The Bankwatch

Tracking the consumer evolution of financial services

Memo to the Financial Times – you were wrong to let this one get through

I would say this piece in the usually venerable FT ought to be better placed in the comment section and hardly in the market insight section.  At a minimum read This Time is Different, and stick them both in the opinion section.  Eight centuries of empirical evidence or one mans irrational opinion.

Japan’s mythical debt crisis | Peter Tasker –

Far from the next Lehman or the next Greece, the market is rating the Japanese government as the best credit on the planet. Indeed if Sidney Homer’s classic “History of Interest Rates” is any guide, Japanese government debt commands the lowest interest rate since Babylonian times.

We all get that Japan is something of an outlier in terms of economic performance and results following the burst bubble in 1990 yet still ambling along nicely today.  But to suggest that economics 101 have been foregone and that the debt levels supplemented by a population that is aging more rapidly than other countries due to the natural resistance to immigration, leave one with a conclusion that fewer tax paying young people supporting more old people plus the countries debt, will not have have some impact, is to stretch incredulity.

What the likes of this piece ignores, and yet Japanese people realise, is that Japan is essentially a managed economy.  Despite 20 years of deflation and post bubble burst, the skyline of Tokyo shows construction cranes.  Midtown was just built.  Roppongi Hills is so empty you could shoot a missile through it, yet all the spots are leased and the stores are open.  Something is keeping Japan going longer than it should, and its got something to do with inherent citizen loyalty to the country, and other underground elements, that translates into purchase of government debt.  The issue will not be personal motivation of the average Japanese.  They would win the work and motivation ethic over anyone, anywhere.  The issue will be financial ability to continue the investment as the demographic direction takes hold.  The pressure and stress on the average person there is incomprehensible to North Americans or others, and no-one will acknowledge.

There is something else going on there and I don’t pretend to understand it all, but I do understand that economic basics stand true, and that I believe Japan to be a temporal anomaly.  Twenty years is a blink in economic terms.

In January it was the brics.  In a February piece Tasker demonstrated an understanding of Japan.  So why this one off, poorly rationalised piece .

Memo to Financial Times:  please watch which categories you employ your writers and separate opinion from (your word) “insight”.

Written by Colin Henderson

March 15, 2010 at 16:47

Posted in Uncategorized

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