Why Japan Isn't Rising It's mellowing as its population ages.
Posted Saturday, July 18, 2009, at 7:52 AM ET
To this gaijin, Japan looks prosperous, clean, highly functioning. At Takashimaya, the high-end department store atop the central train station in Nagoya, shoppers line up in orderly queues before the 10 a.m. opening. But Japan seems to be in the midst of an existential crisis—in the first quarter it shrank at an abysmal 15.2 percent annual rate. In 10 days traveling through the country, I couldn't find anyone who thought the malaise would end soon.
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StumbleUponJapan's rise literally from rubble into an industrial powerhouse is one of the great economic stories of the 20th century. But a slow response to the bursting real-estate and stock bubbles of the 1980s consigned the country to a decade of economic slumber from which it has yet to fully awake. The first great wave of globalization was kind to Japan. But the second wave, dominated by China, which is set to surpass Japan this year as the world's second-largest economy, poses a serious challenge. The unemployment rate has spiked to an unthinkable 5.2 percent, and Japan seems to have reconciled itself to decline. Twenty years after the publication of The Japan That Can Say No, a manifesto of self-assertion co-written by Sony Chairman Akio Morita, we seem to have "The Japan That Can Grow Slow." And part of it is because Japan, like the baby boomers in America, is mellowing as it gets older.
Japan still retains its lead in engineering. A showroom at Panasonic's headquarters displayed a heated, multifunction toilet seat that conserves energy. (Wouldn't leaving the seat cold conserve even more?) The sleek Shinkansen bullet trains roll up to their appointed spots on time. TKX, an 87-year-old Osaka-based company that makes abrasives, has adapted its expertise to cutting silicon ingots into wafers for solar panels.
But social engineering is proving more challenging. Japan's population peaked in 2004 at about 127.8 million and is projected to fall to 89.9 million by 2055. The ratio of working-age to elderly Japanese fell from 8-to-1 in 1975 to 3.3-to-1 in 2005 and may shrivel to 1.3-to-1 in 2055. "In 2055, people will come to work when they have time off from long-term care," said Kiyoaki Fujiwara, director of economic policy at the Japan Business Federation.
Such a decline is cataclysmic for an indebted country that values infrastructure and personal service. (Who is going to maintain the trains, pay for social benefits, slice sushi at the Tsukiji fish market?) The obvious answers—encourage immigration and a higher birthrate—have proved difficult, even impossible, for this conservative society. In the United States, foreign-born workers make up 15 percent of the work force; in Japan, it's 1 percent. And, official protestations to the contrary, they're not particularly welcome. One columnist I met compared the standard Japanese attitude toward immigrants to that of French right-winger Jean-Marie Le Pen. In the 1990s, descendants of Japanese who had emigrated to South America early in the 20th century returned to replace retiring factory workers. Now that unemployment is on the rise, Japan is offering to pay the airfare for those who wish to return home.
Japan doesn't particularly want to import new citizens, but it doesn't seem to want to manufacture them, either. It's become harder to support a family on a single income, and young people are living at home for longer. And Japan isn't particularly friendly to working mothers—pre-K day care is not widely available, and the phrase work-life balance doesn't seem to have a Japanese translation. (The directory of the Japanese Business Federation, a showcase of old guys in suits, makes the Republican Senate caucus look like a Benetton ad.) The upshot: a chronically low birthrate. Too often, demographic change was described to me as a zero-sum game—rather than being seen as potential job creators, women and immigrants are often seen as taking jobs from men.
Chalk it up to age or to culture, but Japan strikes me as strangely passive about the huge changes it is facing. I heard plenty of bromides about the need for new policies toward both immigration and work-life issues but no real policies. "The ongoing issues of the lower birthrate and the aging society have been going with such speed that the national design of how to respond to that has not caught up yet," said Yuriko Koike, a TV reporter turned politician (Japan's first female defense minister) and one of the most prominent women in public life.
As befits a nation riven by geological faults, the focus seems to be on planning to use technology to manage the impact of unstoppable events rather than averting them. In Toyota City, where robots do 90 percent of the welding work on Priuses at the Tsutsumi plant, I asked a city official how demographic changes would affect the delivery of health care. He responded, only partially in jest, "Maybe the robots will take care of us."
A version of this article also appears in this week's issue of Newsweek.
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From what I've gathered from secondhand accounts, Japan has a lot of "make work" service jobs like handling mail, or retrieving information that could be automated to involve fewer people. Meanwhile their automobile manufacturing, an important part of their export dependent economy, is very automated. I'd hazard a guess that as the Japanese workforce contracts, a lot of these make work jobs are going to be replaced by computers in the face of rising labor costs. Basically, it will cost enough to hire someone that people will only be hired for important jobs. All the rising elderly population will mean all those workers get hired by the healthcare industry, etc. So it wouldn't really be a stretch to say the robots are taking care of the Japanese if their economy is becoming less man-power intensive.
-- theamazingjex
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The United States is able to finance its generous social welfare system only on the basis of an expanding tax base. Japan is rapidly approaching a situation in which there will simply not be enough money to tend to its elderly. This situation is held off in the US only because the immigrants to this country have such a high birthrate. SO, big points:
1. Coming economic collapse in Japan - watch for ultra-low interest rates on Japanese government bonds, and beware the day when people stop buying.
2. Beware Japanese socioeconomic policies. Hopefully the US won't end up with its own "lost decade [or two]," but if Japan's the only example of massive bailouts and their effects, there's good reason to be worried.
3. China is basically a big Japan - worse demographic problems, without the high median amount of wealth to lessen the blow when it comes. "It" being the 4-2-1 problem where you've got four grandparents, two parents, and one child, probably male - already there's a scam in China where brides collect the dowry and run - and thus have a society in which 1 person's wages must support three to six elderly people in conjunction with whatever savings they've accumulated. Sounds ok, so long as there are savings. But it's China we're talking about, where a lot of the older generation doesn't have any assets to live on.
-- hellifiknow
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