Japan – will stimulus work?

Most people including the Japanese think the absence of any growth in GDP for 20 years is a poor performance. They have just elected a new government pledged to kick start faster growth and inflation through an enormous monetary stiumulus. It follows two decades of monetary and fiscal stiumli on a large scale. Neither of these so far has induced inflation or much growth in GDP.

Running a permament very large budget deficit has not provoked growth. It has resulted in a large state debt, now more than 230% of Japan’s GDP (on official IMF figures which place the UK and Germany around 80% of GDP). Japan has by far the largest state debt as a proportion of GDP of any country, and the second largest after the USA in absolute terms.

Nor has the monetary laxity so far brought on good growth. Japan has been held back by broken banks, by the long after effects of large loan losses, by a reluctance to add to property and shares given the poor price performance, and by an ageing population more prone to save for fear of the poor economic outlook.

So this time the state is adding not only to the state deficit, but more importantly is going to set out to double the money supply. The Bank of Japan has announced it will buy in 50 tillion yen of government debt each year, 1 trillion yen of ETFs and 30 billion yen of Real Estate Investment trusts. The money base will be increased by 60-70 trillion yen a year.

So far the policy has pushed the yen down sharply, allowing more exports and some imported inflation. It has also pushed up Japanese share prices, and kept bond yields and interest rates on the floor where they have been for a long time.

The third arrow of the government’s three arrows aproach to growth will take longer. It will be a series of supply side reforms to improve competition and competitiveness in the Japanese market. Much will probably depend on these reforms, if Japan is to avoid another disaappointing result in terms of output and incomes from yet another blockbuster of amonetary stimulus. A country of savers with no recent history of inflationary wage rises or imprudent spending is not going to be easy to tip into inflationary growth.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.


  1. Robert K
    Posted April 10, 2013 at 6:20 am | Permalink

    Never quite seen the problem with deflation, myself. Rewards savers. What’s wrong with that?

    • sm
      Posted April 10, 2013 at 9:38 am | Permalink

      Insolvent banks would no longer be able to be disguised and the loss would tend to increase to maximum rather than be inflated away in real terms.

      Banks and political power(lawyers and all) are joined at the hip but pretend otherwise.

      So create all this money and who do they give it to! Certainly not to the people to pay down debt first then spend.

      Its all about keeping the current power structure in place no matter what:- US democracy can go whistle dixie im not sure ours really existed

      This could end with ration books and barter very quickly.

    • Mike Wilson
      Posted April 10, 2013 at 12:29 pm | Permalink

      Unfortunately it would break the economy. Way too many people up to their eyes in debt. Any fall in house prices would break the banks and millions of lives.

    • Peter E
      Posted April 11, 2013 at 3:02 am | Permalink

      the problem with deflation is that everybody holds back from spending money – on goods, on services, on investment etc etc. in a deflationary environment its always better to wait until tomorrow. so there is no growth. there is no investment. there is no progress. that’s the problem with deflation.

  2. Leslie Singleton
    Posted April 10, 2013 at 6:34 am | Permalink

    In what we called International Loan Committee, we watched and commented on what our Tokyo Branch was doing. Whereas in the West a gearing of say three to one would have everybody sucking their teeth, in Japan it was more likely to be thirty to one. We never received any explanation other than something along the lines of not to worry because this was how they did things in Japan. I didn’t understand it then and I don’t understand it now. I am not as you know in the camp that says we or Japan or anybody else has some God-given right to continual never mind continuous growth. Technology has been truly amazing but unlike some I don’t see it carrying on at the same rate. To me it has reached the stage of rather smacking of solving problems most of us didn’t know we had.

    • lifelogic
      Posted April 10, 2013 at 6:25 pm | Permalink

      Technology still has a huge way to go and is accelerating as one tool developed help the development of the next one. If on development make the next development 20% easier the of course it accelerates. It does however help if the government keeps their mad green religions and subsidies from misdirecting it all.

      Information technology, DNA analysis, genetic engineering, energy systems, medical research, energy efficiency, manufacturing technology, IT, building systems ………. all will see huge progress.

      • Leslie Singleton
        Posted April 11, 2013 at 4:30 pm | Permalink

        lifelogic–You might be right but personally I don’t buy it. BTW by “Technology” I guess I meant IT (which I notice you include twice–obviously obsessed like everyone else) in the sense that I happily plod on pleased with myself that I have been able to resist even carrying a mobile phone. Genetic engineering etc is all very well but I don’t myself see it producing the dreaded “growth”. And as you may have read me write many times here I am in the camp that says that the very definition of GDP and therefore the size of any growth in same is so much junk.

  3. Single Acts
    Posted April 10, 2013 at 6:42 am | Permalink

    Rather reminds me of the Blackadder 4 sketch where the plan is to walk very slowly towards heavy machine guns for the 28th time in succession. Almost bound to work isn’t it.

