I have on-gain/off-again Twitter wars with the opinionated Professor Noah Smith of Stony Brook University on subjects Japanese. In a recent exchange I lost patience with the good doctor, for which I am only slightly sorry.
Dr. Smith asked a simple question: why did Japanese women's fertility (number of births per woman) fall when the level of participation of Japanese women in the workforce was still low? To which I offered a simple answer: because age of first marriage rose. (Link)
In the economics explanation women have fewer children based upon calculations marginal utility and opportunity cost. While in agricultural societies children represent potential increases in labor force and output, in industrial and post-industrial societies children represent zero increase in output. Furthermore, for the woman in developed societies the birth of each child represents an economic subtraction, time and energy that could have been spent furthering their careers or increasing their take-home pay.
In Japan's case, however, declines in fertility preceded and exceeded possibilities of tradeoff between work and childbirth.
Hence my answer -- that in East Asia behavioral effects of calculations of marginal utility and opportunity cost are small compared to the effects on fertility of later marriage and the social stigma/economic catastrophe of out-of-wedlock birth. In contradistinction to the economic explanation, married women in Japan are having children at the same rate they always have -- lost economic opportunity turns out to be a feeble predictor of Japanese fertility.
The policy implications of this for the second of the Abe Administration's New Three Arrows -- raising the number of births from 1.4 per woman to 1.8 -- are clear. More day care, including day care centers inside corporate buildings (Link- J)? Largely irrelevant for fertility. Relevant for the workforce participation rate? Sure, flattening the infamous "M Curve" (Link). But largely irrelevant for fertility.
To raise fertility, the government can:
1) Convince Japanese to marry in their early twenties like they did in the 1970s.
2) Eliminate the social stigma and economic consequences of out-of-wedlock birth.
3) Increase the rate at which women above 35 years of age have children or extend the window of fertility by a delay in the onset of menopause, or
4) A combination of all three.
Good luck with the above.
But don't take my word for it. Check out the amazing slide presentation of Saito Jun of the Japan Center for Economic Research on Japan's capacity to overcome its lower fertility and shrinking population (Link). The whole (expletive deleted) argument over Japan's demographic limits to growth is laid out in detail.
Those with a little more time can check out the Tokyo on Fire videos for discussions of these matters. Like this one perhaps.
Class dismissed.
Later - There are many, many debates where I am rooting for Dr. Smith, such as the one he is currently having with John Cochrane on inter-generational fairness. (Link)
Showing posts with label demographics. Show all posts
Showing posts with label demographics. Show all posts
Wednesday, November 25, 2015
Saturday, December 21, 2013
Size Matters
Finally, an article in the vernacular press explaining, at least partially, how Japan's vehicle markets can be so resistant to imports.
Had the author added brand loyalty based on regional and keiretsu ties to his reasons why Japanese consumers and business customers buy what they buy, he would have covered all the bases.
The ruling coalition is set to try leveling the playing field in terms of the tax advantages of minicars. The Liberal Democratic Party's tax committee has recommended lowering the acquisition tax for full-size vehicles and raising the annual taxes minicar owners pay by 50%. (Link). Minicar manufacturers and their suppliers screamed in protest when the proposals came before the committee.
Minicar makers, particularly minicar-motorcycle manufacturers like Suzuki and Yamaha, seem to have little traction or connection with Abe Shinzo and his allies, however. Daihatsu in theory might have been able to bend the ear of the LDP tax committee, corporate parent Toyota Motors being seen as a vital member of Team Abe thanks to President Toyoda Akio's obsequious praise of Abenomics.
Daihatsu, is, however, the outcast problem child of the Toyota family. Toyota Motors would really want to have Daihatsu customers buying the group's more profitable full-sized cars. That Daihatsu did not take a lead in fighting the tax changes, leveraging the Abe-Toyoda relationship into influence upon the committee's deliberations, is not surprising.
Raising the taxes on minicars goes partway into answering the charges of U.S. automakers that regulations plays a role in closing Japan's auto markets to foreign manufacturers. The tax changes can therefore be seen as one facet of the political show Japan has to put on in order to consolidate its position inside Trans Pacific Partnership negotiations on vehicle tariffs -- where the white whale of Japanese trade policy, the U.S. 25% tariff on light trucks (a.k.a., minivans), lurks.
The still far off tax rise (the tax changes would only affect vehicles purchased after March 2015) on minicars does carry a political price. Minicars are seen as "people's cars" (Ja, ist Japonishes Volkswagen!) and everyday life vehicles (seikatsu no ashi - literally, "livelihood legs"). They are particularly important for rural households, which generally have lower than national average incomes yet which need a vehicle for each adult family member for both personal transportation and ferrying goods. Raising the costs of owning a minicar, or two or three or four as is often the case, is a rude slap in the face to rural voters. Coupled with the recently announced plan to phase out the gentan rice subsidy program over the next five years (Link), it looks as though the LDP is double-crossing the rural voters who remained loyal to the LDP even during the party's years of decline and banishment to the political wilderness.
