Tuesday, October 01, 2013

We Few, We Happy Few

Today, October 1, Abenomics really hits the road.

In a few hours' time Prime Minister Abe Shinzo will announce his decision, actually made weeks ago, to green light the raising of the consumption tax from 5% to 8% in April next year. He is also expected to announce a package of fiscal measures designed to lessen the contractionary impact of the imposition of the tax rise. The spending package is projected to be two-thirds the size of the expected extra annual revenue collected by the new tax.

Yes, it is robbing Peter to pay Paul. It is also politics at its roughest, with the nation's legislators admitting they lack the courage to reconsider their vote on raising the tax in two big jumps.

Yuka Hayashi gets it all down here.

Abe should thank the Democratic Party of Japan today for this opportunity to (pretend to*) demonstrate the courage of his convictions.

He should but he will not.

A lot of folks still remember that it was in order to bring recalcitrant DPJ legislators on board that the Noda government agreed to include language requiring the prime minister to certify the economy is strong enough to withstand a rise in the consumption tax. The view of the then opposition Liberal Democratic Party was "raise the consumption tax rise now, raise the consumption tax forever and a collapse in consumption be damned" -- a bit of showy, pseudo-manliness that the LDP cannot recall now that it is once again the party in power.

The DPJ, as we now know, paid a huge price for following what is without a doubt the stupidest political advice ever (Link). As Hamlet would have it, the DPJ went to it over what was an LDP-drafted solution to an LDP-created debt and deficit problem.

The final hurdle for the April tax rise, according to Prime Minister Abe, would be a positive reading in the Ministry of Finances Tankan Survey. This the survey delivered, sort of, this morning, with large enterprises clocking in with a strong Tankan reading of +12, exceeding expectations. (Link)

That the scores for medium and small businesses fell below expectations (0 and -9, when the predictions were for +2 and -5, respectively) is not getting much attention. Since the decision on the tax rise was never really contingent up on the Tankan results, today's poor SME numbers will not be not entering into the government decision making progress. (Link)

Aside for the institutionalized over-reliance on the attitudes of managers of big business as guides to the economic outlook for Japan, a consistent problem made worse by the Abe administration's policies fluffing up the financial results of the country's biggest companies, the Tankan and its readings may increasingly also be fraught with the errors of group think of an ever more insular and isolated managerial class.

The Tankan is subjective. It is a measure of the feelings company executives have about the prospects for their businesses under the prevailing economic climate (the set of questions asked can be found here). Since company executives are the folks who make the big decisions regarding investment and spending, and if they are confident and happy, the more likely they are to invest and spend in a big way, making everyone else happy in a big way, it makes sense to ask them how they are feeling.

What happens, though, when no one else is happy in the way corporate executives are happy?

Come with me on a short journey down a side road.

The online commentariat went gaga a few days ago over a Nihon Keizai Shimbun report on women's attitudes toward work after marriage. The cause for the ruckus was on a giggle-and-"I told you so”" result in a government-commissioned study on the attitudes of persons under 40 years of age. Unmarried women and unmarried men in the survey sample were asked whether once they married they, if they were female, wanted to become housewives, or whether they, if they were male, wanted their future spouses to become housewives.

According to the Nikkei report, 34% of young unmarried women wanted to become full-time housewives after they married -- a seemingly irrationally high number creating headwinds for those arguing Japan's economic salvation lies in creating more opportunities for women to stay in the workforce. (Link)

The Nikkei's take on the survey was unfortunate.

First, because it misrepresented the actual answers to the questions, making it seem as though young women were their own worst enemies in terms of both marriage and economic advancement. It also created the impression of an unbridgeable gulf separating the expectations of young women and young men. **

Second, the Nikkei's report deflected attention away from the rest of the survey (Link - J) which turns out to be a treasure trove of attitude data, allowing one to burrow deep -- at least as deeply as an internet-based survey allows -- into the psyche of Japan's andafo ("under 40 years of age") generations.

For example,

- Personal sense of comfort:

Workers that have the highest level of overall personal satisfaction as regards their present lives? Civil servants, followed by college students, company managers and housewives. (Graph 2, page 5)

- Personal relationships:

Persons believing most strongly that deep personal relationships are burdens? The unemployed, followed by company executives.