    • outsider
      Posted April 10, 2013 at 11:45 am | Permalink

      A wonderful analogy Single Acts. And a warning to us. It is hard to see, for instance, how Japan could return to “normal” interest rates because it would hugely aggravate the state budget deficit and destroy the domestic savings that hold 90 per cent of the government debt. Slaughter guaranteed. A rethink needed.

  4. lifelogic
    Posted April 10, 2013 at 6:44 am | Permalink

    Indeed we shall see – perhaps buy Japanese shares but hedge the currency is the best bet.

    I see the Sir John Beddington the outgoing Chief Scientific Adviser to the UK Government has correctly pointed out the absurdity of the NHS paying for homeopathy.

    What on earth is a half broke government doing taking taxes of people (under threat of imprisonment) so they can waste it on such treatments. After wasting all the costs of collection and distributing the money too? Insanity on stilts as usual.

    A shame he has not yet worked out that his AGW, global warming catastrophe agenda is very similar, but far, far more expensive and damaging.

    It is good to see that Sir James Crosby has given up his knighthood and £175,000 of his (still huge) annual pension. Perhaps now John Major (for his entirely predictable ERM farce) and Gordon Brown for his needless wrecking of the economy and indeed all the many AGW catastrophe priests should also now consider their positions.

  5. alan jutson
    Posted April 10, 2013 at 6:47 am | Permalink

    So with all these high speed trains, they still have no growth ?

    • lifelogic
      Posted April 10, 2013 at 11:04 am | Permalink

      Indeed and HS trains make far less sense in the small UK.

      Why on earth are we led by such Donkeys wasting all our money and HS2, the pigis, the feckless, quack energy systems and quack/vanity NHS treatments?

      • Hope
        Posted April 10, 2013 at 4:21 pm | Permalink

        Today the government quietly announces that women quotas might be introduced to the board room by law. It fIls to say it was another directive of the EU. What a day to slip this under the headlines of the great Maggie Thatcher. She did not need to be part of a quota system to reach the top, just pure talent and determination. We also have an arricle in the DT where Khol state he acted like a dictator to get the German people to accept the Eurobecause if it went to the vote he would have lost. Time to get of of the EU. Mr Cameron and his whole family to spend the weekend with Merkel!

        • lifelogic
          Posted April 10, 2013 at 6:32 pm | Permalink

          Indeed well Cameron has already implemented the absurd gender insurance laws. Yet he has the temerity to complement Lady Thatcher, when he is clearly the complete opposite of her, destroying any progress she left, that had not already been destroyed by Major, Bliar & Brown.

      • Bazman
        Posted April 10, 2013 at 6:59 pm | Permalink

        Still waiting for your reply as to why rich Pakistanis are being blamed for not helping the poor by paying taxes when they will clearly be investing their money in far more useful aid to them instead of tax to waste by their government on such thing as helping the poor stay poor by disincentivising them to find work?

        • Edward2
          Posted April 11, 2013 at 3:30 pm | Permalink

          If I may answer for the excellent LIfelogic Baz as he is a bit busy at the moment to reply to your demands.
          The point you raise was about the millions of overseas aid we give to this nation at a time when their tax system especially for the very rich elite fails to collect what it ought to.
          There is an argument that our UK aid is simply filling the gap.

          • Bazman
            Posted April 12, 2013 at 5:46 pm | Permalink

            Absurd argument. Rich Pakistanis will be investing their money and helping the poor far more wisely than their governments tax and spend methods.

          • Edward2
            Posted April 13, 2013 at 10:18 am | Permalink

            You are funny Baz
            You ask a question,demand an answer, but have your own opinionated answer which you then rush to tell us.
            Im impressed you have asked all the rich in Pakistan if they will invest their money wisely in the poor.
            No spending on arms, nuclear weapons and space programmes then.

    • Leslie Singleton
      Posted April 13, 2013 at 8:56 am | Permalink

      Alan–You should have learnt by now from unanime that growth on HS train lines comes from the planning stage

  6. Andyvan
    Posted April 10, 2013 at 6:51 am | Permalink

    Japan has conclusively proved that the policies that the EU, UK and USA are now following do not work and simply lead to stagnation and eventual collapse under the weight of debt. Of course they have lasted a long time under a staggering debt load but have managed it because most of the money has come from their own population’s savings. That’s now drying up and they’re getting desperate so out comes that old favorite of all central bankers- money printing. That always works well. The long suffering Japanese have had their savings stolen by fraud now what’s left will be destroyed buy inflation. All in the cause of propping up criminally stupid government. Sound familiar? It should.

  7. Ben Kelly
    Posted April 10, 2013 at 7:00 am | Permalink

    If government is to borrow/print to stimulate, I would suggest that tax cuts (aimed at the low to middle) is the best supply side measure to pump money into the economy. Government can then print short term to plug the deficit and better to do so without creating debt.

    Giving funds to bond holders merely serves to bolster reserves for those bond holders and allows them to invest in commodities pushing up prices and reducing individual spending powers.

    Government too often relies on business to do the right thing using trickle down economics when it may be of more use to act at the bottom of the pyramid.

