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The myth of Japan's failure

nytimes.com

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Re: The myth of Japan's failure

#111

Post by angus77 »

tsotha wrote: post #72
rayiner wrote: post #55

Earlier quoted context omitted.

> Firstly, yes there are many people with fancy clothes. What the author does not say is that a lot of those people live with their parents - and their whole income is expendible. I don't know if this phenomeneon started after the bubble economy, but it is quite shocking. Living in larger family units is actually very efficient. The way we do things here in the U.S. is actually shockingly inefficient. Parents buy big…

>Living in larger family units is actually very efficient. Maybe so, but it's not a sign of excess wealth. Japanese young people live with their parents longer than was customary thirty years ago, so it's not a question of culture. They simply can't afford to move out.

All that means is that Japanese young people are getting married later than was customary 30 years ago. For the eldest son, it's still expected in some families that he will never move out, even after getting married (my brother-in-law was roped into this, after having moved away to Kanagawa. He gave up his job and moved back into his parents home because his father more-or-less ordered him to). It's cultural as much as economic.

Re: The myth of Japan's failure

#112

Post by nandemo »

Tsagadai wrote: post #104
cmod wrote: post #102

Earlier quoted context omitted.

This was the case until the mid- 2000s (to the point where if you didn't take money out before New Years, you might find yourself penniless for a few days). Over the last few years 24/7, 365 days/yr ATMs are have become much more common. As have ATMs that accept foreign banking cards. As has a more generalized acceptance of CCs.

It happened to me last year during Golden Week so not that much has changed. I should have known better because I'd seen ATMs turned off during public holidays before. I even had large hotels refuse to accept credit cards but eventually I found accommodation and a restaurant that accepted Visa.

Ironically it happened to me today (which is a holiday in Japan). The ATM at one of the convenience stores wouldn't connect to my bank after 5pm. Luckily the ATM at the convenience store right beside it was working...

Re: The myth of Japan's failure

#113

Post by Retric »

alexmat wrote: post #106
Retric wrote: post #49

Earlier quoted context omitted.

If I citizen of a country buys that country's bonds then a portion of their interest is collected back as capital gains. Thus the country actually pays (interest rate * (1- capital gains rate) - inflation rate). So because the overwhelming majority of Japan's debt is owned by it's own citizens and it's in it's own currency they can easily drive their loan servicing costs below zero at fairly modest inflation rates. T…

"they can easily drive their loan servicing costs below zero at fairly modest inflation rates" Why will Japanese people buy government bonds that return a negative interest? Stuffing cash in a mattress seems like a better option at that point.

People where buying billions of dollars of short term treasury bonds with a negative interest rate recently, because they are safer than mattress's. However, I was talking about real costs after inflation ex: Inflation = 2%, government bond's yield 2.5% capital gains = 25%, mattress yield = 0%. (1 + .025 * .75)/1.02 = 99.88% vs (1/1.02) = 98.04%

The only number the government does not control is the interest rate they need to pay.

Re: The myth of Japan's failure

#114

Post by muraiki »

borism wrote: post #75
yummyfajitas wrote: post #46

Earlier quoted context omitted.

This argument holds little water these days: it is next to impossible to hide information about the true state of a country when access to information is so easy thanks to the Internet. It's actually quite easy: Step 1: recognize that gathering macroeconomic statistics is really hard. One example: if people previously spent $3 on salsa, but now they spend $5 on guacamole, what is the inflation rate for mexican dips?…

except salsa and guacamole are interchangeable. it doesn't seem to me you can easily exchange one component of CPI with another?

Actually, substitution is used in the CPI basket of goods. Fresh fish can be replaced by canned tuna, for instance.

More amusing is the application of "hedonics." This is perhaps best explained by an example. Consider that the cost of gasoline went up when certain additives were made required by the government. This cost is not fully reflected in the CPI, because there is a "hedonic thrill" associated with the perceived improved environmental friendliness (or similar nonsense) of the new required formulation of gasoline. Basically, the new gas should make you "feel better" about using it, so there is an improvement of quality that offsets the full increase in cost. Does this make sense given that fresh fish can be replaced by canned tuna? No...

