2011年01月

2011年01月13日

In Japan, birthrates are declining but thanks to the improvements in healthcare and lifestyle, people are living longer and longer. This creates something of a paradox in that people will be elderly for more years and are therefore likely to need more care for debilitating health problems later in life. Concurrently, the percentage of the population with taxable incomes will shrink, leaving increasingly fewer workers to pick up the tab for care and support of the elderly. By 2025, the percentage of the Japanese population over 65 is expected to reach 26.7, the highest in the world. Under such circumstances, the Japanese government has been piling up its debts to the twice the size of its GDP. It just sounds scary. Unfortunately, in the hands of bureaucrats and politicians the situation is at somewhat of a standstill. Since it has been generally perceived that the idea of tampering with the social security system is viewed as a political hotbed, with any suggestion of a reduction in benefits likely to result in public furor. As a result, politicians are reluctant to address the issue seriously and instead, they tend to offer only stopgap measures that placate voters but provide no real solutions.

Since 1990s, Japan has been experiencing the following cycle: 1) consumers spend less and borrow less, 2) businesses sell less, so they borrow less, employ fewer people and pay less in wages, 3) falling spending, falling wages, rising unemployment and declining debt levels lead to deflation in prices and reinforce the lower spending cycle. Japan has proved that this cycle cannot be fully broken by spending stimulus policy. The root cause of this cycle lies in “demographics” and “factor price equalization with developing countries”. So basically the government cannot stop the natural decline in spending and the restructuring of unsustainable debts. The Japanese government should manage the downsizing process less painfully and needs to change the social systems accordingly. It needs to overhaul present social systems, tax system, legal systems, judicial precedents, Japan’s unique labour system and others which premise growing population, growing economy and accelerating inflation.

Although we are experiencing unprecedented economic changes and a lot of educated people know that the said drastic reform is inevitable, it is difficult to challenge the vested interests who/which premise the old social system. In Japan, it is said that two of the biggest groups which are enjoying the vested interests are 1) elderly and 2) labour union. A government run Ponzi scheme which is usually called a “public pension system”, is obviously not sustainable since it premises growing population. But the elderly is the beneficiary of the Ponzi scheme and they are the ones who take active voting behaviours. If related reform bills won’t be passed, the so-called “it’s me” fraud might function as a measure to transfer wealth from elderly to younger generations who will be burdened with huge debts created by the elderly, however, no one can support this measure, it disturbs the social order and destroy community. It just causes chaos…..

Labour union is another biggest status quo. They usually object almost everything which takes away their vested interests in any circumstances. It might work well under an inflationary economic environment with fewer legal and legislative supports. But Japan is in the middle of deflation caused by “demographics” and “factor price equalization with developing countries”. And since the number of lawyers in Japan increased drastically, the needs of labour union decreased accordingly. Is a labour union necessary evil? There are not only proper labour unions, but also low quality cheap general unions which act like extortionists and racketeers and abuse the systems. So, at least in Japan, it might be high time to think about this evil which is the major obstacle of social reform. There is an interesting article in The Economist, titled “The Battle Ahead”. Anyway, it is important to protect employees and lead them to transfer from a certain position at a zombie company to new opportunities. It is like bridge the gap between two positions. It is important to protect employees but not jobs.

In any case, the Japanese government needs to face the status quos sooner or later. In the latter case, in Japanese expression, it is “yudegaelu” ゆでガエル現象 (gently and slowly boiling frog alive), which means, “die a slow death”. And the current labour union backed Japanese government seems to have taken the latter case. Let’s read the part of the “Noah’s ark” and see what will happen to Japan from Singapore. We may come back after the flood when a bird brings back a leaf.

Legal Londate



(12:55)