Archive for the Category Japan


Bad advice from the Financial Times

The Financial Times is hardly alone in misdiagnosing Japan’s problems, but I can’t resist commenting on this misguided advice from the Editorial Board:

Yet it is still puzzling that such an extreme monetary policy, which has seen the assets of the BoJ rise to an extraordinary level of 100 per cent of gross domestic product, has had so limited an effect on inflation. One reason is that it has not led to overheating of the economy. Another is that the exchange rate against the US dollar has actually appreciated since 2015. A still more important reason must be that inflation expectations became so stubbornly anchored at close to zero. . . .

At the same time, it [the BOJ] will probably need more help from the government. The proposed increase in the consumption tax in October of next year needs to be abandoned until the inflation target is reached. Indeed, the idea that the best target for increased taxation is consumption makes no sense in a country with such exceptionally low shares of consumption in GDP. It would be far better to tax something else, such as undistributed and uninvested profits. It is also possible that explicit resort to “helicopter money” will be required. The aim now should not just be for the BoJ to keep carrying on, but for the government to co-operate fully with it, to lift Japan out of its deflation trap.

“Extreme monetary policies” are exactly what you get when a contractionary monetary policy drives NGDP growth over several decades to the lowest rate ever seen in any country in modern history.  It’s not “puzzling” that this policy is associated with low inflation.

The proposed solutions are exactly backwards.  Japan should increase its consumption tax next year because it needs the revenue and this is one of the most efficient of all taxes.  Or perhaps I should say the least bad tax.  Of course if they wish to cut spending instead, that would be fine.  But there’s almost no chance of that occurring, and a tax increase is less bad than an exploding debt.  A helicopter drop is just more fiscal stimulus, piled onto a public debt that is already roughly 250% of GDP.  Taxes on capital income are much less efficient that consumption taxes, and Japan’s consumption is not an “exceptionally low share” of GDP:

Screen Shot 2018-12-17 at 11.51.45 AMThe BOJ should instead adopt a more expansionary monetary policy combined with fiscal austerity.  There are many options, including NGDP level targeting.  As for the policy instrument, I suggest either exchange rate targeting, or a “do whatever it takes” approach to QE.  So far, the BOJ has refrained from either approach.  If the BOJ prefers a smaller balance sheet, then they should set a higher NGDP (or inflation) target.  And by all means, shift from growth rate targeting to level targeting.

Of course the “concrete steppes” crowd will whine “but they’ve already done so much . . . ”  Nonsense.  As Yoda said:

Do. Or do not. There is no try.

Off topic, Trump believes that Fed decisions on the proper level of IOR should be determined by car bombings in Paris:

“It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!,” he said in a tweet just a day before the start of the final Fed policy meeting of the year.

America cities were burning in 1967 and 1968.  And what happened to inflation?

(And please don’t comment on whether it makes sense for the Fed to raise interest rates. Leave that for another post.)

Japan: Is life getting better?

I’m choosing Japan for this post, but it could refer to almost any developed country.

I would argue that the answer to the question in the title depends on how you define “life”:

Definition A:  The total utility of the typical life.

Definition B:  The average flow of human utility in a typical year.

Economists usually think in terms of definition A, even though one could argue that strict application of our widely used utilitarian framework implies definition B is more appropriate.  (Or even another definition, total flow of utility.)

Below is a typical picture of Japanese Screen Shot 2018-08-28 at 1.15.54 PMlife in the 1950s, along with a more recent picture, which shows what a typical day in Japan might look like during the 2050s.  In which of these two pictures are “living standards” higher?

Now you may complain that I’m comparing apples and oranges, that of course life is more fun when you are young than when you are elderly.  And that’s true, but I’d also argue that these two pictures fit my definition B of “life”.  In each case, I’m showing the typical experience of Japanese life during a given day, or even a given year.

Consider the population distributions, by age for Japan in 1960, 2020 and 2050:

Screen Shot 2018-08-28 at 1.30.47 PMYou can see that during the 1950s, life in Japan was mostly young life.  During the 2050s, life in Japan will be mostly old life.  In my previous post I argued that I’d gladly accept a much lower income to have the health and energy I had at age 31, rather than my current 62.