  8. zorro
    Posted April 10, 2013 at 7:11 am | Permalink

    Japan has some advantages over the UK in that it is an essentially heterogenous society with a strong family ethic (still). It is still a major industrial producer and foreigners own (last time I looked) around 9% of their debt.

    It has been a remarkable 20 year period but they have managed to quite easily get through it. The UK certainly would not have been able to hold it that long. Certainly, there are a few money making opportunities……a near certainty that the value of their stocks will increase with this money printing, and the yen will continue to slide further in relation to the universal fiat currency slide.


    • Mike Stallard
      Posted April 10, 2013 at 3:20 pm | Permalink

      “it is an essentially heterogenous society ” – odd, I thought it was a strongly homogenous society. When my son entered a Japanese restaurant in Tokyo, with his Japanese client, everyone got up and walked out: they didn’t want to eat with a Gaijin!

      • Leslie Singleton
        Posted April 10, 2013 at 6:01 pm | Permalink

        Mike–Pace Zorro, I imagine he was thinking in terms of ‘hetero’ as meaning something like ‘normal family’ and, etymology apart, I don’t think he was far wrong.

        • zorro
          Posted April 11, 2013 at 7:14 pm | Permalink

          Thanks, I subconsciously conflated the two within the same sentence.


      • zorro
        Posted April 10, 2013 at 6:12 pm | Permalink

        Hahaha…..That’ll teach me to post too early in the morning! Indeed, I did mean ‘homogenous’ as in of a similar kind. ‘Heterogenous’ implies diverse origin or from a different species. Mind you, the emperor was supposedly descended from the sun goddess!


        • Leslie Singleton
          Posted April 12, 2013 at 7:54 pm | Permalink

          zorro–Hate to say it but even now not quite ticket-boo because I’ll wager it should be homogeneous (without the second ‘e’ is a different word–very pedantic and boring I know–Sorry).

  9. Richard1
    Posted April 10, 2013 at 7:19 am | Permalink

    The best analyses I have seen of the reasons for Japanese stagnation suggest the big problem is zombie banks propping up zombie firms, preventing reallocation of resources and entrenching existing workers at the expense of potential new workers, also stifling business formation. We should be careful not to do the same thing here by propping up our zombie banks.

    On debt, though its very high, I understand its not quite that bad as half the debt is held by state owned enterprises. So the comparable net debt figure is c. 120%.

    • Gary
      Posted April 10, 2013 at 12:00 pm | Permalink

      The vast unsettled debts are certainly causing a sclerotic seizing of the economy, in Japan and most everywhere else. Carrying zombie banks and zombie businesses tied to zombie property markets is a dead weight on the economy. So what is the govt solution? To underwrite existing debt , extend more debt and print debt based confetti they call money, until the cows come home.

      They will cling to this dead system until they are bypassed as irrelevant by another system that will arise spontaneously, whether they approve or not.

  10. Iain Gill
    Posted April 10, 2013 at 7:26 am | Permalink

    I think Japan has a number of trade barriers it needs to renegotiate. The limits on Japanese car imports were done at a time they were massively out competing the European car industry. Given that we are now importing large numbers of cars from Korea and India to name but two I am not sure the restrictions on Japanese car imports make much sense any more. Of course remove that little barrier and the need for the Japanese firms to have assembly plants here would dwindle. But given open borders they would quickly take large numbers of car orders. (we and Europe seem to be very misguided in the ways we put trade barriers in the way of some and not others and manipulate the market far too much, but fail to protect ourselves from the worst abuses).
    Of course Japan has the massive nuclear legacy to clean up and deal with, which has taken large geographic areas out of productive use. And they have the North Korean missiles a rather more realistic threat than Camerons nonsense about us being threatened.
    Japan has much higher levels of personal saving than we do, it would be interesting to know what their national debt looks like with that balancing it out?

    • uanime5
      Posted April 10, 2013 at 11:59 am | Permalink

      If by “massive nuclear legacy” you’re referring to atomic bombs being dropped on Hiroshima and Nagasaki then you’re incorrect in claiming that it took “large geographic areas out of productive use”. Both were rebuilt after WW2 and in 2010 Hiroshima had a population of 1.2 million, while in 2009 Nagasaki had a population of 446,000.

      • Iain Gill
        Posted April 12, 2013 at 2:30 pm | Permalink

        tsunami-crippled nuclear power plants and the resulting leaks etc

  11. Brian Tomkinson
    Posted April 10, 2013 at 8:29 am | Permalink

    Despite all this lack of GDP growth Japan’s economy has remained the third largest in the world. What is the sense in trying to ” tip (Japan) into inflationary growth”? Is this just another case of trying to inflate away the government debt? What is the long term benefit of inflationary wage rises which force up prices and the whole merry-go-round starts again? Wasn’t that what we saw in the 70s and Mrs Thatcher had to sort it out? If only she were in power today!

