The Japanese enigma......

Being once again inundated with Japanese totty my thoughts naturally turned to the great enigma of the Japanese economy.

The doomsayers are out again in force, crying ‘Woe, woe, Japan has a balance of trade deficit, the first time in 31 years!’

Eh?

The UK seems to have a semi-permanent trade deficit, but it’s still there. Remember when ‘balance of payments’ was the weekly shock-horror story? Whatever happened to it?

The Japanese economy tanked more than 20 years ago. The stock market crashed and property prices went south so far that they have never recovered. And yet Japan remains the world’s 3^rd largest economy.

In fact, the economy has done very well in the last 20 years. True, property prices have never returned to their 1990 levels but the bubble was outrageously large; I seem to recall that the site of the British Embassy in Tokyo was the most valuable piece of real-estate in the world.

So I looked a few measures of Japanese success.

During this period life expectancy has grown by 4.2 years to 83 from 79. This is not due to healthier eating habits. If anything, the Japanese are adopting the unhealthy diet of the West. It is almost certainly down to improved health-care.

It has vastly improved its internet structure; it is reckoned that of the 50 cities with the fastest internet service, 38 are in Japan (and only 3 in the US).

The yen has risen 87% against the USD and 94% against the £. It has also risen against the Swiss franc.

The unemployment rate is 4.2%, about half that of the US.

Japan has a current account surplus of $196 billion; The US has a deficit of $471 billion at the last count.

Yesteryear the received wisdom was that the rise of China would be to the detriment of Japan. It turns out that Japan’s exports have increased by a factor of 14 over the period, and bilateral trade is more or less in balance.

Infrastructure in the US is a mess, with decaying airports, collapsing bridges, badly-maintained roads, whereas Japan has made major improvements and investments in these areas.

So how do the boring statistics translate into quality of life?

Well, Mercedes, Porsche, Audis, Ferraris etc sell well in Japan. Tokyo has 16 of the Michelin guide top restaurants against only 10 in Paris. The Japanese are amongst the top buyers of cutting-edge high tech gizmos. They don’t seem to be doing too badly.

Another rarely-used yardstick of prosperity is electricity consumption. Since Japan became a basket case more than 20 years ago, this has increased at twice the US rate per capita.

But already we have voices saying that China is going to get its comeuppance ‘just like Japan’.

Some comeuppance!

By the way, the main reason for the balance of payments deficit is the importation of fuel to offset the loss of nuclear power after the tsunami, a temporary problem.