Just to be clear, I’m not a nihilist arguing that Japan’s amazing economic progress since the 1950s has been of no value.  Living standards in material terms really are vastly higher.  Not only are the Japanese much richer, they also live much longer.  Nor am I arguing for a natalist policy to boost birthrates—I see no obvious market failure that calls for government interference.  On the other hand, I’m not denying that a natalist policy might be beneficial, just that I haven’t yet seen any convincing arguments for interfering with people’s personal decisions on having children.  So I don’t have any sort of agenda here, other than to make people think about what it means for life to be “better” than in the past.

Of course all this hinges on my preference for definition B of “life”.  Most people probably think in terms of definition A, and hence would not be at all bothered by these trends, as long as the average complete life is better than before.  My “flow approach” partly fits in with my denial of personal identity.  I think of life as a series of experiences, and I think of “me” as being a completely different person from the “me” at age 8.  Japan in the 1950s had a big flow of “young life”.

I’m so agnostic about all of this that I’m not even sure younger people really are happier. Happiness research doesn’t necessarily support this claim, even though we almost all instinctively feel that we’d like to be younger.  Think about the vast industry for beauty products to make people look younger.  Or “health clubs”.  But maybe our worship of youth is all just looking through rose-tinted glasses.

BTW, the Japanese population pyramid from 1960 is roughly how things looked throughout most of human history, almost everywhere in the world.  It’s the new distribution that is uncharted territory.  If youth really does equate with happiness, how do we compare life in Mali and Niger, with life in Japan?  Also, because poor countries typically have higher birth rates, and because birth rates fall as countries get richer, Japan’s birthrate cannot be increased by economic growth, no matter how many stories you read about modern East Asian families being unable to “afford” more than one child.  Singapore is twice as rich as Japan, and has an even lower birth rate.  Crazy rich Asians!

PS.  The little girl on the left didn’t have an iPhone.  I’m old enough to remember just how sad life was back then.  Young people today can’t even imagine.

Japan as sci-fi for grown-ups

Sci-fi is especially popular with the young.  As I got older, I became less interested in stories about space travel, and hence began reading less sci-fi and more of other forms of literature.  But I never lost interest in the idea of alternative worlds.  This is what makes Japan so interesting.  It’s not so much that parts of Tokyo look very futuristic, rather that even Edo period Japan offered an alternative way of living, which was not obviously inferior to the West.  Indeed as far back as 1700, Tokyo was the largest city in the world, with 1.2 million people and a very interesting culture.

Visiting Japan is the closest I’ll ever get to visiting an alternative world.

PS.  In a recent post I made fun of the “cultural appropriation” insanity in America.  The NYT has a new piece on that topic:

When the furor reached Asia, though, many seemed to be scratching their heads. Far from being critical of Ms. Daum, who is not Chinese, many people in mainland China, Hong Kong and Taiwan proclaimed her choice of the traditional high-necked dress as a victory for Chinese culture.

“I am very proud to have our culture recognized by people in other countries,” said someone called Snail Trail, commenting on a post of the Utah episode by a popular account on WeChat, the messaging and social media platform, that had been read more than 100,000 times.

“It’s ridiculous to criticize this as cultural appropriation,” Zhou Yijun, a Hong Kong-based cultural commentator, said in a telephone interview. “From the perspective of a Chinese person, if a foreign woman wears a qipao and thinks she looks pretty, then why shouldn’t she wear it?”

If anything, the uproar surrounding Ms. Daum’s dress prompted many Chinese to reflect on examples of cultural appropriation in their own country.

“So does that mean when we celebrate Christmas and Halloween it’s also cultural appropriation?” asked one WeChat user, Larissa.

Good question.  At least the Japanese and Chinese have not completely lost their minds.

(This is cute.)

PPS.  Some commenters have questioned my credentials.  I am having my personal doctor prepare a letter describing my competence.  I can assure you that the letter will provide a glowing report as to my mental health.