  12. Steve Cox
    Posted April 10, 2013 at 8:36 am | Permalink

    “The central lesson of macroeconomics of the past 40 years has been that low interest rates and deficit financing cannot increase the medium-term growth rate of economies, but if used to excess can lower it. That is a lesson we are at risk of forgetting.

    Why are interest rates still essentially zero and policymakers still urging yet more money printing and yet more “flexibility” in inflation targets, when rates have already been zero for four years? Because in their hearts, policymakers want to believe that monetary policy can increase growth and that growth may be higher if inflation is a little higher. Why is George Osborne planning to run a £120bn deficit in 2013/14 having run a £120bn deficit in 2012/13 and a £120bn deficit in 2011/12? Because in his heart, he wants to believe that running such vast deficits will make the economy grow faster.

    But it’s now six years since the financial crisis began in 2007, and five years since the current depression began.

    We do not have a short-term growth problem, of the sort that running high-budget deficits or low interest rates can help with.

    Forgetting the lessons of the past 40 years of macroeconomics may have terrible consequences in due course – high inflation; mass unemployment; perhaps even sovereign default. Policymakers need to stop trying to apply theories about the 1930s that don’t work, and start applying the well-trodden rules of the 1970s-2000s that do.”

    These are some salient remarks I’ve taken from an excellent article a few days ago by Andrew Lilico:


    • uanime5
      Posted April 10, 2013 at 12:14 pm | Permalink

      Despite his claims that in the 1970’s countries recovered after the Government did nothing and waited for the markets to fix everything for them Andrew Lilico failed to provide any examples of this occurring. He also fails to explain why the markets aren’t currently fixing the problems in the UK.

      I suspect the reason the market isn’t magically fixing everything is that it can’t because of the lack of opportunities in the market owning to people not spending in the real economy because they don’t have enough money. So the solution would be for the Government to provide more public sector jobs, so that more people would have more money to spend in the real economy. In other words what worked in the 1930’s to get the USA out of the great depression.

  13. oldtimer
    Posted April 10, 2013 at 8:51 am | Permalink

    The primary purpose of these measures, it seems to me, is to engineer a devaluation of the yen to help Japanese exporters. Many are suffering from the onslaught of competition from China. The devaluation seems to have worked (with the connivance of other G8 members). The extent to which it will help Japanese exports remains to be seen – it may be a long haul as we are discovering in this country.

    Past efforts to boost the economy by vast public spending programmes (causing the very high debt ratio) have not succeeded in growing the economy – probably because much of it was spent on vanity projects and pork barrel projects which reduced rather than improved national competitiveness.

    • uanime5
      Posted April 10, 2013 at 12:16 pm | Permalink

      Interestingly the UK is copying both of these by devaluing against the euro and building HS2. Though neither seems to be working.

      • Leslie Singleton
        Posted April 10, 2013 at 6:27 pm | Permalink

        unanime–A pox on the Euro as ever–If the Euro is too high as many believe maybe devaluing against it is not so silly and how you could imagine that the effect if any of building the HS2 could have kicked in yet is impossible to fathom.

        • uanime5
          Posted April 11, 2013 at 11:46 am | Permalink

          At present £1 is worth €1.17 so it is the pound that is currently stronger than the euro.

          Also the Government is currently spending money on the planning of HS2 and buying the land they need for it. So the UK is already experiencing some effects of HS2.

          • Leslie Singleton
            Posted April 12, 2013 at 8:00 pm | Permalink

            unanime–I hope for your sake that you don’t really see the relative strengths like that. On that basis, without more ado, the pound is and always has been stronger than the dollar which would be bizarre even for you. “Some effects” is absurd. De minimis.

        • zorro
          Posted April 11, 2013 at 7:31 pm | Permalink

          I know, it’s rather precipitous of uanime5 to already start ascribing economic benefits to long term investments (sic) such as HS2. Anyway, I’m surprised that he isn’t supporting pork barrel projects like FDR did….


  14. peter davies
    Posted April 10, 2013 at 9:00 am | Permalink

    Iceland seems to be the only Western country affected by broken banks to get its house in order against the advice of everyone. Your example here shows that borrowing and printing to excess can only end in tears – their industrial base is far bigger than ours so they have been better able to carry it – 20 years seems a long time to keep doing the same thing with the same results by anyones standards.

  15. Electro-Kevin
    Posted April 10, 2013 at 9:47 am | Permalink

    Japan goes to show that a superior work ethic, efficiency and superlative products are no insulation against ecomic downturn, unemployment and outsourcing.

    I believe that British workers were maligned wrongly in many cases – some of the products they produced are still in work today long after their intended longevity.

    On the bright side for Japan – the monoculturist nature of Japan sees them through disasters such as Fukoshima. I couldn’t see an incident of that magnitude happening in the UK or the US wihout (more trouble and division-ed).

    The Japanese will cope somehow

    • Electro-Kevin
      Posted April 10, 2013 at 9:58 am | Permalink

      Off topic please:

      The BBC’s bias has been outrageous regards Baroness Thatcher.

