Thom Hartmann interviewed me on his show The Big Picture last week. (Thom is one of the most astute commentators in the American media and author of several great books.)
How much will the Japanese earthquake hurt the global economy? (Article as first published by the New Republic.)
Not many people in the American electronics industry had ever heard of the Japanese town of Niihama before the summer of 1993. That changed overnight when a small specialty chemical factory there was knocked out by a fire. Obscure though it may have been, this factory accounted for 65 percent of the world’s supply of epoxy cresol novolac, a resin essential in making most semiconductors. As shockwaves shot through the world electronics industry, prices of some kinds of semiconductors doubled in days. The crisis soon became so acute that the Clinton administration weighed in with a public plea to the Japanese government to take emergency action to restore supplies.
This article was first published at the Atlantic’s website in the immediate aftermath of the earthquake. Click here for the original.
TOKYO, Japan — Your first Japanese earthquake is your most memorable. Or so I thought until, along with about 50 million other residents of northern and eastern Japan, I was transfixed by Friday’s whopper.
My offer to debate the “basket case Japan” story has generated more heat than light at the National Bureau of Asian Research’s Japan Forum.
As a matter of policy, I do not participate in online forums but, as friends have alerted me to some exceptionally egregious misrepresentations in the Japan Forum in the last couple of days, it is time to respond.
I know that the great majority of forum members believe in fairness and intellectual honesty and it is to them that I address this message.
Although my proposal to hold a debate on Japan’s “lost decades” story has met with considerable support, some people have demurred.
Would a debate on the Japanese economy really solve anything? One correspondent at a major American university seems to think not. Here’s what he wrote:
My call for a debate on Japan’s “lost decades” story continues to make waves and many well-placed observers have written in support. I have obtained permission to pass on the comments below.
From an investment banker in the United States:
“I greatly enjoyed your piece in the Atlantic on the myth of the Japanese “Lost Decades”. The same issue has flummoxed me for quite some time. The data just don’t add up. The idea that they have been managing the numbers low makes a great deal of sense.”
From a former Tokyo-based think tank executive who has now returned to his home country:
Britain’s Guardian newspaper ran an editorial page article last year that closely supported the Fingleton analysis of Japan’s “slump.”
Among the many expressions of support I have had since I posted a blog article at theatlantic.com last week on the myth of Japan’s “slump,” one of the most welcome apprised me to the views of the American political analyst Steven Hill. He has published many articles in recent years that closely mirror my analysis. Below is one from Britain’s Guardian.
The Economic Fallacy of ‘Zombie’ Japan
By Steven Hill, Guardian, August 11, 2010
Japan has been getting a raw deal from the so-called economic experts. Consider this: in the midst of the great recession, the United States is suffering through nearly 10% unemployment, rising inequality and poverty, 47 million people without health insurance, declining retirement prospects for the middle class and a general increase in economic insecurity. Various European nations also are having their difficulties, and no one knows if China is the next bubble due to explode.
It turns out — surprise — that not everyone thinks the Japanese economy is a basket case.
A few days ago I issued an invitation to ten top Japan watchers to a debate on what has really happened to the Japanese economy in the last twenty years. I publicized my initiative not only in this forum but via James Fallows’s blog at The Atlantic — where I was privileged to be a guest blogger last week — and I must say both the size of the reaction and its tone have been a very pleasant surprise.
It seems I am far from alone in my view that the “two lost decades” story is a myth. Several capable observers who have known Japan for years (most of them new to me) have written to congratulate me on my stand. I will quote from some of their messages when I obtain their permission. In the meantime readers might like to check out this link to an article someone has just drawn to my attention. It is by a well-placed Tokyo-based journalist who has lived in Japan even longer than me.
For years I have held that Japan’s “slump” is a media myth. I have twice in the past extended an invitation to the principal proponents of the slump story to join me in a live one-on-one debate. I have had no takers. This time, as I have announced in a guest blog at the Atlantic, I am adding an extra twist that should have them banging down my door.
An invitation to:
• Kenneth Courtis, investment banker
• Bill Emmott, author of The Sun Also Sets
• Robert Alan Feldman, author of The Weakening of Japan
• Richard Katz, author of The System that Soured
• Alexander Kinmont, author of The Irrelevance of Japan
• Paul Krugman, author of It’s Baaack! Japan’s Slump and the Return of the Liquidity Trap
• Edward Lincoln, author of Arthritic Japan
• Michael Porter, author of Can Japan Compete?
• Peter Tasker, author of Can Japan Survive?
• Gillian Tett, author of Saving the Sun
As 2011 marks the 20th anniversary of the great Tokyo real estate crash, this is an appropriate time to review what has really happened to Japan during its alleged “two lost decades.”
As you know, I am the only Tokyo-based observer who can document a record of having publicly predicted the crash. I have moreover been almost alone in arguing since the beginning that the crash was a purely financial affair that did not hinder progress in the real economy.
Only the most obvious evidence of such progress is that in the twenty years to 2010, Japan multiplied its current account surplus more than five-fold — and did so in the teeth of intensifying competition from South Korea, Taiwan, Germany, and, of course, China.
As for the United States, by a remarkable coincidence, it also multiplied its current account balance more than five-fold — its current account deficit, that is!
Evidence of Japan’s progress is also apparent in currency markets. Although from the early 1990s on, a resurgent America supposedly turned the tables on an egregiously mismanaged Japan, the yen has not fallen against the dollar. Quite the reverse, it has rocketed by more than 65 percent. Japan’s economic leadership is notably reflected in China’s import numbers. Not only is Japan China’s largest source of imports ($160 billion worth as of 2010, according to the CIA Factbook) but it is almost unique among manufacturing nations in running a balanced trade account with China (actually on Beijing’s numbers Japan enjoys a bilateral surplus). China’s numbers testify to the fact that even with some of the highest wages in the world, Japan is the world’s leading or only supplier of a vast array of state-of-the-artmanufactured products.
Many other similarly impressive statistics could be cited. So how do we reconcile such statistics with the story of Japan’s alleged two decades of “stagnation”? We can’t, of course. Surprising though this may appear to unacclimatized Westerners, all the evidence is that the Japanese economy’s true growth performance has been systematically, if counterintuitively, understated in the last twenty years.
America’s foreign military bases are bad business. (This article first appeared in the January 2011 issue of the American Conservative.)
TOKYO. When German executives visit Tokyo, they are often treated to a
session at Bernd’s Bar, a notably authentic German pub. A bit too
authentic, perhaps, given the place’s Axis-era accoutrements. The last
time I was there, one of the walls still featured a huge photograph of
Willy Messerschmitt in conversation with Charles Lindbergh. It had
evidently been taken at a German aerodrome in the late 1930s and a
couple of Messerschmitt’s eponymous fighter planes — the sort that a
few years later were to cause such grief for the British — loomed in
the background.