktop than mobile. I mostly choose to ignore the existence of mobile game designs as having devolved into a form of cynical parasitism from its desktop and console origins that has some regrettable feedback effects in terms of desktop monetization schemes.]
For a foreign fan in the last decade jpop was very hard to access because companies feared piracy while kpop was very inviting as a result of korean national industrial policy that sees kpop and the entire Korean Wave as means of gaining both profits and soft power.
Jpop was extremally hostile to posting content on Youtube until recently because fears that it will hurt CD sales. It's only in the last few years that jpop started moving towards streaming and are posting stuff on youtube.
On the contrary kpop was quick to embrace foreign audiences and the state encouraged those companies and acts that achieved international success. Music videos are regularly posted on Youtube since around 2010. Variety shows are posted with english subtitles from the beginning. Companies buy lots of youtube ads to promote their music. Kpop festivals are regularly held overseas as a promotional tool etc.
KPop singing is better than JPop and KPop girls have more variety and talent than just being “kawaii”
Personally I’d describe JPop as “boring” and KPop as “culturally appropriated from 2000s black women groups”.
Seriously, have you seen their streetwear fits?
Example of a boring artist would be ChouChou and a surprisingly good one would be Luce Twinkle Wink, who do much harder dances than usual.
hmm, would you say you have experienced a sufficiently large sample from both to make this statement? and how long have you been following both? It's hard for me to tell because the J-Pop i know is mostly from 20 years ago, while the K-Pop i know is like 2017 onwards if that. I don't get the impression you get but am also comparing offerings from two different eras.
I will mention one other thing that just occurred to me - there are a decent number of K-Pop groups that have foreigner members - Japanese (e.g. the three that are on Twice), Chinese/Taiwanese (say Ningning), the odd Korean-American (Nancy). That's something that at least back in the days would have been hard to imagine happening in Japan, and probably helps significantly with export popularity of Kpop.
Could the timing of the 'Japan coolness cliff' be due to demographic trends?
It looks like the fall off in Japan's TFR started in earnest after ~1972. They would have had a decent sized 20- and 30-something cohort coming of age in the 90s and early 00s, and then the young adult share of the population would have dropped off steadily afterwards.
Maybe Japan is just too demographically old now?
South Korea's TFR only started plummeting ~1985 or so, so the timing kind of fits for them taking the lead from Japan.
Excellent article. There was a section on a lack of Japan bringing their products to other nations to promote exports. I have worked in the Sourcing departments of major US manufacturers (industrial goods, pharma, and medical device) for the past 10 years. My job is to find manufacturers of items we need. For large US businesses, demand for parts and finished goods is a process of seeking out vendors to make custom items. In my experience, Japanese companies were absent or not focused on the main marketing platforms for international business-to-business sales (Alibaba, Thomasnet, Pharmacompass). When you can find a Japanese company online, more than 75% do not have an English version of their webpage which makes getting an idea of a companies technical prowess dependent on Google Translate. This is opposite of Chinese companies. They are hyper present on these platforms and they have English versions of their websites. This makes it super easy to do business with Chinese companies.
From where I sit, Japan's export problem is even worse than you make it out to be. Basically, the Japanese don't make _anything_ any more. My Sony cameras and lenses? All made in China. Sharp is owned by a Taiwanese company, and LG has won the TV/PC monitor wars. The Omron blood pressure gizmo at hand was made in China. Of everything* I've bought in the last 10 years, only my manual focus (camera otaku) camera lenses (Cosina. But no one other than camera otakus have ever heard of them) were actually made in Japan. Peecees are all China. Etc. Etc. Etc. (And Japan lost the semiconductor wars years ago. (Renessais (or however it's spelled) is still running their ancient Japanese fab lines, but all their new technology stuff is fabbed in Taiwan.))
*: Truth in advertising: the Tanita bathroom scale we just bought claims to be made in Japan!
So what happened? Dunno, but I think that the enoumous profits that the trading companies have been making of late _may_ have something to do with it. This year's corporate profit results (announced in March and April, prior to the Yen crash) were at record highs, by large amounts. So the sectors of (and actors in) the economy that the folks in the government are most interested in (i.e., their corporate friends), are doing just fine, thank you. Frog in boiling water syndrome: they can't notice that there's a problem until it's too late. And the LDP folks simply aren't very smart: the only thing they can think to do with the cheap Yen is tourism. Which is a horrific industry in terms of labor productivity: except for management, it's pretty much all minimimum wage labor. (Employment in Japan has always been a scam: Japanese labor laws only apply to companies with over 300 employees, so the protections (such as they are) provided labor don't apply to the majority of the labor force. The LDP has been promissing to increase wages, but they're only talking about wages at the large companies, again, leaving most Japanese workers out in the cold. (Minimum wage is pitifully low and there's no talk of raising it. There's a disaster lurking here in that a lot of Japanese minimum-wage labor is by immigrants (like Qatar!), but with the yen at 140 to the dollar and the wages so low, it doesn't make sense for folks from Sri Lanka or Nepal to come, or even stay. From agriculture to construction to retail, Japan's day-to-day operation is quite dependent on foreign labor, and Japan hasn't realized that this is going to stop working in the near, if not immediate, future. (Again, the LDP's friends are all big company management, and they hate paying wages, so they've been increasing the number of low-wage foreign workers of late.))