      Today there was much focus on the satire surrounding her under the pretext of the ‘news’ item ‘What will people who relied on her for a living do now ?’

      This was an excuse to dust off cruel Gerald Scarf cartoons and show them on screen repeatedly – and also to air the Spitting Image puppetry that mocked her.

      Each item is preceded with “Baroness Thatcher was loved and loathed in equal measure…” Clearly not. She was elected to office three times and would have won a fourth term in my opinion.

      The complaints of the cost of her funeral were highlighted (why mention them ?) and the answer was given that high security was required ‘…because of threats of terrorism and violence. She was hated by many.’

      Sounds like she picked the right targets then but this wasn’t mentioned.

      Nor the discussion item which followed in which the lack of women elected to boards was questioned. An ideal time to point out that Margaret Thatcher proved that there is no ‘glass ceiling’. At least not in the ‘sexist’ Tory Party.

      • Winston Smith
        Posted April 10, 2013 at 11:01 am | Permalink

        The answer to the entrenched left-wing bias and hate of the BBC is to stop paying the licence fee and go online if you must watch a few programmes. Starve them of funds.

        • Ralph Musgrave
          Posted April 10, 2013 at 5:10 pm | Permalink

          Good idea. Also instead of referring to the “BBC” on any blog etc perhaps we should refer to the (failure of the BBC to root out bad sexual behaviour-ed). No harm in kicking where it hurts most!

        • Gwem Tanner
          Posted April 10, 2013 at 5:24 pm | Permalink

          I will be doing this next time my licence fee is due. So many of us would like to see the overpaid executives go down the pan. Lots of wastage every day of the licence fee we pay i.e. using two newsreaders instead of one – what is there reason for this! Appalling.

        • Bob
          Posted April 10, 2013 at 7:50 pm | Permalink

          I already stopped paying the TV Licence years ago.

          It’s easier than most people realise.


      • uanime5
        Posted April 10, 2013 at 12:30 pm | Permalink

        Each item is preceded with “Baroness Thatcher was loved and loathed in equal measure…” Clearly not. She was elected to office three times and would have won a fourth term in my opinion.

        Below is a list of elections, the percentage of votes the Conservatives got in each election, and the number of seats they got:

        1979: 43.9% (339/635)
        1983: 42.4% (397/650)
        1987: 42.2% (376/650)
        1992: 41.9% (336/651)

        So in all the elections more people voted against the Conservatives than for them but because of the UK’s FPTP system the Conservatives were able to get a majority most of the time. Only in an electoral system using a form of proportional representation does winning elections mean that the party is the most liked.

        • peter davies
          Posted April 10, 2013 at 1:13 pm | Permalink

          You can twist stats all you like here are some from 2005, they give your labour colleagues a heavy advantage:

          60000 more people voted Tory in England 2005 than labour yet labour got 92 more seats

          Labour’s share of the total possible electorate was 22%, yet they got 55% of the seats in 2005 with 36% of the votes cast.

          Tories got got 30% of the seats with 33% of the votes cast

          LD 10% with 22% of the votes

          Little wonder Labour dont want to change anything, they only need 22% of the population to vote for them to win elections

          • uanime5
            Posted April 11, 2013 at 11:49 am | Permalink

            Pity the Conservatives didn’t change the voting system by introducing AV or PR. That would have reduced the number of seats Labour gets.

        • edward2
          Posted April 10, 2013 at 1:15 pm | Permalink

          Uni, given that similar percentages elected Tony Blair for 3 terms of Labour Government and a recent referendum on a form of PR in the UK was defeated and PR in Europe often results in a party gaining power the majority have not directly voted for, Im not sure your point is very strong.
          We vote in the UK knowing what the system is and if a leader or a particular political party was really very unpopular then there would be a different result.

          • uanime5
            Posted April 11, 2013 at 11:53 am | Permalink

            Firstly the vote was on AV, not PR.

            Secondly PR means that the more votes a party gets the larger it is. So it’s impossible for a party that the majority of people didn’t vote for to be in power. Though you can end up with coalitions they still need the support of 50% of the electorate to have a majority.

            Thirdly in the UK due to the FPTP system an MP can be elected with 20-30% of the votes. So they can be elected even if unpopular with the majority of the electorate.

          • zorro
            Posted April 11, 2013 at 7:34 pm | Permalink

            He never mentions this side, or the inherent bias in favour of Labour in seat allocation.


          • Edward2
            Posted April 12, 2013 at 12:02 pm | Permalink

            Firstly AV is a form of PR so dont be so stupidly pedantic.
            Secondly the minority parties of the outer left and right can easily end up holding the power with just a few seats and having got a small percentage of the vote.
            Not as democratic as you claim.
            Thirdly it is unusual for an MP to get elected on 20-30% of the vote unless you are counting the whole eligible electorate rather than those who actually voted.