Substition and hedonics are very useful for keeping the CPI from rising, which has a number of benefits for the government, as various welfare payments and wage structures are based off of it.

Re: The myth of Japan's failure

#115

Post by muraiki »

rmrm wrote: post #51
blumentopf wrote: post #8

Earlier quoted context omitted.

It does make a difference in that Japan could finance the public debt entirely by itself. The country has a trade account surplus, it's not them being indebted to others, but others are indebted to them. That makes it unattractive for speculators to bet against the country. Countries like China or Germany are in a similar position.

They have had a historically high internal savings rate that allowed this. One thing to keep an eye on is their terrible demographics. I believe Japanese citizens as well as the largest institutional buyers (Japan Post etc) have just recently become net sellers of JGBs as they move towards liquidation to fund retirements. Japan currently funds more than half of their gov't via borrowing, with the demographic shift an…

I've read that most of this money came from retiree savings, which are rapidly running out. Furthermore, the younger generation doesn't have such savings, yet alone the population, to keep such a thing going.

In a sense, this system of internal borrowing in a hidden tax. While it of course is not mandated, it's required in order to keep things going smoothly.

Re: The myth of Japan's failure

#116

Post by muraiki »

philwelch wrote: post #34
abracat1 wrote: post #30

It is easy and popular for westerners to romantacize Japan - but it has serious and structural problems. When analyzed on its own (instead of comparing it to the USA) it becomes readily apparent. I will just say a few observations which show that the picture the article paints is not quite accurate. Firstly, yes there are many people with fancy clothes. What the author does not say is that a lot of those people live…

> What the author does not say is that a lot of those people live with their parents - and their whole income is expendible. I don't know if this phenomeneon started after the bubble economy, but it is quite shocking. In many cultures, it's customary, even expected to live with one's parents at least until marriage, and possibly longer. Extended families are an important social resource, and the American model of imm…

I understand your objection, but perhaps what he is saying will make more sense with a little background. It's not that these youth are people between jobs at startups, which is what this community might have in mind when hearing about someone who lives with their parents. There is an ever increasing number of Japanese youth who choose not to obtain full time employment, who work multiple part time jobs, and who do not amass any savings. It's not necessarily that they are not saving money because they aren't making enough; rather, they are spending all of it on non-essential material goods -- be it clothes or technology or collectible figures or any other such thing.

As far as I understand, this is a "live for now" cultural reaction against the failure of the salaried worker lifestyle that existed prior to the Lost Decade(s). It was once the norm for a Japanese student to graduate college and to then work for one company for the rest of their life. This was known as being a "salaryman". When Japan entered this long recession, many young people saw that their parents had worked so hard for a promise that couldn't be fulfilled. They rejected the salaryman lifestyle for the sake of a less stressful, less structured lifestyle focused more on cultural identity, such as style, music, a hobby, etc.

Sometimes such youth do move out (such as living with a partner -- marriage is becoming increasingly delayed though) but I think that the criticism is that this lifestyle is just the pendulum swung fully the other way: it is too focused on the immediate future and lacks any long term planning. A person in this situation will have a difficult time dealing with a family emergency, whether it is a sick parent or a pregnant girlfriend, for instance.

Re: The myth of Japan's failure

#117

Post by yummyfajitas »

muraiki wrote: post #114
borism wrote: post #75

Earlier quoted context omitted.

except salsa and guacamole are interchangeable. it doesn't seem to me you can easily exchange one component of CPI with another?

Actually, substitution is used in the CPI basket of goods. Fresh fish can be replaced by canned tuna, for instance. More amusing is the application of "hedonics." This is perhaps best explained by an example. Consider that the cost of gasoline went up when certain additives were made required by the government. This cost is not fully reflected in the CPI, because there is a "hedonic thrill" associated with the percei…

Substitution is not very useful for keeping CPI down. We substitute from steak to spam, then from spam to cat food, and then there is nothing more to do. It's a trick you can only do once.

Substitution does, however, keep CPI stable, and rightly so. My food bill hasn't changed much in spite of the recent peanut butter price spike - I just substitute other goods for peanut butter.

