Japan fact of the day

Exports are 16 per cent below the peak reached in 2008 in real terms, according to data from CLSA.

From Henny Sender at The FT, there is more here.


Nothing like a tidal wave of historic proportions to be the cause for one of those rare disasters, right?


"Nothing like a tidal wave of historic proportions to be the cause for one of those rare disasters, right?"

Actually, no. See FRED XTEXVA01JPM664S. 3-11 does show up in the March-June export numbers. Recovery is complete by the end of the summer.

The tsunami and earthquake did only minimal damage to Japan's export industries. The nuclear power shutdown had a larger impact. The tsunami was very deadly but hit coastal towns with little export capacity. The earthquake struck Northern Japan. However, most of the export oriented factories are in the South. In any case, Japan has rather tough earthquake building codes. Building damage from the earthquake was modest considering that the 3-11 quake (9.0) was the worst in Japan's entire history and the 5th worst in world history.

Over 90% of the deaths from the 3-11 quake were from drowning.

As China moves up the value chain in electronics, Japanese firms lose market share. Same thing is happening to Korea, Taiwan, etc.

South Korea's exports have flatlined since 2011 after growing strongly in the previous decade. http://www.tradingeconomics.com/south-korea/exports

Taiwan's annual exports doubled between 2001 and 2008. They are only up 10% since then. http://www.tradingeconomics.com/taiwan/exports

The tsunami was bad. Strong competition from China is making it worse.

The 1906 San Francisco Earthquake and Chicago Fire of 1871 didn't permanently reduce industrial production in those regions. The cities bounced back.

However, the loss of competitiveness in a core industry is much harder to recover from...see Detroit.



One of the models I use to explain the poor performance of the U.S. economy, of late, is New England mill towns after 1900. The textile and shoe factories were all closing (back then) and moving south. Local economies declined and many never recovered. The NE mill town analogy shows how useless many of the contemporary policy recommendations are.

1. Would "free trade" have helped? - The NE mill towns had free trade with the rest of the U.S. (that was the problem)
2. Would tax cuts have helped? - Absurd
3. Would investment in education helped? - Sure. Every mill worker could have obtained a PhD (absurd)
4. Would investment in infrastructure helped? - Absurd.
5. Would deficit spending helped? - Yes, until the towns defaulted.
6. Would Open Borders have helped? - Absurd. The problem was too few jobs, not too many.

The truth is nothing would have made much of a difference back then. The NE mill towns were doomed to decline (and they did).

Is the U.S. really just an over-sized mill town losing its way? Too some extent that is true. The difference is that plenty of people somehow think that ideas 1-6 will make a difference.

What might a difference? The U.S. can do, what no NE mill town could even consider. We can balance our foreign trade by direct intervention. See the Buffet plan for one suggested approach. NE mill towns had no borders and no national currency. The U.S. has both if we choose to use them.

Add number 7.

7. Would changes in monetary policy have helped - They didn't have a currency.

Isn't (3) essentially what happened? New England is one of the richest parts of the country. I don't think this is a great example.

Yes, (3) and concomitantly switch from textile and shoes to other industries such as computers, medical research, and finance.

However I suspect that out-migration probably helped too.

Isn't a lot the problem that most Japan electronic giants are making a lot of products that have already peaked in the 1980 - 2005? Could Sony in 2022 be the GM (2009) of Japan? Considering the falling the population, could Japan we the country version of Detroit?

Never reason from a change; Abenomics is working. Japan will have their women in the workforce and wages lower than ever in no time.


As a counter example look at Northern Europe. Women work and get government sponsored child care services. The result is highly productive economies with high wages and high living standards.

Social pressure that excludes women from the workplace makes families poorer, not richer.

Japan's labor force is shrinking and their debt burden is growing. They need more working women to stave off economic collapse.

I believe the writer is Henny Sender, not Hennry.

So what: Net exports = Savings - Investment. How about Japan's imports? Are they spending their savings in their old age? Nothing worth thinking about.

Exports are up ~8.5% since the implementation of so-called "Abenomics"

The yen is still about 5 percent higher vs the dollar than it was in early 2008, and about 20 percent higher than it was for most of 2006 and 2007.

So, over the past six years Scott Sumner says U.S. monetary policy has been much too tight. From mid-2006 to mid-2012, the yen appreciated at least 50 percent versus the dollar, and since then has given back most but not all of that gain. If you think U.S. money was too tight during that period, the exchange rate says Japanese money was even tighter, and it still is.. The yen needs to depreciate another 20 percent at least. But once again, the Japanese economy is being sabotaged by the Japanese central bank.

Comments for this post are closed