        • Winston Smith
          Posted April 10, 2013 at 3:53 pm | Permalink

          That only makes sense if you believe all those who voted LD, SDP, Labour, nationalist, fringe parties did so because they disliked MT and the Tories. it may surprise you, but not everyone live sin a hate-filled socialist bubble. Some people vote because they support their policies.

          • uanime5
            Posted April 11, 2013 at 11:56 am | Permalink

            Is there really any difference between voting for party A because you like there policies and not voting for party B because you don’t like their policies?

        • alan jutson
          Posted April 10, 2013 at 4:58 pm | Permalink


          Using your logic

          So they were the least disliked then, because they got the more votes than anyone else.

        • lifelogic
          Posted April 10, 2013 at 6:41 pm | Permalink

          She did really win a forth term, they voted for Major as being her choice, only a little later did they realise what a complete pro EU, tax borrow and waste, disaster Major was. He then buried the party for three + terms.

        • Electro-Kevin
          Posted April 11, 2013 at 8:18 am | Permalink

          Uanime5 – I thank the other commenters for pinning some detail to my comment.

          “Loved and loathed in equal measure”

          The figures you have shown are not detailed enough to show love nor loathing.

          My guess is that most people of the time were not in possession of either emotion.

    • uanime5
      Posted April 10, 2013 at 12:21 pm | Permalink

      the monoculturist nature of Japan sees them through disasters such as Fukoshima. I couldn’t see an incident of that magnitude happening in the UK or the US wihout (more trouble and division-ed).

      Given that the USA managed to survive 3 mile island without society collapsing it seems that they can survive major disasters.

      • Edward2
        Posted April 10, 2013 at 1:40 pm | Permalink

        In the USA 3 Mile Island nuclear emergency there were no deaths.
        Not what I would call a “major disaster”
        Fukoshima nuclear emergency there were approx 15 deaths, though the UN are predicting perhaps 2500 more deaths due to illnesses caused by exposure to radiation in the future.
        The actual tsunami in Japan killed over 20,000 people.

        • lifelogic
          Posted April 10, 2013 at 6:43 pm | Permalink


        • lifelogic
          Posted April 10, 2013 at 6:45 pm | Permalink

          Surprising the AGW nutters and the BBC did not blame the tsunami on CO2 that is the usual approach.

        • uanime5
          Posted April 11, 2013 at 12:06 pm | Permalink

          Not sure where you’re getting the figure of 15 deaths from. While 2 workers were drowned by the tsunami and 1 suddenly died during clean up none of these deaths were due to radiation.


          Also the UN isn’t predicting 2,500 deaths due to radiation as they determined that the expose was very low level. Though they have said that the people affected are 1% more likely to have certain types of cancer.


          So I’d have to say that Fukushima wasn’t a major disaster.

          • Edward2
            Posted April 13, 2013 at 10:24 am | Permalink

            Your talent for pedantry is growing

      • Electro-Kevin
        Posted April 10, 2013 at 6:51 pm | Permalink

        Uanime5 – Of 3 Mile Island – The ‘Big Easy’ didn’t turn out to be so able to cope with a natural disaster.

        Of your comment about the electoral system – the BBC says before every bulletin “Margaret Thatcher was divisive” or “She loathed and loved in equal measure” or (as today) “She was a real Marmite politician – you either loved it or hated it”

        Every single bulletin.

        Are you happy with such reporting ? Do you think it impartial as the BBC should be ?

        From where I’m viewing it any person who was not there would see her premiership as a disaster for Britain.


      • Bazman
        Posted April 10, 2013 at 7:05 pm | Permalink

        The monoculture of Japan also causes problems. The nuclear disaster has forbidden negative thoughts and public derision from not eating foods from that area though most are scared and have Geiger counters.

        • Electro-Kevin
          Posted April 11, 2013 at 8:11 am | Permalink

          Bazman – Our own government gives no advice or warning about food safety to British travellers to Japan


          Their government may well be robust in preventing public panic (a duty of any good government in fact) But it cannot force other governments to lie to their own people.

          I expect that the food safety issues are being well managed.

          • Edward2
            Posted April 11, 2013 at 3:39 pm | Permalink

            Indeed E-K
            There is a strange misplaced perception regarding the safety of gas oil and coal compared to nuclear power.
            Hundreds of thousands of people have died to bring us energy from gas, oil and coal.
            Yet deaths caused by nuclear power generation is a tiny number by comparison.

          • Bazman
            Posted April 12, 2013 at 7:46 pm | Permalink

            Oh really? Obviously the horse meat scandal was just a BBC lie too.

  16. English Pensioner
    Posted April 10, 2013 at 10:39 am | Permalink

    Why must there be the assumption that there will be perpetual growth? What happens when we all have our homes, all the domestic appliances and gadgets we need? Surely at some point it will be necessary to decide that no further major growth is possible and simply maintain the status quo?
    Meanwhile, it would seem that government action has never produced real growth in any country so unless they can find some entirely new approach which no-one has tried before, it would be best if the governments would sit back and do nothing on the economic front other than reduce their own expenditure.

