Japan Goes From Dynamic to Disheartened

[Rollyco]

[fullattach]360483[/fullattach]
(C) New York Times

http://www.nytimes.com/2010/10/17/world/asia/17japan.html?_r=3&th&emc=th

This is the first in a series of articles that will examine the effects on Japanese society of two decades of economic stagnation and declining prices.

While the effects are felt across Japan’s economy, they are more apparent in regions like Osaka, the third-largest city, than in relatively prosperous Tokyo. In this proudly commercial city, merchants have gone to extremes to coax shell-shocked shoppers into spending again. But this often takes the shape of price wars that end up only feeding Japan’s deflationary spiral.

There are vending machines that sell canned drinks for 10 yen, or 12 cents; restaurants with 50-yen beer; apartments with the first month’s rent of just 100 yen, about $1.22. Even marriage ceremonies are on sale, with discount wedding halls offering weddings for $600 — less than a tenth of what ceremonies typically cost here just a decade ago.

Any residents of Japan here been personally affected by deflation?

 

[hypemx7]

Honestly though, how the Japanese do business really didn't evolve for the last two decades and would have
caused the economic down fall of any nation.

Their closed door policies when it came to partnerships and sharing innovations to further increase their market share
is none existent in their "former" electronics giants.

As my friends and I joke all the time, Sony Electronics is now probably a shell corporation filled with earnings from
Sony Entertainment via tv shows, movies and gaming, to keep up a front. andalaugh:

 

[Rollyco]

how the Japanese do business really didn't evolve

That certainly ties into what I read here:

After the 1985 Plaza Accord, major powers intervened in currency markets to weaken the dollar and strengthen the yen. The goal, echoed in present-day international pressures on China, was to open Japan to more imports and slow down its export juggernaut. The yen quickly doubled in value, and property values skyrocketed, to 50 times their 1950s levels in some cases. Even the cramped wooden house where this correspondent lived in the Osaka area in 1989 was worth $1 million at that time.

Expecting Japanese to get wealthier, businesses jacked up their prices to absurd levels, and Japanese kept buying $60 bottles of wine and $100 melons because they feared prices would rise further. But when the bubble burst, and the stock market benchmark index, the Nikkei 225, shrank from 39,000 to 9,000 in the 1990s, prices didn't fall accordingly. Many landlords, farmers, and suppliers stubbornly held their prices firm, believing consumer demand would recover - which it never did.

 

[Ceewan]

Interesting reading.

Personally I do not subscribe to certain popular economic reasonings. Deflation can actually be a good sign, in my humble opinion. Consider it an "Economic scab", it does not look very pretty but it is a sign of healing. Being able to buy more for less means a better standard of living for the Japanese people. That is a good thing.

 

[Rollyco]

At the beginning of a deflationary spiral, steadily declining prices can be exciting from the consumer's perspective. But the uncertainty eventually leads to delaying purchases of big-ticket items like homes and automobiles. Reticent consumers lead to even lower prices, a vicious cycle (that's why they call it a spiral.) Credit dries up, profits evaporate, unemployment climbs and everything grinds to a halt.

I suppose one can look at it like a process of healing, in that it's like a patient burning off an infection with a high fever. But it's very painful and the end of the road is strewn with bankruptcies and a shrunken economy. It sounds to me like standard of living is going downhill in Japan right now, not uphill.

 

[Ceewan]

I suppose I could try to argue the point. I am not much of a debater though.

The people who have steady jobs may not get many raises but their rent will not go up, utilities are likely not to rise, they can buy more clothes and put more food in the fridge with their paychecks. This also means they have more money for luxury items or to pay off debts or to just build up their savings.

Credit drying up, that is a good thing. Credit is one of the more asinine inventions of civilization. No credit means no debts. No debts means a journey from the red ink to the black ink.

Businesses failing is not the end of the world. It is culling. The weak and sick die off. The strong get stronger or just endure. The innovative and ingenuity minded find oppurtunities in the gaps that other businesses left in their wake.

It is a slow process and painful. Greed and lust has its' price. You cannot prey upon the very people that support your economy without consequences. This is just a period of adjustment as the economy finds its' balance again.

