by Tyler Cowen
on January 15, 2013 at 1:30 pm
in Current Affairs, Economics |
The unemployment rate is 4.1 percent.
In recent discussions of Japanese fiscal stimulus, this point could use a little more…emphasis.
Here is one source for the data.
That is surprising and makes one wonder how much slack is in the economy. Japan has a very high proportion of older retired people people. I wonder if stimulus could jump start the economy in part by bringing some of those people out of retirement, maybe just need to make it worth their while?
I am not an economist and TC was talking to his peers here, but I think what he is saying is JP NAIRU is above where it is now, which if you expand the graph at the link shows 4% is kind of low in the post-crash era (after 1991). Hence I think if Keynesian stimulus works in Japan, you should see inflation, unless, as you say, the old timers come out of retirement. It will be an interesting experiment, and will show how the USA is likely to react a couple of years (or decades) from now if this stagnate recovery continues.
What Tyler is really pointing out here is the failure of fiscal stimulus when you have a central bank targeting an inflation rate. In the case of Japan that is unfortunately 0%.
Edit: just one ‘people’
Japan is rather homogeneous.
All the unemployed immediately commit suicide out of shame.
It’s my impression that many governments manage to “define away” unemployment: they delete people who have been unemployed for a long time, who have given up searching for a job, who have been creatively classified as disabled, and so on. It must often make international comparisons pretty meaningless, mustn’t it?
Well, yes and no. International comparisons are indeed pretty meaningless if you look for insight, but make perfect sense if the goal of the exercise is to be producing impressive-looking graphs that play to one’s preconceived notions and/or push one’s preferred policies. For variables such as unemployment and inflation it’s not only cross-sectional studies that are pretty meaningless, but longitudinal ones as well, at least over periods longer than ten years, give or take a couple.
Japan severely restricts immigration. Policies have consequences. Sometimes very good consequences.
And yet the popular perception in Japan is that the job market is still terrible. Apparently there are a huge number of young people who are stuck in temporary/part-time work without much of a future.
If they were facing 8% unemployment they’d be singing a different tuna.
And if the Japanese were facing 0.8% unemployment they’d be singeing a different tuna, possible the delicious but endangered West Atlantic bluefin tuna, albeit you lose face if you pan fry sushi.
Wouldn’t Japan experience employment hysteresis in reverse after such a long period of low inflation expectations?
You mean immigration restriction works?
Having no land borders problem helps.
So, we should do like the Japanese, and erase our land borders…annex North & South America.
“Having no land borders problem helps”
It should help. However, the UK is an island (several to be precise). The UK is the poster-boy for immigration control failure. Finland is far from being an island, but far more successful in restricting immigration so far. Policy, not geography is the major determinant of immigration.
What’s Japan’s labour force participation rate?
I don’t really know how ~59% stacks up, given the demographics. But it’s a much lower rate than the US, which is at ~63.5%
According to FRED, the U.S. employment population ratio is 58.5% (down from a peak of 65% in 2000). See http://research.stlouisfed.org/fred2/series/LNU02300000. The comparable number for Japan is 56.2%. The highest number for Japan was roughly 64% back in 1970. See http://research.stlouisfed.org/fred2/series/JPNEPRNA.
The Great Recession brought a large fall in the employment population ratio in the U.S., but only a much smaller decline in Japan.
This isn’t really a rebuttal (and certainly isn’t one in the context of the stimulus), but just something to keep in mind: a large proportion of the employed are in low-productivity, low-security part-time jobs, doing things like handing out branded tissues at train stations. More here: http://www.cfr.org/japan/japan-two-tier-economy/p8056
Indeed. Recall that Japan was the country that gave us terms like ‘office lady’ and ‘NEET’ and ‘hikikomori’.
Freeter is probably most apt for this discussion.
As if here in the US, everyone has an upper middle class job that is not only monetarily rewarding, but fulfilling in purpose
Steve Sailer is funny.
But Tyler is making me feel despair. We all know that an enormous amount of Japan’s savings are in Government bonds or insured by Government bonds. This means that those same bonds have to be paid for by either taxes or inflation. This means they have considerably less real savings than they think they do at the individual level.
I suppose Japan could get lucky after 20 years and start growing at 5% a year again—but that seems unlikely. Even as Steve Sailer made me laugh, he makes a serious point too. The Japanese are a tight culture. They are willing to work more for less. This is what has kept them going even as their debt is 2.5x their GDP. Their average age is 47. Maybe if they persued a growth oriented economy back in 1990 they would not be getting so squeezed now. They are a shrinking culture and country valiently going down with the ship—unecessarily perhaps—but as of now seemingly inevitably.
And Tyler thinks a little more stimulus that lowers their “unemployment rate” should be looked at by us more closely? For what purpose?
The notion that Japan’s under-performance is due to Keynesian reasons is ridiculous. The explanation is simple: Japan’s primary exports pre-1990 were highly profitable because they had few competitors that could match their manufacturing prowess, particularly in electronics.
Post-1990 China, Korea, Taiwan, Thailand, and Malaysia have all proved major competitors to Japanese export industries. America did better because few to no rising economies were major competitors in traditional America export powerhouse sectors like financial services, media or aerospace.
You can only take the Krugman-ite thinking of “countries cannot be thought of as firms” too far. All the macroeconomists want to show off how sophisticated they are, so they end up ignoring common-sense business-school like country-level analysis. When you suddenly and unexpectedly get major competition in your major industries its bound to hurt your economy. The notion that all Japan needs is a “good dose of stimulus” is as ridiculous as saying that all Blockbuster has to do to turn itself around is dilute its common equity a whole bunch.
Women are actively excluded from the workforce and immigration to Japan is very low.
I’m pretty sure that Sumner linked to this some time ago: http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fingleton/
Which would suggest that my assumption that Tyler Cowan is a man who reads much but understands little is true.
In Japan you can avoid being unemployed when you lose your job, if you drop out of the “potentially productive” category into the “not potentially productive” category. That happens when you reach a certain age. For part time college instructors that would be 63 or 64 (depending on your birthday). Since “not potentially productive” people can’t have jobs, they also can’t be unemployed.
But it’s still at historically high levels, as you’ll note if you extend the start period of the chart. The same historically high levels it’s been at for the last 20 years.
This might not be an “economy is awesome!” point, so much as a “Japanese work ethic is awesome!” point.
I don’t know too much about how extensive Japan’s welfare state is. But it seems as if the culture is such that people would be made to feel very ashamed to be unemployed and on social assistance for long periods of time. So it may be that many poor Japanese are willing to take really shitty jobs at low pay rather than be unemployed.
They also don’t have a lot of low-skilled immigration.
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