If only we were all Japanese!
Japan is known as much for its smartphones and robots as it is for the implosion of its real estate mega bubble nearly twenty years before the subprime crisis in the US in 2007, which itself preceded the collapse of the Spanish and Irish real estate markets in 2009. In fact, the Japanese financial and real estate crashes smashed all the records, and, in this context, the development of the Nikkei index is totally significant. Having registered a historic peak at nearly 39,000 in 1989, it has never again been able to reach this level, now remaining around 23,000 points. According to the Japanese economist Richard Koo, this period caused three times more losses in Japan than the wealth ruined in the US during the Great Depression.
And yet, admirably, Japan recovered, not only because it didn’t suffer any economic contraction throughout the whole of the 1990s, but also because it is on its way to becoming an economic role model, mortally wounded before, but now well and truly resuscitated. Its growth over the years – albeit starkly anaemic – has of course owed to colossal debts combined with multiple plans for recovery and other stimulus. However, this same anaemic growth that has fashioned the Japanese landscape these last twenty years was due precisely to timid plans that were too cautious, and basically to weak responses that prolonged this nation’s suffering and transformed the first few difficult years into a drawn-out agony known as the “Lost Decade”.
While the Japanese share indexes still haven’t returned to their previous levels, this country’s economy does seem to have recovered most of its prosperity from before the implosion of its bubble. The traditional statistics, however, struggle to show it since the drop in numbers in the workforce due to real demographic problems in Japan falsifies the figures. It is in fact impossible to see the current dynamism of the Japanese economy through the banal prism of GDP because this includes the whole of the population, including the swathes of seniors who produce next to nothing. It is therefore much more interesting to analyse the country’s economic activity by age bracket, or even by gender. Women’s participation in the world of work between the ages of 25 and 54 has in fact jumped nearly 10 points (from 70% to 79%) since 2012, meaning that the overall 25-54 age bracket for both genders is now employed at rate higher than 85%. In other words, with an overall unemployment rate of 2.5% (which by the way never rose above 6% at the height of the crisis), full employment has been widely re-established in Japan.
Japan – that had been lagging behind US growth by 15 points since the 1990s – has now caught up on all its backlog and has now filled the gap. The explanation for it is actually quite simple and it’s called Shinzo Abe, the current Premier Minister who – taking the reins in 2012 – showed an unfaltering determination to revive his country’s economy. He implemented reforms that aimed to massively promote women entering the labour market, all the while frantically churning his central bank’s printing press so as to give the cogs of the economy a good oiling. In doing so, Japan and Shinzo Abe have given a masterful lesson in economics to the deficit fetishists: they have shown that confidence – a vital ingredient – can prevail, sometimes as easily as anything in the word.