And this is in a context where median income has been falling for the last 25 years, while every other industrialized country has seen rising median incomes.
This is interesting, I think:
"I think that the enormous profits that the trading companies have been making of late _may_ have something to do with it. This year's corporate profit results (announced in March and April, prior to the Yen crash) were at record highs, by large amounts. So the sectors of (and actors in) the economy that the folks in the government are most interested in (i.e., their corporate friends), are doing just fine, thank you."
This almost looks like an issue similar to some of those elsewhere (the UK and US, among others), where the problem is 'financialization' of the economy. So long as profits remain high, there is no recognition of a problem.
So what happened. The Yen’s dramatic appreciation in the mid 1980’s triggered a trend in outward foreign direct investment that continued after the bubble burst. The ratio of investment made in foreign affiliates, as compared to investment at home by domestic firms, increased 10-fold between 1985 and 2013. Japanese companies owned around 4000 overseas affiliates in 1987. That rose to around 12,600 by 1998 and to 25,000 in 2018. This info comes from Japan’s Ministry of Economy, Trade and Industry, METI. ( I read about this in The Great Demographic Reversal by Goodhart and Pradhan.)
Is this why Japanese companies are profitable? This is not a bad way to run an economy, off overseas investments, though in the long run it seems unstable, as other counties have an incentive to disfavor these investments.
"as other counties have an incentive to disfavor these investments."
I'm not sure how true this is. I think the US and Indian approaches are much more oriented towards an openness to foreign capital employed in the form of domestic production and domestic wages -- Toyotas and Hondas being build on US soil, iPhones built in India, that sort of thing -- without any particular animus to profits being realized by foreign capitalists because the political focus is much more on job creation.
The US median income is not falling but has gone up 10% in 20 years. And 2/3 of that gain has been between 2017 and 2019, which seems peculiar to me. Did anyone notice an increase in standard of living then? Perhaps Trumps protectionist economic policies worked?
https://fred.stlouisfed.org/series/MEPAINUSA672N#0
Trump tax cuts & post-2008 recovery cycle & Fed constantly pumping money into the economy finally made unemployment low enough that real wages started rising
the protectionist policies worked against this
and of course the tax cuts mean even more deficit spending (which is dumb if the ROI on it is <1)
> My Sony cameras and lenses? All made in China.
Mostly Thailand, I think?
Cosina also makes white-label lenses for other brands (Zeiss, Voigtländer) though the business can't be that big, and China also has companies like Venus Optics.
Well, manufacturing isn't everything when you have design. Sony continues to design most all phone camera sensors for instance.
> And this is in a context where median income has been falling for the last 25 years, while every other industrialized country has seen rising median incomes.
The UK's real wages have been doing pretty badly too.
I thought Thailand, too, but the ones I checked were China. (Even the (getting ancient by now) tiny pocket one I just pulled out of the back of the drawer says China. So that's four for four being China.) Maybe it's Nikon that mfrs in Thailand.
Good point on sensors: I don't know where they are fabbed, but Sony has dominated the image sensor universe for an age. (I used to translate spec sheets for them back in the day...)
UK's real wages have been bad, I'd guess, since Brexit, but Japan's have been a mess since the bubble burst.
UK did a more-extreme version of the US reaction to the Global Financial Crisis: very loose fiscal/monetary policy in 2008-2010, then a much tighter fiscal policy from there onwards, which did a number on real after-tax wages. Loose monetary policy meant that GDP and corporate profits did OK, but employment never got back to 2007/8 levels and it takes a very tight labour market to lift up wages at the bottom end in the UK these days - and there never was one.
Workers blaming this on competition from EU immigrants was one of the causes of Brexit.
Ha! Sony just made a liar of me: the latest version of their mid-range full-frame mirrorless digital (the A7Rv) is made in Thailand.
Interesting article since I happen to be in Tokyo for a few days. Any recommendations for a couple of restaurants? Thx!
Try Teppen Onnadojo in Shibuya! :-)
"Germany, whose economy is almost as big as Japan’s, sits at a whopping 47.5%"
Is this a fair comparison? Like, I'm sure that if you looked at, say, California, and counted what it "exports to" and "imports from" the rest of the US, the size of its trade flows would be enormous. Japan doesn't have the kind of closely integrated relationship with _anyone_ that Germany has with other parts of the Eurozone, or that CA has with the rest of the US.
Could it be that Japan just got old?