Thinking that the demographic trends in agriculture and the rural areas make the minicar tax rise a safe bet for the LDP -- a "So long and thanks for the votes, you losers" -- ignores the reality that younger consumers are also big fans of minicars. Ticking off youth, folks who will voting for a long time to come, seems dumb, strategically. The young, however, are s numerically small proportion of the current electorate who do themselves no favors by furthermore not showing up at the polls on election day. (Link - J)
So minicars go to it, despite their extreme popularity.
Are Japan's Minicars a Trade Barrier?
Nation's Preference for Ultrasmall Autos Poses Hurdle for Foreign Auto Makers
TOKYO—Japan's auto market, once a global trend setter, has become one of the most disconnected from markets elsewhere, putting it at risk of becoming irrelevant, say executives here.
More than 90% of cars sold in Japan are Japanese brands. A third of them—ultralight minicars—are sold nowhere else. Originally developed to fill Japan's need for cheap cars after World War II, they are too small or too expensive for other markets.
The country's singularly strong appetite for fuel-efficient cars means car makers have developed a series of advanced technologies, such as hybrid cars, that don't necessary translate easily elsewhere.
Japan has no tariffs on auto imports. Japanese auto executives say the country's unique tastes are a big reason for global auto makers' failure to thrive in the world's third largest auto-buying country, after China and the U.S. Foreign auto executives say the country's preferential tax treatment for minicars and its unique safety and environmental regulations are nontariff barriers that protect the country from foreign competition...
(Link)
Had the author added brand loyalty based on regional and keiretsu ties to his reasons why Japanese consumers and business customers buy what they buy, he would have covered all the bases.
The ruling coalition is set to try leveling the playing field in terms of the tax advantages of minicars. The Liberal Democratic Party's tax committee has recommended lowering the acquisition tax for full-size vehicles and raising the annual taxes minicar owners pay by 50%. (Link). Minicar manufacturers and their suppliers screamed in protest when the proposals came before the committee.
Minicar makers, particularly minicar-motorcycle manufacturers like Suzuki and Yamaha, seem to have little traction or connection with Abe Shinzo and his allies, however. Daihatsu in theory might have been able to bend the ear of the LDP tax committee, corporate parent Toyota Motors being seen as a vital member of Team Abe thanks to President Toyoda Akio's obsequious praise of Abenomics.
Daihatsu, is, however, the outcast problem child of the Toyota family. Toyota Motors would really want to have Daihatsu customers buying the group's more profitable full-sized cars. That Daihatsu did not take a lead in fighting the tax changes, leveraging the Abe-Toyoda relationship into influence upon the committee's deliberations, is not surprising.
Raising the taxes on minicars goes partway into answering the charges of U.S. automakers that regulations plays a role in closing Japan's auto markets to foreign manufacturers. The tax changes can therefore be seen as one facet of the political show Japan has to put on in order to consolidate its position inside Trans Pacific Partnership negotiations on vehicle tariffs -- where the white whale of Japanese trade policy, the U.S. 25% tariff on light trucks (a.k.a., minivans), lurks.
The still far off tax rise (the tax changes would only affect vehicles purchased after March 2015) on minicars does carry a political price. Minicars are seen as "people's cars" (Ja, ist Japonishes Volkswagen!) and everyday life vehicles (seikatsu no ashi - literally, "livelihood legs"). They are particularly important for rural households, which generally have lower than national average incomes yet which need a vehicle for each adult family member for both personal transportation and ferrying goods. Raising the costs of owning a minicar, or two or three or four as is often the case, is a rude slap in the face to rural voters. Coupled with the recently announced plan to phase out the gentan rice subsidy program over the next five years (Link), it looks as though the LDP is double-crossing the rural voters who remained loyal to the LDP even during the party's years of decline and banishment to the political wilderness.
Thinking that the demographic trends in agriculture and the rural areas make the minicar tax rise a safe bet for the LDP -- a "So long and thanks for the votes, you losers" -- ignores the reality that younger consumers are also big fans of minicars. Ticking off youth, folks who will voting for a long time to come, seems dumb, strategically. The young, however, are s numerically small proportion of the current electorate who do themselves no favors by furthermore not showing up at the polls on election day. (Link - J)
So minicars go to it, despite their extreme popularity.
Monday, October 28, 2013
Worthwhile Reads for October 28, 2013
- Don't be put off by the title. David Pilling, the incredibly skilled former bureau chief for the Financial Times, has published the fairest portrait of Abe Shinzo available in the English language (Link).