 

[Rollyco]

You don't have to look very far back in history to see that, long-term, the standard of living in a deflationary environment will decrease. Hong Kong went through a prolonged deflation during the Asian financial crisis in the 90's; probably similar to what Japan is experiencing right now. They even had a preceding inflationary bubble, just like Japan. The result was high unemployment rates, terrible property values, onerous tax increases, cuts in government expenditure, sector-wide bankruptcies, etc. The working and middle classes of Hong Kong were NOT happy and protests were rampant.

 

[Ceewan]

Hong Kong is perhaps not the best example, do you have another one? I mean Hong Kong went through some serious political upheaval including the loss of many freedoms that are taken for granted. China, despite its' modern day improved image, is a very oppressive regime. That the Hong Kong problems coincided with the return of Hong Kong to Chinese reign is not an accident.

The Great Depression in America makes your case better, I would think. Yet every historical case of a deflationary economy seems to vary greatly. Japan still has a strong GNP and I think its' deflationary economy is fairly unique in the annals of history. I would be curious to hear from people that live there on the subject.

 

[lycraphile]

it all owes to 米国 ---- Big Brother's "favor" .:scared:

 

[Rollyco]

it all owes to 米国

Can you translate to English?

 

[lickylicky]

ugh...so how much the call girls at now/window red light district shoppingandalaugh:?

 

[jc1762]

You've never been to Japan have you...If you're a foreigner, don't even dream about going to the red light district, most places if not all will not take you.

Apparently, Japanese money is more valuable than a foreigner money, despite using the same currency.

This is just one of the many utterly illogical aspects of Japan's culture.

 

[plmko]

You've never been to Japan have you...If you're a foreigner, don't even dream about going to the red light district, most places if not all will not take you.

Apparently, Japanese money is more valuable than a foreigner money, despite using the same currency.

This is just one of the many utterly illogical aspects of Japan's culture.

What on early are you on about?

1. I'm obviously a foreigner and I've been to the red light down Shinjuku, no problems, expensive but kinda overrated.

2. Japanese currency is not the same as the US dollar, it is more valuable because the US dollar has been sliding in it's worth, meaning foreign investors have been buying up Yen rather than US dollars.
Demand = higher prices.

 

[lycraphile]

Sliding is attributed to incontinently printing by Fed. Reserve. :thief:

 

[zach8012]

I live in Okinawa. I've been here about a year. I don't think much has changed here. I visited Tokyo multiple times from 2005-2007. Only difference between then and now is that then the dollar was stronger than the yen. Now it's the other way around. Actually the yen is getting stronger/dollar getting weaker as I speak.

 

[lycraphile]

Can you translate to English?

OK, i could.
米国 is the abbreviation of 亜米利加合衆国
亜米利加 = America
合衆国 = United States
:study:

 

[scwam]

I was in Osaka just 2 months ago, I never saw 10 yen drinks anywhere. This is an exageration. And I don't believe in 2005 the dollar was stronger than the Yen (maybe depending on how you percieve it). I've watched the dollar fall for 15 years from the 125 Yen to 84 Yen now. Even at that favorable exchange rate of 125 Yen, the stuff over there was still nearly double the cost as what you could get it in the states for. Going to Mcdonalds in Japan would be an exception, but was still practically breaking even with US comparisons.

 

[facetus]

Deflation is really not good because it is a disincentive to consumption and investment as your cash has more value the next day.
Things would be much better if the BOJ dropped its ultra conservative stance and considered economic results as the American Fed in its objectives.
Getting a JPY cheaper will fight deflation but Bank of Japan Governor Masaaki Shirakawa only cares about inflation and not deflation... (what an ass hole!)
I hope DPJ lawmakers will change the status of the BOJ sooner than later.
And by the way, there are ongoing discussions among economists to try anticipate whether the US will also enter a similar deflation process.

 

[Ceewan]

And by the way, there are ongoing discussions among economists to try anticipate whether the US will also enter a similar deflation process.

It would seem imminent but do not underestimate the greed of the American businessman. Most would rather go broke than settle for a lesser profit, thus the trend in most areas has been to continue to raise prices.

Nice inputs on the Japanese situation. First person viewpoints are very enlightening, even when they differ.

 

[Axandra]

Interesting thread... for this particular site's profile, I mean. So, "What is Deflation?" (And is it good or bad?)