The backstory here is demographics. Japan has a shrinking, aging population and almost no immigration. With fewer people there are naturally less things bought, sold, and produced. Japanese authorities have been trying to pump the economy by deficit spending (central government borrows money and spends it), quantitative easing (central bank buys long term private debt, increasing the money supply for short term spending) and low interest rates. The central bank has to push people to invest in the economy, because without growth driving investment returns, generally people would rather the safety of a savings account giving a guaranteed if small interest rate. Negative rates are a way to push money into the investment economy even with no growth.
The irony of this approach is that the lower interest rates are, the more people need to save to reach their retirement goals. If this effect is stronger than the incentive to borrow and invest, low interest rates might actually curb consumption.
Saving for retirement using a savings account hasn't been a viable strategy in decades (at least in the US). People need to be encouraged to invest a significant portion of their money in other securities, and know that in the long term, they'll be much better off for it.
As a general rule of financial planning, higher yield means higher risk, so being "much better off for it" is a highly subjective, if not naive statement with respect to saving. Sure, in the long term it is possible to gain more investment returns with certain securities, and in other instances, one can lose the entire principal and be completely worse off. Saving long-term is not a model that totally works during 'catastrophic financial events' but it sure insulates a person from the occasional Enron or other significant event beyond their control.
Younger people are saving more cash than ever -- and I'm not willing to chalk it up to financial illiteracy. Even well-off individuals are sticking to plain savings accounts that do nothing other than gather dust with their 1% annual rate of return.
Why? Faith in the financial services industry has been utterly shattered.
The only exception is for tax purposes, eg: Roth IRA/TFSA, 401k/RRSP, etc.
But that's only for the long term. If you are in retirement, where you need to spend your savings, you want to keep your money in low risk assets. Central banks are trying their hardest to minimize your spending income by giving you no return on these less risky assets.
Not really. "The irony of this approach is that the lower interest rates are, the more people need to save to reach their retirement goals."
That statement doesn't necessarily assume people are just socking their money away in a savings account while working. The goal of saving for retirement is that you need your money to outlast you. If your can expect much lower income during retirement, you'll need to have a bigger pot at the beginning of your retirement (i.e. you'll need to save more while working).
> People need to be encouraged to invest a significant portion of their money in other securities, and know that in the long term, they'll be much better off for it.
Until equities and other securities no longer provide the return needed for long term wealth accumulation.
Wouldn't it be acceptable to just accept a shrinking economy and change policies in such a way to deal with it? i.e. shrink the police and armed forces, public services, cut needless spending, etc. Become more frugal as economy allows.
> Japan needs to bite the bullet and accept immigration.
Immigration isn't going to solve anything, immigration from where ? Japan isn't the US, they aren't talking English nor their society is build in a way it can accept huge immigration waves.
Japan needs to work on techs that will solve its problems, not resort to a massive immigration wave that will only kick the can down the road.
Not to mention the change immigration could potentially cause in day to day life. In my opinion one of the best things about Japan is the homogeneous and pleasant (in most but not all ways) culture - if I lived there voting for increased immigration would be one of the absolute last resort measures I would vote for.
Alternatives include raising Japan's retirement age from 60 to 70, because they're already raising it to 65 and that's not going to be good enough to deal with the inevitable fiscal situation.
Edit: A lot of people saying "immigration won't work" but not offering alternative solutions.
That homogeneous and mostly pleasant culture is killing itself, apparently. We may get to witness a nation commit suicide, which ought to be interesting from the outside.
I hope the insularity ends up being worth it for them, but history is not on their side.
>That homogeneous and mostly pleasant culture is killing itself, apparently.
No, this is literally the post-WW2 boom dying off. Occupied Japan underwent a period of extreme population growth in the few decades after WW2 ended. They currently have 125mm people living in a land area the size of California which is 75% uninhabitable (mountains).
In my experience, the immigrants and foreign workers in Japan in the highly skilled jobs often don't need much Japanese to do their jobs, but the ones that learn the language have a much easier time and obviously advance quicker. All the people I came in to contact with low skill jobs that had spent any time in Japan, had amazing Japanese because they absolutely needed it because the vast majority of people do not speak any meaningful amount of English.
Japanese is not an easy language to learn, but its not impossible to learn. If people are allowed in then they will learn Japanese
Thinking out loud.. the Olympics in 2020 will be a good chance to showcase the country as an attractive destination, not just for tourism. They could loosen their immigration policy to coincide with the timeline.
It would still be tricky because as a society Japan is famously homogeneous, so the idea of diversity would have to be phased in slowly.. but it could be a starting point. In the end it's about adaptation to ensure a future for the country.
> In the end it's about adaptation to ensure a future for the country.
I think that most Japanese would believe that a future Japan that wasn't majority Japanese was no future at all.
From the nationalist perspective, you're essentially saying "to save Japanese society we must destroy Japanese society." To these people Japan is more than just an island, it is Japanese.
I really can't agree with you enough. What's troubling though is that any ideas of nationalism are often confused with extreme right-wing or jingoism, largely (and possibly rightfully) due to history. So it sounds bad to even say Japan is a nationalistic society.
But you've hit the nail on the head - and it is something many foreigners have little to no concept of. Being proud of one's cultural heritage and history. Even if that means recognizing the bad stains on the tapestry.
I've recognized the ones who have the worst problem with nationalism are those who are completely full of guilt of their own culture/history.
Except Japan is astoundingly horrible at recognizing "bad stains on the tapestry" like the Rape of Nanking and comfort women (in fact calling the now elderly women who were abducted and raped prostitutes with an agenda). Nationalism is a cancer and you're blind to it because of your country's thorough inculcation.