  17. Gary
    Posted April 10, 2013 at 11:00 am | Permalink

    We are witnessing the inexorable march to the demise of the present elitist , debt based, inflating, fiat monetary system. History will record this system as an abomination. Sound cryto-currencies of some form, some now exponentially rising, are going to set the world free from the money-as-debt slave plantation. Frictionless, middle-man free, instantly transferable, debt free , non-inflating currency will be seen as the emancipation of humans. The implications are vast and exciting.

    • Mark
      Posted April 10, 2013 at 5:10 pm | Permalink

      The bubble in the value of bitcoin is becoming alarming. It will burst, and show that supposed debt free currency is not necessarily the answer.

  18. Mark
    Posted April 10, 2013 at 11:13 am | Permalink

    I think it’s useful to consider the origins of the Japanese problems. Back in the 1970s and 1980s Japan was an industrial powerhouse, running substantial balance of payments surpluses that were of necessity invested in the paper bonds offered by deficit countries, as Japanese companies were unable to invest abroad in tangible assets fast enough to absorb the surpluses. Some of that money helped to create the highly leveraged bubble in property (the grounds of the Imperial Palace were at one stage valued at more than the entire State of California, and multi generation mortgages became common) and the Nikkei (which reached over 39,000 – 3 times current levels), with its extensive cross-shareholdings in the Keiretsu.

    The fabled Mrs Watanabe chose to invest abroad for higher yields, promoting the yen carry trade that parked the consequences of ZIRP into currency risk as demographic balances changed and an ageing Japan sought to generate pensions from its savings. These paper savings have proved to be of far less worth in real terms as Japan’s export counterparties have struggled, and currencies have depreciated against commodities. As savings are repatriated to pay pensions the demand for yen has been bolstered, keeping the currency high and damaging economic competitiveness. Attempts to counteract it by flooding more deficit spending do nothing to correct the underlying problems: it will only fuel another round of carry trade that will store up more problems for the future.

    Japan still needs to work on resolving its bubble – even though we now have lower prices, bubble debt remains on the books of the banks and companies. It is stymied by the economic failure of its counterparties to maintain the real value of their currencies.

    Comparison with the UK is interesting. The Industrial Revolution and Empire provided our period of large surplus – but in an era of the gold standard, so we did not end up with paper investments. We have been through the 1929 crash and 1930s depression, WW II, and economic stagnation in much of the post war period since then. Assets have been transmuted to debts for us and mortgages against bubble priced property and business. We are probably even less well off than Japan.

  19. Peter
    Posted April 10, 2013 at 11:38 am | Permalink

    This “stimulus” will blow asset bubbles and make some people very rich in the process, but overall it will reduce GDP by fostering a mis-allocation of resources and sustaining an array of malinvestments, which should long ago have been liquidated.

    There is no way in which money conjured out of thin air can create value in an economy. There never has been and there never will be.

    If there were, all that places like Bangladesh and Somalia would need for a prosperous future would be a printing press, some paper and ink.

  20. Mike Wilson
    Posted April 10, 2013 at 12:19 pm | Permalink

    You can argue for or against stimulus as a way to create growth but, in the situation we are in, surely such arguments are academic.

    We are borrowing one hundred and fifty thousand, million pounds every year to pay for the state. Saying ‘£150 billion’ is meaningless – billions are bandied around these days as though a billion pounds is not a lot of money.

    £150 billion is a collosal sum of money. Nearly a quarter of government revenues. ‘For every £4 we spend, we borrow £1.

    This is utter madness and cannot continue. Our children and grandchildren will be paying these debts back all their lives. By the time you add £60 billion of interest into the equation each year – how do these debts ever become repayable?

    I understand the arguments that an economy is not like a household and that if you borrow to invest, you can create the conditions for more growth in the future. But we are not borrowing to invest. We are borrowing to pay our teachers, nurses, doctors, police, MPs, diversity co-ordinators, arts and community officers and the rest. And, of course, we are borrowing to send £12 billion overseas and to send money down the EU drain.

    We are way beyond borrowing more money – surely government spending must be cut.

    Why not just cut all government budgets by 1% a year? Over 10 years government spending would decrease by best part of 10% and, with a bit of inflation driven growth, you might balance the books.

    Every government department and council should be forced to publish a list of all jobs and rate them from 1 to 10 – from ‘absolutely essential’ to ‘a complete luxury’. The 10s to 7s should be got rid of immediately.

    • uanime5
      Posted April 11, 2013 at 12:21 pm | Permalink

      The state isn’t made up of parts that can be cut without any problems, so you can’t simple reduce budgets by 1%. Unless you want fewer nurses, doctors, teachers, and police officers then cuts will cause more problems than they solve.

      Also even if a job isn’t “absolutely essential” if the work needs to be done then firing the person who does this job means someone else has to do the extra work. So expect the state departments to become less efficient if they have less staff.

