If only we were all Japanese!

If only we were all Japanese!

December 12, 2019 0 By Michel Santi


The economists and bankers of my generation have had the habit of entertaining themselves by dividing the world into four types of economies: developed, emerging, Argentina and Japan. It is worth, however, updating this somewhat simplistic and caricatural joke by removing Japan from the list of economic aberrations.

Albeit highly unlikely, the Japanese property market – whose value multiplied by 6 in a decade – was in1990 itself worth double the whole American property market! The Nikkei stock market index, in its turn, was to soar 40,000% between 1949 and 1989. It’s simple: Japan’s capitalisations too were worth double US capitalisations at the end of the 1980s…before falling by 80% and reaching the bottom of the abyss in 2003. The (mainly commercial) property market imploded and eventually lost no less than 90% of its value, taking down with it, as logic would have it, the banking sector whose mortgage portfolios were massive. Japanese industry, also giddy with property investments, was severely impacted. So much so that the combined effect of the collapse of the property market and gargantuan financial losses of the private sector brought about the stock market crash that was accompanied by an economic and financial crisis never before seen in human history.

These dramatic episodes nevertheless belong to the past thanks to one man, Shinzo Abe, who is the longest-serving Japanese Prime Minister in history. His exceptional drive and determination as well as his original programme founded on the “three arrows” has finally allowed the country to lift itself out of its double lost decade, to break the deflationary spiral, restore growth, and stabilise the public debt to GDP ratio. Abe didn’t invent gun powder, but had the courage to apply a fundamentally Keynesian programme that consists of increasing public spending, maintaining (via his central bank) a very loose monetary policy, all the while energetically setting in motion structural reforms that lead to the long-term cleansing of his economy.

One of the pillars of these structural reforms is his determination to put Japanese women to work – who have been widely excluded from it until now – to such an extent that their participation in the labour market is now greater than in the US! The other pillar has been the prolonging of the working life of seniors, which goes hand in hand with the improvement of life expectancy and living standards.The result speaks volumes, with a quarter of over 65s still currently in work in Japan, compared to barely 5% of over 65s still in work in France…Japan is therefore a pioneer: the country put its trust in its people who delivered for it, and its example should inspire the other developed nations.

His central bank hasn’t hesitated to venture into unchartered territory by setting its base rates to negative, and even buying shares listed on the stock market in order to support its economy and maintain control over its long-term rates. Japan’s buying power never ceases to grow, allowing it in turn to level out inequalities. With Europe looking more and more like Japan of the 1990s, may its leaders merely deign to take an interest in what Shinzo Abe has accomplished in less than seven years.