Upon returning from my month-long trip to Japan last year, I noted that the state of the country as evidenced by what I saw was very far from matching the impression one gathers reading about the Japanese economy from afar. The public facilities were as immaculate as ever, the streets remained utterly safe, people were as well-dressed as I'd ever seen them (i.e., much better dressed than the average Londoner or Berliner), and all of the young people seemed to be carrying the same sorts of technotoys which are popular in Europe and the United States: in short, in the course of my travels from Tokyo to Kyoto, Kobe, Tokushima and Nara, nothing I saw gelled in the least with the incessant stories of Japanese stagnation I'd encountered in the Western press. Issues of space aside, I could not find any evidence to support a belief that the Japanese standard of living was lagging behind that of the average Western European in the slightest - on the contrary, the very opposite seemed to me to be true.
At the time I'd ascribed the discrepancy between what I'd read and what I'd actually seen down to flaws in the usage of GDP as a measure of economic prosperity*, but what I'd overlooked entirely was that most of the gloomy writing about the Japanese economy has been based on considering total GDP growth, without accounting for the fact that Japan's aging population is actually shrinking. In fact, when examined on a per-capita basis, Japan's GDP growth over the 2001-2010 period has actually surpassed that in the United States and Eurozone, and this has been accompanied by enviably low unemployment rates as well as a level of quality of service in the non-manufacturing sector which Westerners can only dream of. If this is what stagnation looks like, then we should all wish for it ...
Of course, all of the above isn't to deny that the Japanese economy does still face particularly thorny challenges. For one thing, it isn't clear just how much more headroom for total-factor productivity growth there will be in an economy dominated by octogenarians, even on a per-capita level. For another thing, I am doubtful that Japan's retirees will be as easily convinced to renounce their claims on the future production of the young as some of the Economist's commentators seem to believe.
*A position I still adhere to, by the way. For instance, GDP fails to take into account how pollution detracts from well-being, nor does it comfortably accommodate the idea that goods and services can actually increase in quality without increasing in price.
Kel Kelly at the Mises Institute seems to mirror your own position most perfectly:
http://mises.org/daily/5170
E. Fingleton from the Atlantic however, gets closer to what I am particularly interested in: a certain kind of economic reporting about Japan that insinuates that the Japanese deliberately lie about their economic health, as part of trade policy, and in order to mislead the rest of the world. This type of talk was very common among East Asia area studies types in the 1980s - that the Japanese had woven some sort of cultural imperative into their economic policy that necessitated deception, oriental inscrutability and good old corporate samurai sword-work (complete with harakiri and all). Talk such as this is still very much around, as the underlying tone in The Atlantic article suggests.
Check out the excerpts:
[...Preposterous though it may seem to an unacclimatized Western observer, it appears that Japanese officials have been deliberately understating the nation's growth. But why would they do such a thing? For those who know Japanese history, a clue lies in trade policy. The fact is that, constantly since the 1870s (with the exception of a brief interlude in the late 1930s and early 1940s), Japan's pre-eminent policy objective has been to keep ramping up exports. That policy came very close to derailment in the late 1980s as a groundswell of opposition built up in the West. By the early 1990s, however, the opposition had largely evaporated as news of the crash led Western policymakers to pity rather than fear the "humbled juggernaut." It is a short jump from this to the conclusion that Japanese officials have decided to put a negative spin on much of the economic news ever since...]
[...Anyone who knows East Asia knows that what is not said is often far more informative than what is said. It is interesting, therefore, to note that when Japanese leaders -- and their many semi-official spokesmen in places like Washington and London -- discuss Japan's seemingly endless litany of woe, they never mention the continuing spectacularly strong long-term trend in the trade numbers. Yet trade was the one issue that earned Japan the "juggernaut" soubriquet in the 1980s. Think about it: when did you last hear a Tokyo talking head mention, for instance, that the current account surplus is up five-fold in two decades? Or that Japan is unique among major First World nations in that it runs a balanced trade account (actually on some calculations a bilateral surplus) with China? Or that, on a net basis, its holdings of U.S. Treasury bonds and other foreign assets have multiplied probably ten-fold since the 1980s?...]
Posted by: Chuckles | November 23, 2011 at 03:36 PM