      • Edward2
        Posted April 12, 2013 at 12:11 pm | Permalink

        This the left wing myth about cuts that even a 1% cut in a huge budget will result in front line services being hit.
        Its a method local councils near me have deliberately and outrageously carried out rather than cutting at the top where the big savings can be made and by making easy internal HQ improvements in efficiency.
        I assume you therefore think salaries of over £250,000 for managers in the public sector and local councils are OK whilst these same people sack school crossing patrol employees and disabled carers.

  21. Mike Wilson
    Posted April 10, 2013 at 12:22 pm | Permalink

    I meant to add to my last post – oh, where is Maggie now that we really need her?

    She led us out of the last Labour mess.

    Who will do it this time. If she were PM now – yes there would be division all right. Because unlike Cameron who is increasing government spending even when we are already borrowing a fortune every year – she would have CUT spending and fought the public sector unions to the death to prove she was right.

    But, alas, she is no longer with us.

    May she rest in peace.

  22. Dennis
    Posted April 10, 2013 at 12:31 pm | Permalink

    I hope Japan’s growth plan doesn’t work – if it does then more resource depletion, running after more wealth etc. which quickens the ‘deluge’.
    The Japanese have learnt to sacrifice, with much suffering of the unemployed etc. but this will be necessary for many other countries including the UK at some time but we refuse to contemplate and prepare for it. Perhaps like 1939, when it comes, we will knuckle down and ‘get on with it’ surviving at whatever level this reduces us to.

  23. uanime5
    Posted April 10, 2013 at 12:34 pm | Permalink

    I hear that Japan has a high number of savers because of some problem with their pension system.

    Unsure if devaluing the yen will help Japan as devaluing the pound didn’t help the UK export more and import less.

  24. Dennis
    Posted April 10, 2013 at 2:13 pm | Permalink
  25. Bert Young
    Posted April 10, 2013 at 3:04 pm | Permalink

    The Japanese are a very resourceful and disciplined people who are far more capable in international markets now than they used to be . It took them a long time to adjust to the design and market demands of North America and Europe and to put in place the follow -up requirements of their products . I worked as an adviser / consultant to one of their major automotive companies for quite a few years and helped in the expansion period of the 70s/80s . They were slow at the start but , once their management and organisation had assimilated the changes necessary , they very quickly and successfully produced what those markets wanted . The demands of their domestic home market were ignored for a long time and did not receive much interest until the 90s ; it was during this period they took their eye off the ball of their exports and allowed competition to erode away a lot of their previous success and to accumulate much of their present debt . I believe they now have the bit between their teeth and will turn their economy around ; it is the time when diligence and discipline will pay off .

  26. Mark
    Posted April 10, 2013 at 4:57 pm | Permalink


  27. Ralph Musgrave
    Posted April 10, 2013 at 5:12 pm | Permalink

    Unemployment in Japan during its so called lost decades never rose much above 5%. So what all this nonsense about “lost decades” is I’m not sure. Europe and the US would be overjoyed with a 5% unemployment rate. The “loss” is in the US and Europe.

  28. margaret brandreth-j
    Posted April 10, 2013 at 6:08 pm | Permalink

    So if all countries carry on printing money like this ,we are all on a level playing field again. I think we must remember that it is difference which causes energy,.

  29. Acorn
    Posted April 10, 2013 at 6:20 pm | Permalink

    I have been told to stop messing about on this site and concentrate on more important things happening in May. But, as one last go at trying to convert Denis C to MMT thinking JR; please allow this, my last link for a while: http://neweconomicperspectives.org/2013/04/what-does-paul-ryan-not-understand-about-reserve-banking.html . You may also want to click forward to read: “Nobody in Europe” sees a “contradiction” between austerity and growth”.

    BTW. Don’t let JR sell you a dummy. Japan has a current account balance that is currently trending upwards at about plus 3.5%. The UK is trending downwards at minus 2.3%. Japan has no problem selling its Treasury debt. (Even though it does not have to; but the markets can’t get enough of it.)

    Austerity (budget deficit reduction) is killing the UK economy. If the private sector is not spending the government sector has to step in, till the private sector recovers. Forget about the deficit and the debt to GDP ratio, until the economy is expanding at 2.5 to 3.0 % yoy for a few quarters. We are a sovereign currency issuing nation. We can pay any bill presented in pounds Stirling.

    Try and understand that the phrase “taxpayers money” is meaningless. Taxpayers money does not pay for anything. Paying taxes just un-prints into thin air, the money, that the government and its central bank printed out of thin air in the first place. All the best 😉 .

  30. Bazman
    Posted April 10, 2013 at 7:09 pm | Permalink

    Like most conservative societies Japan has a denial culture. It has been pointed out by a number of people before previous natural disasters such as earthquakes that some structures are not up to such stresses. Many have simply said that it is Japanese and this is enough. Sound familiar? It should.

  31. APL
    Posted April 11, 2013 at 5:21 pm | Permalink

    JR: “will stimulus work?”

    Wrong question. Has it worked – that’s the correct question.

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page