Back in the USA

A quick follow-up to my previous post on Japan.  Leaving the sleek, attractive, courteous, efficient Narita Airport and arriving into messy, rude, chaotic, disorganized LAX is a real slap in the face.  My favorite part is when the airlines give you a customs form to fill out while still on the airplane.  After landing, you never show the customs form to anyone.  I guess they view it as a way for passengers to pass the time, sort of like doing Suduko.  On the other hand, south Orange County seems like paradise after visiting Japanese cities full of small houses, concrete buildings and power lines.  It’s really hard to compare America and Japan, as they have such different strengths and weaknesses.

I don’t have a lot of travel tips, as most people have different interests from me.  For instance, on the train to Narita airport I saw people staring at their cell phones.  I spent the time looking out the window, and enjoyed the view as much if not more than 90% of the films that I have seen.  I enjoy seeing the amazing variety of architecture in Tokyo, especially the stuff that reminds me of the 1960s.

During the final part of our trip we visited some less urban areas.  Two places stood out.  We spent 3 days on the Izu peninsula at a onsen (hot springs hotel)  near Kawazu, but I could see spending another month exploring the region.  (Of course I’ll never go back, just as I’ll never go back to all the other places I told myself I’d return to someday and see in more depth.)

Another highlight was the onsen at Takaragawa (in Gunma).  The hotel is rated 4 stars, but in reality is pretty delapidated.  Nonetheless, it’s well worth visiting due to the spectacular outdoor hot spring baths.  In the past, hotel customers could bathe with a black bear.  That’s no longer allowed, but they still do serve bear soup.

I do plan to go back to Japan someday, as it remains my favorite country.

PS. One of my favorite sights was the vending machines selling cigarettes and alcohol:

Screen Shot 2018-04-27 at 11.59.46 AM

The machines also sell some 9% alcohol drinks. Indeed Japan has a huge vending machine industry, with an amazing variety of products.

PPS.  I also appreciate that Japan doesn’t accept the “cultural appropriation” insanity of the SJWs.  The Japanese view it as a compliment when Kay Perry dresses up in a kimono.  What is wrong with this country?

They also have lack America’s bizarre obsession with the safety of children.  I don’t have the article, but I recall reading a North Ridgeville, Ohio newspaper that reported an 8th grade school trip to DC was recently cancelled because school officials were worried about “terrorism”.  Not any specific terrorist threat, but just terrorism in general.  Tyler Cowen recently reported that Penn State was cancelling a student group that did outings to wilderness areas.

What’s happened to this country?  When I was young a whacky TV personality named Pat Paulson ran for President as a joke.  Back then, Americans were smart enough to realize that you don’t actually elect someone President who is running as a prank.

Reality is increasingly resembling the Onion newspaper.

Japan is in the details

Those who have already been here will want to skip over this post for something more informative—for example Noah Smith.  But I thought I’d make a few comments about my first trip to Japan, which is 60% over.  Consider these to be non-authoritative impressions.

1.  Just say Noh:  After arriving at 4am very jet-lagged, I stayed up all day and attended a performance of Noh theatre at the Yasukuni Shrine.  (Yes, that Yasukuni Shrine.)  Despite the jet lag and the tiny uncomfortable chairs, I sort of enjoyed the event.  Perhaps it helped that I had previously read William Vollmann’s Kissing the Mask, although it had been awhile and I still didn’t really understand what I was watching. In any case, I recommend a performance of Noh, at least for those with patience. (I’d like to thank my friend and his wife for bringing me to this show, and helping my wife and I adjust to Japan.)

2.  The “wouldn’t it be neat if” country: Japan seems like a land of contrasts (how’s that for a cliche!)  From the understated subtlety of Noh we transitioned to the sensory bombardment of Robot Restaurant, which makes Las Vegas seem refined and tasteful by comparison.  If you like young Japanese ladies in skimpy comic book outfits using whips to mercilessly attack men dressed up as awful monsters, all to the sound of deafening rock music (and who doesn’t?) then be sure not to miss this show.  I saw roughly zero Japanese there, which must mean something.  Later that day we saw a group of western tourists driving go-carts through Shibuya, all dressed up in bizarre costumes.  I like the fact that the Japanese seem rather uninhibited in terms of coming up with offbeat ways of having fun.  In many cases, it’s just a matter of tweaking some familiar product to make it more convenient.  Which brings me to my next observation:

3.  Japan is in the details:

One of the pleasures of traveling in Japan is that you notice all sorts of interesting little details.  The Japanese are good at perfecting products or processes that are widely used elsewhere.  In the basement of a Tokyo department store I saw the most astounding collection of baked goods that I’ve ever come across.  This place is paradise for people with a sweet tooth. There are lots of innovations in travel, such as taxi doors that open automatically, and a train system that runs with such perfect precision that you’ll almost burst out laughing.  When I watched thousands of commuters pour through a Tokyo train station in the morning their movements were so precise and efficient and synchronized that it almost seemed staged, like as scene in a Hollywood film.  I dared not cross this river of people, fearing it would throw the clockwork precision out of whack.

Detail of a door in Nara:

Screen Shot 2018-04-12 at 10.31.53 PM

4.  Libertarian Japan:

I read that the drinking and smoking age in Japan is 20, but the age limits are not enforced.  There are lots of vending machines selling cigarettes, and I’m told there are also a few machines selling alcohol.  In an Osaka restaurant I saw an ash tray with a couple cigarette butts.  What a thrill that was!  To paraphrase Colonel Kilgore, cigarette smoke smells like . . . freedom.  Japan still has phone booths, so you can get by without a cell phone.  (My model 6s iPhone broke on the first day of my trip; I borrowed my wife’s for the Nara picture.)  Most businesses I’ve frequented don’t take credit cards—another big plus in my view.

5.  Visual Japan

I’m a very visually oriented person, so it’s visual images, not food, that motivates me to travel.  Japan has the sort of visual aesthetic that I like best, especially in art, film, architecture and design.  And yet much (perhaps most) of the architecture is pretty bland, even ugly–especially buildings from 20 to 60 years old.  Lots of mediocre stuff was thrown up during the post-war boom.  I’m interested in the very old and very new stuff.  Newer Japanese houses are often very attractive, as are some of the modernist commercial buildings or museums.

The older temples and gardens in places like Kyoto are even better than I imagined.  If you are in one of the better Kyoto gardens on a nice spring day, you’d see some of the most astoundingly beautiful scenery that you’ll ever experience.  At a smaller scale, they are very good at things like pottery design, and also the presentation of food items, in stores or restaurants.  BTW, I’m not a foodie, but the food here seems excellent, and relatively inexpensive.  I recall one lunch in Tokyo that was 700 yen (includes tax and there is no tipping), which is $6.50.  The meal would have easily been over $10 in the US, especially including tax and tip.

Japanese cities often look better at night, with parts of Osaka looking like Times Square.

6.  The barbarians are coming

When you see a mix of foreign tourists and locals in a place like Tokyo, the locals look better.  The tourists (mostly Westerners and East/Southeast Asians) seem louder, less well-mannered, less attractively dressed, fatter, etc.  In affluent parts of Tokyo the men wear suits and the women dress more elegantly than in the West.  The younger women often look very  . . .  demure, if that’s the right word.  Unless they look totally crazy.  Whatever the look, there are no halfway measures in Japan.

Locals in Kyoto are a bit dismayed by the sudden influx of tourists.  I read that tourism in Japan has soared from 5 million in 2005 to 24 million in 2016, and is expected to soon reach 40 million.  Tourists don’t know all the complicated rules that make Japanese society work well despite the high population density.  (The alt-right would have a much stronger argument against immigration in Japan than in the (mongrel) US.)  I feel oversized and clumsy here, always bumping my head on something, or my knees against a table.

Before the trip I read The Three Body Problem trilogy.  In the future, the people were more attractive, softer, less rugged.  The cities were full of video screens.  Tokyo sort of reminds me of that imagined future society.

BTW, it’s hard to tell Chinese and Japanese apart at the individual level (until they speak), but easy at the group level.  Sort of like Germans and Italians.  That reminds me of the “race is a social construct . . . no it’s not” debate. To my eye, the Japanese look slightly more Western.

