Japan: It's All Good

June 24, 2015

Peter Tasker, writer, speaker, and most notably, a finance guru, delivered some good news on Japan's economic outlook when he spoke at a BCCJ lunch event yesterday. Tasker opened on an upbeat note, saying “Japan is in amazing condition economically” and went on to explain how he believes Japan is well positioned for the future.

Referring to the "Misery Index" - a calculation of a nation's rate of unemployment to the rate of its inflation - Tasker explained how Japan has the lowest misery index of the developed world, at 3.9. Meanwhile the Eurozone has a misery index of 11.4, while the U.K. and U.S. sit at 5.6 and 5.5 respectively. 

Tasker then turned his attention to Japan's labour participation rate. He pointed out that even in a time of economic recovery the U.S. still has very low labour participation. Japan, on the other hand, is doing extremely well in this regard with an unemployment rate of 3.33%, which constitutes full employment. The job offer to application ration is at a 23 year high of 1.17. Not only are there more jobs but wages are "rising across the board, " with even part time hourly wages rising by 1%. In addition, bank lending is going up while bankruptcy is at its lowest rate for 23 years.

How did Japan get to this place of economic prosperity? Tasker explain that some factors which influence economic change are slow burners and incremental, while others are faster with greater impact. Historically the speed of Japan’s economic policy change has been "glacial", however, with the help of Abenomics things have begun to shift more rapidly. Policy has changed from a “hard and tight” to an “easy and aggressive” style, strengthening the economy all around. Tasker referred to the Nikkei, which is at a 15 year high, and said that the depreciation of the yen meant it was at its most competitive rare since the 1970s.

Japan is also riding a wave of inbound tourism. By the end of this year Japan is expected to have 16 million visitors, and these tourists are spending a lot of money. Tasker described their spending power as “explosive”, he said it is the equivalent to adding 1 million people to the Japanese population. Japan is not only looking to bring in tourists but also to bring back some businesses that were sent offshore during the 90s, which will also bring more money back into the Japanese economy.

Tasker also addressed the social mood of the Japanese population, saying there had been a clear change. It has been said that suicide rates often correlate with the economic climate, indicating how people are responding the economic conditions. To give an idea of how the two are linked Tasker spoke about Europe and Japan. In the late 90s, after the economic crisis, the Japanese suicide rate rose nearly 50%, 2/3 of which were men and more than 2/3 were unemployed. Now Japan’s suicide rate is similar to before the economic crisis, while Europe’s is on the rise.

During an engaging Q&A session Tasker addressed opportunities for foreign investment and what is driving Japanese businesses to acquire more business globally.

Tasker also explained why he doesn't see immigrant workers as the solution to demographic problems. "Immigrants just delay the aging process and do not solve the demographic issue. We are 25 years into this and Japan hasn't opened up all that much."

He acknowleged that the weak yen would be a deterrent for young Japanese workers and students to go overseas, but said he believed the younger generation was "well-equipped to think on their feet and survive."

And he explained how recent rules demanding stronger corporate goverance were an important step forward. "In the past, companies were basically governing themselves. A huge systematic change has been accelerated by Abe. The private sector is becoming more accountable and more dynamic."