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| Japan's Fake Funk: Rebutting the Rebutters |
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Tuesday, February 4th, 2003
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My article debunking the myth of Japan's "lost decade" ("Japan's fake funk," Prospect magazine, November 2002) has predictably evoked screams of pain from upholders of the conventional wisdom. I reproduce below an exchange with the wealthy investment banker Andrew Smithers. Smithers' letter was published in the January 2003 issue of Prospect and my reply was published in the February issue.
SMITHERS' LETTER
2nd December 2002
Eamonn Fingleton's statistics (November) seem to have little connection to official data. He claims that OECD figures show that Japan ran large budget surpluses in the first eight years of the 1990s, but the actual data show an average deficit of 2.8 per cent and one which is expected to amount to 8 per cent of GDP this year. And he claims that Japan's national debt is lower than "most other developed countries." The relevant OECD data list 19 countries, all of which, excepting Italy and Belgium, have lower ratios than Japan.
Fingleton's selection of anecdotal evidence is also questionable. Only a blind visitor to Tokyo can have failed to notice the explosion of the homeless, living in the parks under blue plastic sheets. Nor could any but the heartless fail to be moved by the terrible fact that the 1990s produced the only postwar year in which average life expectancy for the male Japanese fell, as the suicide rate rose in response to economic misery.
Andrew Smithers
Smithers & Co, London EC3
MY REPLY
10th January 2003
Referring to my article "Japan's fake funk" (November), Andrew Smithers (Letters, January) suggests that I erred in stating Japan's budget position. My numbers are taken from OECD in Figures and represent each nation's government savings ratio (the most meaningful measure of its budget position). As for Japan's ranking in the national debt league table, he has ignored my point that each nation's figures should be adjusted for its foreign reserves. Japan's holdings of foreign reserves are huge and greatly reduce the country's net debt burden.
Smithers accuses me of overlooking an alleged "explosion" in homelessness in Tokyo. This explosion is a myth. The homeless are merely more visible than in the 1980s. As James Fallows documented in 1988, the impression that homelessness hardly existed in Japan was an illusion. In a famously orderly country, the authorities formerly confined the homeless almost entirely to certain hidden slum districts far from foreigners' eyes. The most notorious such district was Sanya, north of central Tokyo. For some reason, however, hundreds of homeless men formerly resident in such districts were suddenly permitted in the early 1990s to pitch their tents highly conspicuously in central Tokyo's most elegant parks.
As for Japan's suicide rate, this moves independently of economic cycles, and the recent modest rise reflects mainly ageing demographics. In the first half of the 1990s-when Japan suffered the worst share and property crashes in modern world history-the suicide rate remained near historic lows. Moreover, Japanese male life expectancy increased by 1.2 years in the 1990s.
Essentially, Smithers has unwittingly recycled the latest propaganda positions of the Tokyo establishment. Not for the first time. He was badly deceived in the late 1980s, when he accepted the Japanese securities industry's then line that Japanese shares were headed for the moon. At the height of the bubble he was quoted in a US newspaper describing as "balderdash" the idea that Japanese share prices were too high. The Nikkei index has fallen more than 60 per cent since then.
Eamonn Fingleton
Minami Aoyama, Tokyo
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Contact Eamonn Fingleton |
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