A key difference between Japan and the U.S. economies?

[erik_kosberg]

FWIW, Richard Daughty, pulling no punches:

There are similarities between Japan and the USA, as many point out. One is the similarity of the cause of our problems. Namely, hu-freaking-mongous debt. But that is pretty much where the similarity ends. Japan has a towering trade surplus, and thus has actual money coming into their economy. Japanese citizens save a huge fraction of their income. With more money coming in than going out, they are putatively "making a profit." The USA saved Japan's bacon up to now, buying all that stuff we love so much, so that the Japanese could show a national, notional "profit."

The USA, on the other hand, is a gigantic net debtor with towering trade deficit, and has unbelievably huge amounts of money going out of the economy. We save little to nothing. We are the Welfare Queen of the world, gobbling a surfeit of consumables with one hand, signing credit-card slips with the other, and lecturing everybody else about how being a big, fat, stupid gluttonous pig is so healthy.

[murasaki]

Yes, but...

Having lived in Japan, I can only talk about what I have seen. And I've seen a lot of materialism and thirst for new gadgets, just like the US, frequently worse. Everything there is more expensive, especially day-to-day living items like food, toiletries and the like (of course, things like minimum wage are higher too). If they save a lot, the Japanese spend a lot too.

Japan may be making a profit on the goods they produce, but they also have to import all the materials to make those things with. They import all of their oil and petroleum products (which the Japanese consumer pays a hell of a lot more than American consumers do and Mr. Daughty says they don't have inflation?). They don't have much in the way of natural resources, but I'm sure they get the raw materials for a lot less than they sell the finished products for--a condition that may not always last. What Japan has done better than the US is protect what they do produce--from eletronics to rice to cars--with tarriffs and trade restrictions on importing those items from the US or elsewhere.

"We save little to nothing." I don't know what "we" Mr. Daughty is talking about because my husband I save and invest a lot, around 30% of our income. Maybe Mr. Daughty is referring to working class people, like my parents, a group which I doubt Mr. Daughty has much contact with, who try to save and continually have their savings wiped out by emergencies--they never get ahead enough to save anything substantial or are uninformed about investing. I always hear that the Japanese save more, but I've never learned (or found out) exactly how much, per capita, that is.

Sure, I have debt: it's called mortgage. But my mortgage, unlike a Japanese mortgage, will be paid off in my lifetime, 30 years in fact. The current Japanese mortgage is 100 years.

And finally, the Asian stockmarkets, which are smaller, feel it whenever the US stock market takes a dive. If we're going down, unfortunately, we're taking nearly everyone else with us.

--naomi
who probably sounds more snappish than she is

[brian_igo]

Nah, you sound fine and you make some great points.

I think most of the comparisons economists make between the US and Japan are about as useful (and entertaining) as the NY/California routine hack comics use. For the reasons you note, the fundamental differences prevent an apples-to-apples comparison.

But the difference in savings and the ratio of savings to unsecured debt is real. And I suspect that can have a major effect on how a country is able to weather an economic downturn.

When you look at what happened to their banking system and stock markets over the last several years, Japan should be in the winter of a great depression right now. Their huge trade surplus has helped. But Japan largely missed out on the semiconductor and technology boom, and has seen a lot of its consumer electronic and auto manufacturing move to lower-cost facilites in other countries.

Again, I'm not a professional economist and I don't play one on TV. But I can't help but believe that not having a mountain of unsecured debt and having cash savings (as opposed to equity investments) did a lot to keep consumer spending up and helped prevent a full economic crash.


Brian

[frazzledspice]

Japanese workers have lifetime job security.

One thing that's stalling consumer spending right now is our unemployment rate and lack of consumer confidence among many workers who fear they might become unemployed.

Japan is a kinder, gentler nation, hands down.

[murasaki]

Not true. Japanese management personnel have job security. The working classes do not--specifically the people who work in factories for those managers with job security. The women who work in offices (called OLs or "office ladies") certainly don't have job security and expected to quit working when they get married or when they get pregnant.

The Japanese corporate world is a meritocracy based on hiring the top people (most often men, rarely women) from the top universities who went to the top high schools and on down to pre-school. It's all based on testing well and getting into those elite schools and then into management positions with Japanese corporations. And sometimes testing well depends on the amount of extra tutoring or cram schools a Japanese school attends--things that cost a lot of money.

Kinder and gentler? Sure, for smart Japanese men from families who can afford the cram schools and the private prep schools. Not so much for anybody else.

--naomi