Persons feeling that deep personal relationship are not a burden? Student and company employees.

Notwithstanding the above, the social group with the highest percentage of person with intense feelings that deep personal relations are not a burden? Company executives. (Graph vi , 2), page 41)

- Enthusiasm about work:

Age cohort and sex with the highest percentage of individuals wanting to keep on working, moving up the corporate ladder? Women in their teens.

Age cohort and sex with the highest percentage of individuals who do not want to work at all? Men in their mid- and late-twenties. (Graph xxxii, 1), page 76)

Then there is Graph 7, on page 8.

Despite high levels of personal satisfaction with their present lives, housewives are the least likely to agree with the statement "the future of Japan is bright" -- a vanishingly small 0.2% of housewives being in full agreement with that assertion.

Conversely -- and why I feel one needs to be careful on about relying on the results of the Tankan attitude survey as gauges of national economic performance -- those agreeing most enthusiastically with the statement "the future of Japan is bright" are: company executives.

I reproduce the report's graph of the results of the "the future of Japan is bright" question, in all its default Excel colors glory, below:

(Click on the graph to open up image in a larger format)

Line two in the graph has the responses of the company executives, showing both the highest levels of full agreement (15.4%) and agreeing somewhat (23.1%) with the statement, "The future of Japan is bright."

Accepting the caveats that the company executives in this survey are younger folks than the ones surveyed by the Tankan, and that as persons with their hands on the tillers of the economy company managers are more likely to be attuned to changes in economic winds, company managers seem to be real outliers when gauging public attitudes about Japan’s prospects. They are inordinately (Graph 6 on page 7 shows the average scores) confident about the future of the country, indicating that they are over-optimistic.

[By contrast, the survey finds housewives are inordinately pessimistic and afraid, making surveys of their attitudes equally fraught.]

Such optimism may of course be trans-national, with the managerial classes in each nation having similarly optimistic assessments of the national future. Wealth, security and a sense of control would tend to make a person feel more optimistic.

Nevertheless I am concerned at the seeming huge disconnect existing in between what managers sense will happen and what the average citizens sense will happen. In the online survey company managers made up a scant 0.4% of those surveyed, making their confidence truly a privilege of the very, very few.

I of course believe in leverage when it comes to business -- that the decisions of a tiny number or even one person can make a huge difference.

However, when the number of folks feeling a strong sense of hope are so tiny, the weight of general pessimism needs addressing -- and I am failing to see the ostensibly proactive and aggressive Abe II administration doing what it takes to generate a countervailing optimism in any but the most privileged in society.


* I have to wonder about Mr. Abe and his convictions. They seems less convictions than persistent notions.

* The results to the question were messy, indicating a lot of internal calculation are being undertaken with understandable confusion as to what members of the opposite sex expect from a spouse:

Unmarried women - "After you get married, do you want to be a full-time housewife?"

Yes 8.2%
If I had to say yes or no, I would say yes 26.0%
I can’t say either yes or no 27.2%
If I had to say yes or no, I would say no 25.1%
No 13.4%
Unmarried men - "Would you want your wife to be a full-time housewife?"
Yes 3.9%
If I had to say yes or no, I would say yes 15.4%
I can’t say either yes or no 50.5%
If I had to say yes or no, I would say no 20.2%
No 10.0%
The 34% of young women who responded either strongly or weakly in favor of becoming housewives were asked the reasons of their choice. Contrary to popular prejudice, laziness or fear of social pressures were relatively unimportant reasons driving a decision to become a housewife:
Because I think we can get by on just my spouse's salary 12.1%
Because women should just quit work after marriage 6.3%
Because either my parents, my in-laws or my employers would expect it 0.9%
Because for women, taking care of the house and the children are more important than work 41.5%
Because I hate work 14.0%
A wife's role is to support her husband's being a good worker 19.8%
Other 5.4%

[N.B. - Respondents in this group were asked to give two reasons for their earlier positive response. The above percentages are thus composed of a mix of #1 and #2 favorite explanations.]

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