Sun Still Rising -- Rediscovering Asia's real powerhouse

[idlisambar]

"For those who claim an above average knowledge of the global economy, here's a question: which East Asian economic powerhouse recently announced the largest current account surplus in world history?

The answer is, of course, Japan. Not that readers of the American press would have noticed. Given the press's obsession with China, little about East Asia's other economic powerhouse makes it into print these days. Yet in most of the ways that matter to current American economic policy, Japan is far more important than China.

To be sure China is growing very fast. But all misinformed American commentary to the contrary, China remains a long way from displacing Japan as Asia's largest economy. Still less is China any sort of benchmark against which a high-wage economy like the United States should be measuring itself.

Japan by contrast is avowedly such a benchmark. A fact utterly lost on the American media is that Japanese industrial wages are now among the world's highest. They are not only far higher than in China -- about four to fifteen times higher depending on the region of China -- but they are actually 20 to 30 percent higher than in the United States. Yet Japan's export industries have not only survived but also thrived. ....."


Scroll down the page to see this article... http://www.uscc.gov/hearings/2005hearings/written_testimonies/05_21_22wrts/eamonn_fingleton_wrts.htm

[orwell]

1. Thanks

Thanks for this article and the link.

[fedsron2us]

2. Interesting article

Japan is also far more important in supplying the finance to cover the US deficits than China. It holds $696 billion dollars of US debt compared with China's $167 billion dollars. This makes the relationship between Washington and Tokyo is just as significant as that with Beijing. It is Japanese cash that is really keeping the dollar afloat.

http://www.bloomberg.com/apps/news?pid=10000101&sid=aH6Bk.leHbpc&refer=japan

[bemildred]

3. It's just amazing what not having a large military parasitizing it

can do for an economy. The US' greatest gift to Japan after WWII,
no large military-industrial complex.

[LdyGuique]

4. Very interesting -- now, will our leadership pay attention?

This is probably the most instructive quote from the Statement:

The experience in Japan, where I have lived for nearly twenty years, is particularly instructive. It is a little known fact that wages in Japan are actually higher than in the United States -- about 20 to 30 percent higher measured at recent market exchange rates. Yet even as Japan has rapidly increased its imports from China, it has shown no evidence of being hollowed out. Quite the reverse. Japan's industrial strength has, on balance, actually been considerably enhanced by trade with China in recent years. Certainly Japan's trade surpluses have continued to burgeon. Japan's current account surplus last year, at $181 billion, was not only the largest of any nation in world history but it was more than three times Japan's current account surplus in 1989, the last year of the Tokyo financial boom.

It is interesting to note that China supplied full 20.7 percent of all Japan's imports in 2004, compared to a mere 13.4 percent of America's. Measured in yen, Japan's imports from China increased by 263 percent in the ten years to 2004.


Just as in the case of the United States, outsourcing from China has played a major role in the rise in Japan's imports in recent years. There the similarity ends. Unlike the United States, Japan believes in managing its trade. Although Japanese officials recognize, of course, that consumers can benefit considerably from trade, they also recognize that people need jobs and incomes before they can consume. Thus where imports would pose a significant threat to jobs, the Japanese government generally acts to minimize the damage. It does so typically by issuing guidance to key players in, for instance, the Japanese distribution system to minimize their purchases of the relevant imports.

Where outsourcing is concerned, a second key concern for Japanese policymakers is to keep tight control of the nation's key production technologies, thereby maximizing Japan's productivity edge. It is taken for granted in Japan that production technologies are as much the nation's property as they are the property of the corporations that developed them. Thus individual corporations are not permitted unilaterally to transfer advanced technologies to foreign operations. The sense that the technologies are national property is enhanced by the fact that they are typically developed jointly by Japanese corporations in industry-wide research cartels. It is assumed by all concerned that the latest technologies will be applied in the first instance in factories at home, thereby giving Japanese workers a vital edge in global competition. Any decision to move the technologies abroad will be the result of a government-guided industry consensus. Thus although corporate Japan has transferred significant production technologies to China in recent years, it has never given away the crown jewels.