7.  Surprises

I recall reading about an island off the north coast of Australia where the natives have no concept of left and right.  Everything is described in terms of compass directions, such as north or east.  They’d say “John was sitting to the west of Max.”  Tokyo seems the opposite.  When I spoke of a neighborhood lying to the north of where we were staying, my host said that almost nobody in Tokyo thinks in terms of compass directions.  The numerous maps on the street confused me at first, as they are often upside down, with south pointing up.

There is often surprisingly light traffic in Tokyo–it’s not hard to get around.  I’m told that’s because there are few places to park, so people take public transport.

Subway cars are sometimes “women only”, I believe to prevent groping.  So the “Me too” movement is also making some progress in Japan.

Why are the Japanese so slim and healthy?  The secret seems to be a diet rich in sugar, carbs and fat, and light on fruits and vegetables.  Oh, and lots of smoking.  Try finding a Diet Coke, or sugar-free sweetener for your coffee.

When I watched animated films by Miyazaki I used to think the trees were drawn in a very interesting way.  Now I know why.  Many Japanese trees actually do look like large green cumulus clouds of foliage.

At dinner last night, in a traditional Japanese onsen near Mt. Fuji (recommended), the clams served were still moving around quite vigorously, right at our table. Memories of Oldboy. Many Americans would be disturbed by this sight.

Many of the waitresses speak with a soft child-like voice.  (Maybe they are children, I’m not good at judging ages.)

Mt. Fuji is more impressive than I imagined.

8. The economy:

It’s really hard to compare Japan to the US, because the countries are so different.  I visited the home of a professional couple in Kyoto, and the living standards seemed closer to what you’s see in a lower middle class house in America.  I suspect that Japanese consumption is more equal than in the US, and that the upper 50% of Americans consume at far higher levels than in Japan, while the bottom 50% are closer to Japanese levels.  Japan does have some advantages, like excellent services and low crime rates. The high level of service is labor intensive, and may reduce measured labor productivity.  Productivity is probably hurt someone what by the high population density (it’s hard to find room to build Walmarts) as well as burdensome regulations, which partly reflect a culture with strict rules.  But this is just guesswork on my part.  There seems to be a tight labor market, with many foreigners brought in to do routine work.

9. Random impressions:

I recall Donald Richie saying that Japan was a great place to live, as long as you were not Japanese.  A Westerner visiting Japan benefits from all the attractive aspects of Japanese society, without being expected to adhere to all the rules, which can seem stultifying to an outsider.  I very much enjoy being here as an outsider, and wish I could live a year in Kyoto, as Pico Iyer did.

When I lived in London back in 1986, I wanted to blot out all of modern London, and imagine I was in the city described by Stevenson and Chesterton.  That’s less true of Tokyo, for which futurism is part of the appeal.  Even so, the Japan described in earlier accounts has some appealing features that have been lost.  On the plus side, Japan seems less influenced by the world’s major religions (Christianity, Islam, Hinduism, etc.) than most other places.

Japan gives me a powerful sense of nostalgia, for reasons that are not entirely clear.  I don’t believe in reincarnation, but even the red and white electrical pylons and the trains running on elevated tracks seem oddly familiar.  Perhaps the sense of deja-vu comes from seeing so many Japanese films, and having the images burrow deeply into my subconscious.  (BTW, when you come here it’s immediately clear that Ozu and Naruse are more “Japanese” directors than Kurosawa.)  Or maybe it has to do with spending so many hours looking at woodblock prints, and then finally seeing the actual places they depicted.  Or maybe my personality is more Japanese than American.  I like polite people. (Don’t judge me by my nasty internet persona.)

When you are young you should visit China and SE Asia, and then late in life come to Japan, to rediscover your (imagined) past.

PS.  Because of my injured foot, and because I’ve had a bad cold for the past 11 days, and because I’m twice as old as when I lived in London, I saw much less than I hoped to (and much less than my (younger) wife saw.)  The fact that I’m nonetheless enjoying the trip speaks volumes about Japan.  My only recommendation for Kyoto is to see the popular places in the early morning or near closing time, and the quieter places at midday.  If you go to Arashiyama, don’t miss this house:

Screen Shot 2018-04-17 at 10.52.47 PMPPS.  I positively HATE the way email and Facetime are destroying the romance of travel.