Good article with some reasonable theories about why Japan is failing to export as much as before. The hydrogen car thing is mostly Toyota and Honda as chief promoters. I think part of this is that for the domestic market, battery electric cars are a hard sell. In cities most dwellings are large multi story buildings whose parking garages aren’t suited for overnight charging, and in the countryside most houses have less than 100amp service (central heating or even central hot water is not common (many use natural gas and electric water heaters are mostly tankless, mainly for the bath and a smaller one for the kitchen) so a high load car charging station would be hard to accommodate. As far as roadside chargers the space required is not available in urban areas, gas stations can accommodate only a few cars at once and if they had to each remain for 20 - 40 minutes each it would not work. With hybrids or hydrogen vehicles these problems go away. I guess the Galapagos syndrome prevented them from considering that many export markets don’t have this same issue.
Noah does it again -- the Japanese version of the amazing Sri Lanka article, thank you for the clarity. Couple of questions; 1. ‘unlike the U.S., which was pretty much fine running large trade deficit’ - why? 2. Germans huge export as % of GDP, do they run a large trade surplus? If so, assuming this is advantageous but not in times increasingly isolationist/war times.
The US doesn’t need to import two of the most needed categories: food and petroleum which as was stated in the article Japan does. The US dollar is also the global reserve currency which many global commodities are priced in so exchange rates are less of an issue. Unless one believes like Trump that a trade deficit is “losing” or that China pays tariffs (that actually importers pay) then by comparative advantage importing things that are more cheaply made overseas is better than trying to build a trade surplus.
You can buy weapons, oil, and American suburban tract homes for dollars. All the things anyone could need!
I’m not really joking, either. Dollars are secured by $40T in US residential property. Which is a very liquid market, and ownership is also immediately useful, since roughly everyone dreams of living here or having family members do so.
Germany is the definition of trade surplus.
"a weak currency can be a big opportunity for a country,"
I remember in the early aughts every time it looked like the economy was heading into trouble and finally Howard was going to be held electorally responsible for his terrible Govt we would see the Aussie Dollar dip down towards 50cents and our mining exports would boom & Howard would have enough money in the budget to keep the surplus and hand out some goodies
While this was obviously good for the country it used to drive me nuts as it was Paul Keating as Treasurer of a Labor Govt who took the brave decision early in the 80s to go to a floating exchange rate (and Central Bank independence) and here was the economic plan working perfectly but to help a Liberal Govt and this after the independent Central Bank made back to back mistakes with interest rates in the last 80s (fear of the 87 Stock Market crash meant they kept interest rates too low for too long which caused some inflation which forced them into putting interest rates to 17% in the early 90s where they then kept it there too long and both these mistakes ended up hurting the reputation of the Hawke/Keating Govt despite the fact we have proof that Keating after the 87 crash did say that he thought that interest rates should go up before the Reserve Bank actually did it, so he was right but got held politically responsible for the mistakes the Reserve Bank made in the Australian political memory)
Super informative article. I'm living over her in Okinawa right now and I see the consequences of everything in this article on the ground.
Japanese culture seems to have a hard time adopting new mindsets around many things. I'm not surprised to learn exports is one of them.
The aging population is a problem, but the aging mindset is a bigger one.
It feels like a series of interrelated and self-reinforcing problems that is holding Japan back. The aging population is likely the prime agent and that without it, none of the others are possible.
The corporate culture is a driven in no small part by the relative lack of political clout of Japan’s (tiny) younger generation.
Lack of immigration feeds the small young population and promotes an insular society among those most likely to adopt change, international standards, etc.
A shrinking talent pool means top firms have to dip lower and lower on the talent ladder, preventing the chaotic rebirth that has been the hallmark of my many startup stories in the US.
Population. If Japan wants to grow, it needs to GROW.
Anecdotal, but traveling around Japan for the last two weeks I’ve noticed a larger number of mothers and couples with new babies, possibly a result of the pandemic ( not so much lockdowns but less after-work drinking parties and other outside social activities may have increased at home social activities). Increasing the birth rate would help, but immigration would be a faster way out. I heard reports of more younger workers being allowed in, but given how long it took the government to allow tourists and non-resident visitors in after the covid restrictions (only opening up a few weeks ago) there still seems to be public support for continued isolation. This may also be Covid fear, I notice greater than 95% of people walking outside wearing masks and most stores and hotels have hand sanitizer stations at the entrances and many hotels have automated body temperature scanners at the entrances, while hotels buffets require donning plastic gloves as well as mask wearing.
Possible explanation :capital account surplus is going down because of an ageing population plus high infrastructure spending, and that drives a falling trade account surplus.
Correction. It’s not the BOJ intervention, but the central government. The BOJ has just executed.
I found this interesting discussion randomly today. Learned a lot about kpop lol.
https://www.reddit.com/r/kpophelp/comments/pu4cn1/which_groups_are_actually_popular_in_south_korea/
Thanks Noah, this is such a insightful and easy to follow article.
I found it particularly interesting how Japanese car manufacturers have fallen behind in terms of battery technology, given their push towards hydrogen technology. I do wonder though if it could prove beneficial long term, even if hydrogen cars continue to be a flop. The technology seems promising none the less, so it could be worth watching the space especially in terms of renewables etc.
This was such an interesting article, thanks!