A Commission that I was completely unaware of and was surprised to see that it was actually created during Bushco's term of office.

Overview

U.S.-China Economic and Security Review Commission

Establishment:
The Commission was created in October 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Pub. L. No. 106-398, 114 STAT.1654A-334 (2000) (codified at 22 U.S. C.§ 7002 (2001)), as amended, and the "Consolidated Appropriations Resolution of 2003, " Pub. L. No. 108-7 dated February 20, 2003.

Purpose:
To monitor, investigate, and submit to congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China, and to provide recommendations, where appropriate, to Congress for the legislative and administrative action.

Public Law 108-7 directs the Commission to focus its work and study on the following nine areas: proliferation practices, economic reforms and U.S. economic transfers, energy, U.S. capital markets, corporate reporting, regional economic and security impacts, U.S.-China bilateral programs, WTO compliance, and media control by the Chinese government.

Composition:
The Commission is composed of 12 members, three of whom are selected by each of the Majority and Minority Leaders of the Senate, and the Speaker and the Minority Leader of the House. The Commissioners serve two-year terms.

Commissioners:
C. Richard D'Amato, Chairman; Roger W. Robinson, Vice Chairman; Carolyn Bartholomew, George Becker, Stephen Bryen, June Teufel Dreyer, Robert Ellsworth, Patrick A. Mulloy, William A. Reinsch, Michael R. Wessel, Larry M. Wortzel

[idlisambar]

6. It would be nice if they did pay attention

Two events contributed to the sense among our economic policy-makers that they no longer had to pay attention to the merits of the East Asian economic system. One, was the collapse of the late 80's bubble in Japan and the subsequent banking troubles. Two, was the East Asian financial crisis of the late 90's. In the latter case, it seems that the so-called financial crisis was a mere bump in the road, the Asian tiger economies (Taiwan, South Korea, Singapore, Hong Kong) are humming along nicely by whatever metric you want to use.

Most importantly, most economists are unwilling to take a good look because Anglo-American economic principles (neo-classicism and neoliberalism) are supposed to be universal, and any system that departs from its prescriptions is not supposed to work this well.

[Lydia Leftcoast]

5. Japan has nearly dropped off the radar in recent years

A lot of so-called tours of Asia even seem to skip it entirely, hitting only Bangkok, Hong Kong, Shanghai, and Seoul, for example. The myths are that it's too expensive or that it's in economic ruin.

Well, its economy has changed since I first went there in 1977. I regret the replacement of the mom and pop neighborhood stores by chain stores. Young people find it hard to get into a lucrative career, and lifetime employment is a thing of the past, although that may change with the declining birth rate. But the country is far from destitute and still has the highest living standard in Asia. Its government is financially corrupt, but not mean, and it's willing to think about and plan for the future.

But is it expensive? Not especially. Sure, you can do things the expensive way, as U.S. journalists seem to like to do. If you're going from the airport to central Tokyo, you can take a cab for $200. (Of course, the reporters don't mention that it's a 40-mile journey.)
Or you can take one of the two train lines for as little as $17.

You can order an American-style bacon and egg breakfast at the Hilton for $25, or you can go into a coffee shop and get "morning service": toast, an egg, coffee or tea, and a tossed salad for $5 or less.

You can stay in a $300 a night hotel, or you can stay in a small but clean, safe, and adequately equipped room in a budget hotel for $90 a night or in a minshuku (bed and breakfast and dinner) for about $60.

If you have to pay more than $10 for a meal, you not really trying very hard, because there are literally thousands of small restaurants everywhere. Of course, you can also pay $100 for a meal.

As a foreigner, you can buy a Japan Rail Pass that will give you unlimited travel, including the bullet trains, up and down the country for one, two, or three weeks.

Vegetables, phone calls, broadband Internet, and paperback books are cheap, but meat, recorded music, clothes, and movies are expensive.

It's a great place to visit, the first country outside the Euro-American cultural sphere to fully industrialize and modernize. Most of the so-called "Americanization" is actually modernization and bears little resemblance to genuine Americanization on close examination. The traditional culture is a great attraction, but so is the modern society.