Re: The myth of Japan's failure

#118

Post by tsotha »

angus77 wrote: post #111
tsotha wrote: post #72

Earlier quoted context omitted.

>Living in larger family units is actually very efficient. Maybe so, but it's not a sign of excess wealth. Japanese young people live with their parents longer than was customary thirty years ago, so it's not a question of culture. They simply can't afford to move out.

All that means is that Japanese young people are getting married later than was customary 30 years ago. For the eldest son, it's still expected in some families that he will never move out, even after getting married (my brother-in-law was roped into this, after having moved away to Kanagawa. He gave up his job and moved back into his parents home because his father more-or-less ordered him to). It's cultural as much…

Which is the chicken and which is the egg? Are they moving out later because they're getting married later, or are they getting married later because they're moving out later?

Re: The myth of Japan's failure

#119

Post by muraiki »

yummyfajitas wrote: post #117
muraiki wrote: post #114

Earlier quoted context omitted.

Actually, substitution is used in the CPI basket of goods. Fresh fish can be replaced by canned tuna, for instance. More amusing is the application of "hedonics." This is perhaps best explained by an example. Consider that the cost of gasoline went up when certain additives were made required by the government. This cost is not fully reflected in the CPI, because there is a "hedonic thrill" associated with the percei…

Substitution is not very useful for keeping CPI down. We substitute from steak to spam, then from spam to cat food, and then there is nothing more to do. It's a trick you can only do once. Substitution does, however, keep CPI stable, and rightly so. My food bill hasn't changed much in spite of the recent peanut butter price spike - I just substitute other goods for peanut butter.

I understand what you are saying, but you've just shown how versatile substitution is. If wheat spikes they can substitute oats for the time being. If chocolate spikes they can substitute sugar candy. However, I think that when a non-economist thinks of the CPI, what they are considering is if they can maintain the same quality of life over a period of time for the same amount of money.

As you say, this does keep the CPI stable, but I think that the way an economist experiences the CPI is different from the way the average consumer does. For the consumer who has a relatively predictable pattern of food purchases, the response is "Wow, why does it cost so much more for me to buy the same stuff this year than last year?" They experience price inflation and their economic decisions are affected by it, but the CPI remains the same.

If we want to talk about how the consumers weather pricing changes, then substitution doesn't reallyconvey their experience. Yes, the average person will say, "let me get something else instead of peanut butter," but the CPI doesn't account for the "anhedonic pain" of substitution, to poke fun at their own terminology.

Re: The myth of Japan's failure

#120

Post by yummyfajitas »

muraiki wrote: post #119
yummyfajitas wrote: post #117

Earlier quoted context omitted.

Substitution is not very useful for keeping CPI down. We substitute from steak to spam, then from spam to cat food, and then there is nothing more to do. It's a trick you can only do once. Substitution does, however, keep CPI stable, and rightly so. My food bill hasn't changed much in spite of the recent peanut butter price spike - I just substitute other goods for peanut butter.

I understand what you are saying, but you've just shown how versatile substitution is. If wheat spikes they can substitute oats for the time being. If chocolate spikes they can substitute sugar candy. However, I think that when a non-economist thinks of the CPI, what they are considering is if they can maintain the same quality of life over a period of time for the same amount of money. As you say, this does keep the…

...the CPI doesn't account for the "anhedonic pain" of substitution, to poke fun at their own terminology.

Yes it does, or at least it attempts to. The hedonic penalties are exactly the hedonic benefits with a minus sign.

If guacamole is 2x as good as salsa, then if the price of guacamole doubles from $5 to $10 and consumers switch to $3 salsa, then mexican dips have increased in price 17%.

Look, I'm not saying a good job is done. In fact, I've argued many times that inflation is wildly overstated. I'm just saying that the hedonic adjustments and substitution adjustments are necessary if you want to have any sort of CPI-like measurement.

Of course, it's also the case that CPI doesn't actually measure inflation. To get a real inflation measure, you'd need to measure the price of a fixed basket of goods. But then no statistic like CPI would even be possible, since inflation would no longer be a rate - Inflation(1970, 2012) would not be equal to Inflation(1970, 1990) x Inflation(1990, 2012).

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