Is Japan Reviving?

Japan Can Teach U.S. How to Overcome National Rot

While more people in the U.S. are noticing a period of institutional sclerosis and Europe suffers from its paralyzed politics and  high unemployment, Noah argues that Japan has managed to mostly pull itself out of a long period of paralysis. Despite of Japan’s seemingly endless dysfunction following the bursting of its real estate and stock-market bubbles, he claims that the perception that Japan is mired in an eternal “lost decade” is now out of date.

Yes, Japan’s economy has a number of long-term structural problems, most significantly its aging, shrinking population. But in most areas, Japan has overcome its bout of sclerosis, and in many ways is looking healthier than any other major economy.

The areas he mentioned are:

1) GDP:
While total GDP figure, or fail to account for inflation understate Japan’s performance,  the country’s real output per working-age population has outpaced the U.S.’s since 2000, despite the fact that Japan’s working-age population has aged much more.

2) Employment:
In Japan now, practically everyone who wants a job has a job

スクリーンショット 2017-04-17 19.09.57スクリーンショット 2017-04-17 19.10.24

Though women in Japan still haven’t won economic equality in the workplace, they now have jobs at higher rates than their American counterparts.imrs

3) Companies:
Though Japanese companies are simply employing too many people, they also have managed to improve profitability a lot. Margins are higher than they’ve been since the Great Recession.

スクリーンショット 2017-04-17 19.17.25

4) Many social indicators:
Fertility, tough at very low level in developed countries, has begun to inch up.
Japan’s violent crime rate is still legendarily low.
High suicide rate has also come down substantially.

Noah lay the cause of these healthy indicators on good leadership who were willing to confront issues like unproductive workplaces and pervasive sexism head-on, as well as on companies’ effort endeavored in waves of consolidation that helped raise profitability in industries from autos to banking to electronics.

However, as a student of Japanese economic history and a foreigner living in Japan, I really doubt that if two lost-decades has made Japan to collectively realize that the old growth and social models weren’t working.


Firstly, despite of the growing GDP per capita at all, Japan is a country famous for its low white-collar productivity which is borne out by the statistics. And thus the full employment is still strayed from perfect stage as the substantial growth of employment since 1990 is mainly driven by part-time workers, who are arguably offered jobs that  even a Robot shouldn’t do. [1]

Secondly, my own research finds that the waves of consolidation is nothing but a boom stimulated by changes on laws and the level of firm reorganization is still way lower comparing to UK or US market. Moreover, based on the data of listed firms in Tokyo exchange, I find that that despite of increasing turbulence on the economic environment as well as the technology revolution, the risk of bankruptcy on big firms in Japan are becoming lower in recent decade, which might imply a more stable and rigid market environment.

The case in Japan is not like what Chandler said “structure follows strategy” but the verse. So the main question is if the structure (inter-firm, intro-firm, market) has changed institutionally or not. Or in a more pessimistic sense, is Japan able to get rid of its institutional sclerosis formed and trapped in its economic heyday in principle?



“Some of that comes from the reluctance by tradition-minded companies to adopt modern workplace technologies — there are still companies using fax machines or copying electronic documents onto paper. Some of it is from outdated management practices. Some of it is from employees staying at work for too many hours, long after their productivity has gone into free-fall. But some of it is certainly just a function of useless jobs. There are Japanese people being paid to do things that no one, not even a robot, should be paid to do.”

Appendix: Aging and Shrinking population in Japan

The population of Japan is estimated to drop below 100 million in 2053, and the most pessimistic calculation is that Japan will diminish in 3766. Immigration is the only way in the short to medium term to solve Japan’s pension deficit and manpower issues, and Japan is relaxing its some of its immigration rules. However, Japan’s government has claimed that this is only foreign-skilled variety and it will never welcome the word of immigration but only guest worker.


Liquidity crisis or Solvency crisis


Basic knowledge:

How do banks become insolvent and the importance of deposit insurance

Bank capital and liquidity

Bank Runs

2008 crisis:

2008: Liquidity crisis, or solvency crisis? (*Noah introduced loads of related researches.)