I don't understand why you are getting downvoted - there's nothing controversial or ridiculous about this suggestion. Unlikely perhaps, for reason stated elsewhere in the thread but that's another matter entirely.
One of the causes why people postpone having children is financial insecurity. In their mid-twenties they cannot afford to have a home, they are unable to secure the costs of first few years of raising child, when they don't know if they will have a job in three months and they have zero savings. Add student loans to the mix, popular desires to travel the world, to "live" and it's obvious why the developed countries have problems with natality.
One of the reason of population boom in Czechoslovakia in 1970's was the policy of support of young families. Newly wed pairs were were provided security, they got their own homes, they had job security[1], they got financial support for raising children. It wasn't a luxury, you couldn't lead a lavish life, but you knew that if you have a child, everything will be OK.
[1] we are abstracting from the fact, that in socialist countries it was unlawful to be jobless. You were provided a job, but it didn't have to be a one you would like.
Might be referring to the fact that many Japanese women choose not to marry and have kids because it is essentially career suicide. There's a very strong cultural bias against working mothers in Japan.
Very few countries, communities, or individuals are willing to accept a fate of involuntary, slow recession.
As suggested by previous commentators, social policies could possibly play a larger role in the long term Japanese recovery than fiscal stimulus. Opening the country to immigration may help rejuvenate the workforce, but would require significant upheavals of xenophobic Japanese culture. The government could use economic measures to encourage childbirth, but at a population density of 869 people per square mile, one must wonder how many more citizens the island can accommodate.
The rational assumption that Japan should "bite the bullet ... [and] balance the budget" is not what the country will do, as the circumstances of its plight encourage irrationality.
Is a Japan without any Japanese people still Japan? Culturally would modern Japanese tolerate a cultural mass suicide or did that go out of style at the end of WW2? USA has been talked into it, but would that work on modern Japanese?
Meanwhile there's a weird undercurrent of racism, if we just take Japan 2016 and person for person swap out for obviously superior foreigners (imperialism?) then magically everything is supposed to be better. However, in reality, that would obviously not be the case. If an Asian guy is sitting in a broken car, and the driver is removed and replaced with a foreigner, the car is still going to be just as broken. Likewise if the Japanese abandon their land and culture, that doesn't mean anyone else will necessarily do a better job of running the place. Or if there is a better way to run the place, they could save everyone a lot of bother, and implement it themselves.
> Mmmm... the Japanese have problems even reintegrating Japanese Brazilians,
That's no problem of the Japanese, but of the immigrants. They're the newcomers, they're the ones who should be putting all the effort to assimilate into the host culture.
And it isn't happening, not even with descendants of Japanese. Imagine what would happen with a radically different culture (no need to imagine, just look at Europe).
>"That's no problem of the Japanese, but of the immigrants. They're the newcomers, they're the ones who should be putting all the effort to assimilate into the host culture."
This rigidity and inflexibility is going to be the biggest problem facing Japan when they inevitability reach the population cliff. What you are asking for is unreasonable. There is no way immigrants can ever completely assimilate to that degree. The cultural gap and linguistic distance is simply to big. It doesn't help that Japan has historically been isolationist and based on anecdotal evidence, still seems to be pretty xenophobic. At best, you could hope for a compromise, where the immigrants do their best to integrate, and hosts make compromises and try to be more accomodating. You could try taking immigrants from nearby regions where the gap is conceivably smaller, but politics and history will get in the way.
Ultimately there seems to be no good solutions on the horizon. You will just have to pick the least worst from a selction of poor ones:-
1. Ignore the problem and see what happens.
2. Begin a reasonable program of immigration that suits Japan (there are number of ways to go about this), and deal with the problems that will come with it.
3. Try and hope for some technological breakthrough.
Why would a slightly more open immigration policy result in a Japan without any Japanese people? Nobody is proposing Schengen-agreement style open borders, anyways.
The culturally (and racially) homogeneous state is a myth. Even the Japan you might perceive as homogeneous is the result of many waves of migration stretching to pre-history (Jomon, Ainu, Yayoi, Chinese...)
Places that have relatively open borders (EU, US) aren't experiencing anything like "cultural mass suicide" - unless you buy the nationalist rhetoric coming out of right wing and neo-nazi camps.
All cultures are evolving, including Japan. Sometimes it is gradual, and sometimes it is faster (your example of WWII). Healthy societies accept that change is natural, and try to make sure that it happens in a constructive way.
In general, it would not be acceptable. "A shrinking economy" can be interpreted as deflationary, and deflation destabilizes regimes in favor of something akin to "strong man" dictatorships. See the interwar period in the 20th century for details.
If you swing the value of holding just currency to where it grows relative to goods without doing anything, then people won't do anything. This spirals. Since nothing is being done, there's no work. You might have a black/grey market economy spring up but don't tell anybody about it.
Specific to Japan, I am not sure. Depends on whether the demographic slack is permanent or temporary.
Question: if the government doesn't want people "parking their money" in government bonds at all... then why not just stop issuing government bonds altogether, thus giving banks no choice but to invest in the market instead?
Is that somehow impossible? Would it make the market illiquid? Are there laws concerning the required volatility caps for the securities backing savings accounts that would have to be relaxed?
it means they can sell the bonds for less (i.e. pay less interest) because one source of competition, depositing the money rather than buying the bond, is less attractive for the captial. As with all credit - that's a great dynamic if you're using the funds for capital infrastructure to strengthen your overall situation, but kinda questionable if you're using it for living expenses.
They would presumably just invest it into other countries' government bonds? With the low interest rates, that has already been going on: borrow Japan money at low interest and buy a high interest government bond.
Have they tried changing their disastrous work culture so that Japanese citizens of childbearing age feel more free and energetic to form relationships?
