March 20, 2012 14 Comments
I started this blog for one reason, and for one reason only: to bring awareness to the macroeconomic problems facing Japan and the consequences if these concerns are not addressed promptly, if not immediately.
I have clearly failed in this respect.
You see, it doesn’t take much to realize how much of a pickle Japan is in. Record trade deficits. Record debt. Record tax rates. The oldest population in the world. Highly restrictive immigration. With fewer people to pay for a growing amount of debt, compounded with greater expense incurred by taxes spearheaded by the Noda administration, the conditions for Japan’s fall from grace are in place, ready to be triggered be the smallest sign of economic uncertainty.
Remember, this is not itsy-bitsy Greece that we’re talking about. This is Japan – the world’s third largest economy. The only reason that it is still breathing is because of how tiny Japanese government bond yields are.
With its current account deficit being the way it is, Japan will have to look outside its borders to finance its debt. That’s when the house of cards will start to collapse. Interest rates will skyrocket in an attempt to attract foreign investors. Increased consumption taxes, combined with flat wages, will push the savings rate through the roof. Consumption will, in turn, fall flat on its face, and investment into Japan will dip as a result of little to no growth prospects. The combined result of all of this? Default.
Despite the horrifying prospect of the world’s third largest economy tanking, nobody seems to be paying attention. The politicians are too focused on attacking each other to do anything else. Some Japanese businesses are toying with the concept of given up on Japan. Many people in Japan remain pessimistic or apathetic about future prospects, while the international community is still pumping money into Greece and counting the number of hairs on Newt Gingrich’s hair.
What gives? Am I, a Hong Kong-born, Canadian secondary school student with an interest in economics and the culture of Japan, the only one who cares about what will happen to the economy of one of the richest nations on Earth? Look at what happened back in 2008 when the US economy hiccuped. Now imagine a full scale, Fukushima-style meltdown of the Japanese economy. Don’t think for a second that you won’t be affected if you’re not living in Japan. We’re looking at a tank greater than the decline and collapse of the Roman Empire. No exaggeration.
I want to do more about the situation than write about it. I really, honestly do. But by the time I come of age and get the necessary experience and education to be remotely useful to Japan, I fear it may be far too late.
“Japan is falling!” the little Asian boy cried. But no one heeded a word and the earth soon stood still.