Bank Assets and Bank Runs

1930s crisis and now:

The Problem Was Never Liquidity, But Insolvency … And We Should Let Insolvent Banks Fail (Friedman and Schwartz hypothesis)


Causes of U.S. Bank Distress During the Depression

Balance Sheet Crises: Causes, Consequences, and Responses

The banking panics in the United States in the 1930s: some lessons for today



USD/JPY views 2017/04













1. 日本投资者对日元的乐观程度的影响(两方面 买卖资产和对冲)
2. 对冲的成本
3. 直接抛售海外资产的可能
4. 全球避险情绪















Noah Smith的一篇文章在我看来非常好的解释了为何以上的一些无效工作案例说明机器人彻底消灭工作岗位是不太可能的。

See, the so-called lump of jobs fallacy really is a fallacy. Many people think that if you eliminate an existing job, the number of available jobs in the economy goes down by one. But this is simply not support by the facts. The rate of job churn in any modern economy — even Japan’s — is much, much larger than the rate of net job creation or destruction. When people’s jobs are eliminated, they almost always find new things to do, unless the country is in a deep recession. 

Of course, there are costs involved with eliminating an existing position — for example, if people have to retrain. But the skill of pushing an elevator button or guarding an empty lot isn’t exactly something that requires one to go back to school. And government can help laid-off people look for work, through websites and other services. 



2017/08/10 update

The Robot Takeover Is Greatly Exaggerated

It makes sense to be worried:
[1] the extreme version: automation simply makes human workers obsolete, just as cars made horses redundant
[2] a less apocalyptic possibility is what economists call “skill-biased technological change” — people who are technically savvy, mentally flexible and educated will reap greater and greater rewards while everyone else sees their wages decline.
→ some/all either impoverished or reduced to living off of the government dole

Although adoption of machines in the past didn’t make human labor obsolete so far:
[1] if it had, we’d be seeing faster productivity growth and higher unemployment
[2] claims that companies are substituting machines for humans more than in the past are not few, but so far the evidence remains scant
[3] the example of the Luddites: they could always find ever-more-lucrative jobs that made use of new tools → previous technological revolutions always ended up making the mass of humanity more valuable, not less
[4] reviewing economic history, new technology has complemented human labor rather than replacing it (most macroeconomic models assume that the relationship between technology and humans is basically fixed)

[5]  though the paper by Acemoglu&Restrepofinds in MIT evidence that robots are already costing American jobs, Mishel&Bivens of the Economic Policy Institute(a think tank) examine MIT paper in detail, and note that capital investment, and use of computers specifically, tend to increase jobs, as Acemoglu&Restrepo themselves wrote

“(comparing to industrial robots – fully autonomous multipurpose machines with no human operators -) other types of capital equipment and even computers tend to increase the demand for labor…thus a very different impact on employment and wages.”

[5.1] + workers haven’t been changing occupations as much as they did in past decades — if people were losing their jobs to automation at a faster rate, we’d expect them to have to retrain more frequently
[5.2] productivity growth and corporate investment in IT has fallen, which also doesn’t fit with a story of accelerating automation (actually an investment drought in rich countries, as companies sit on cash)
[5.3] negative impact of Chinese competition on U.S. jobs was more than three times larger than the effect of robots

there’s no guarantee that future technology will work the same:
[1] robot revolution may be more of a long-term concern, driven by the rapid advances in machine learning → a world machine do anything better than human? / capital-labor substitutability would increase dramatically — you don’t need a human to operate the machine tool or the computer (← it’s always hard to predict future technology)
[2] before 1800 before Industrial Revolution, an economist would conclude technologies of the past have never allowed the mass of the species to escape from poverty and malthus trap  → new technologies were qualitatively different (though resulted in an abrupt acceleration of wealth generation)
[3] If the elasticity of substitution between capital and labor (how easy it is to replace humans with machines) goes up, labor’s share of income can go down and down + Skill-biased technological change rewards the top workers while punishing everyone else
[4] more extreme, huge inequality: people who won at the beginning of the artificial-intelligence revolution would start off in a privileged position, able to outcompete new entrants in winner-take-all markets / people who started out with the capital would amass essentially all the wealth in society, while those who started out with less would be out of luck.
[5] there will always be more work for humans to do, despite more absurd, esoteric jobs ← the problem is that such jobs will not necessarily pay a living wage ← if capital-labor substitutability increases dramatically, wages may fall a lot ← either humans will survive via redistribution, or they won’t survive at all ← redistribution depends on politics, and in an age of robots, the masses may have very little power to compel the wealthy to give up even a small sliver of their wealth
“Once the military became robotic, revolution became impossible.”

when is next difference? (source)



more on real, pressing problems:
[1] Inequality in developed countries remains severe and potentially harmful to civic society.
[2] The productivity slowdown is disturbing and imposes a drag on growth.
[3] Reduced economic dynamism, including falling startup rates and less job-switching, is a concern.
[4] Monopoly power is a looming threat to the health of the economy.
[5] Although wages have been rising recently, those gains come after many yearsof stagnation or decline.