It makes one's mouth water for the book on Japan Mr. Pilling has coming out in January.
- Over at the East Asia Forum a three-part series of succinct articles on facets of Abenomics from Hugh Patrick of Columbia University. (Part 1, Part 2, and Part 3)
- Though defensive, Mark Adomanis' blog post for Forbes on Russia's reputed disastrous demographics (Link) is fantastic for the graph comparing the number of life births in Russia and Japan (Graph). Generation by generation, Japan's and Russia total number of births have been declining, with the peaks in each successively lower swing in Russia coming about 12 years after a similar peak in Japan. The head shaker is how the generational climb in births in Russia births since 1998 (the build up out of the collapse of the ruble thanks to the echo of the boomer echo - i.e., the grandchildren of the post-1945 baby boom) had no equivalent in Japan, unless one counts the ripple around 1995.
It makes one's mouth water for the book on Japan Mr. Pilling has coming out in January.
- Over at the East Asia Forum a three-part series of succinct articles on facets of Abenomics from Hugh Patrick of Columbia University. (Part 1, Part 2, and Part 3)
- Though defensive, Mark Adomanis' blog post for Forbes on Russia's reputed disastrous demographics (Link) is fantastic for the graph comparing the number of life births in Russia and Japan (Graph). Generation by generation, Japan's and Russia total number of births have been declining, with the peaks in each successively lower swing in Russia coming about 12 years after a similar peak in Japan. The head shaker is how the generational climb in births in Russia births since 1998 (the build up out of the collapse of the ruble thanks to the echo of the boomer echo - i.e., the grandchildren of the post-1945 baby boom) had no equivalent in Japan, unless one counts the ripple around 1995.
Sunday, May 19, 2013
A More Serious Slapping Around of Abenomics Cheerleading
Edward Hugh has a sharp review of the negative view of Abenomics, or perhaps more properly the dismissive-as-irrelevant-and-possibly-quite-harmful view of Abenomics:
The Real Experiment That Is Being Carried Out In Japan
Particularly thought-provoking are the quotations from Keynes, showing both the incredible brilliance of the man and the continuing validity of the old saw, "There is nothing new under the sun."
I agree with almost everything in the post, particularly with the quotations from the speeches of former Bank of Japan governor Shirakawa Masaaki, whom the Kool Kids in this blessed land's business and media elites all feel free to disdain and revile. Shirakawa is revealed to be who he is and what he always was: a central banker blessed with intelligence, humility and a conscience.
With all that is good (and there is a lot of it) I think Hugh does himself a disfavor with the cheap shot at the what may be the most important goal of the creation of inflationary expectations: pressing savers to convert their assets in to real goods or put them into higher risk/higher return investments. A critic would point out that "Uh, that's sort of the point of the program. Duh."
The demographic angle of the story is that while there is a vast pool of cash that could be deployed in lifting the economy to a higher level of activity, almost all of it is in the hands of persons over 60 years of age. Seniors are very, very conservative about their assets and cash, clinging to low-or-negative return real estate or money kept in bank accounts...or in the safe at home.
The government is trying some direct methods to get older citizens to turn over their savings to younger citizens, the most famous/infamous being the tax free accounts for the education of grandchildren (a plan which has been widely derided as just a tax avoidance scheme for the extremely wealthy). Increased taxation of the assets of retirees would be the one, absolutely effective, politically lethal (those damn retirees vote, a lot) solution.
Debasing the currency and creating the desire to convert cash into something that is meaningful and useful is an actual, non-ridiculous goal of induced inflation...the caveat being "but what if instead of increased consumption and domestic investment the result of debasing of the yen is capital flight, with savers sheltering the current value of their money in overseas accounts and assets?"
I guess we have to keep an eye on the yen. I am sure if someone popped an inquiry into Richard Katz's mailbox he would have something to say about what the yen level should be, using trade-adjusted figures.
Later - Richard Katz responds in comments. He corrects my incautious claim that he would know at what level the yen should be.
No one knows this, save, supposedly Mr. Market.
What Richard Katz can tell you is what the long-term average real exchange rate has been, and whether or not the Abe governments disengenuous program to crush the "high yen" has firm intellectual roots.
Nota Bene: All comments to Shisaku are moderated, except my own.
The Real Experiment That Is Being Carried Out In Japan
Particularly thought-provoking are the quotations from Keynes, showing both the incredible brilliance of the man and the continuing validity of the old saw, "There is nothing new under the sun."
I agree with almost everything in the post, particularly with the quotations from the speeches of former Bank of Japan governor Shirakawa Masaaki, whom the Kool Kids in this blessed land's business and media elites all feel free to disdain and revile. Shirakawa is revealed to be who he is and what he always was: a central banker blessed with intelligence, humility and a conscience.
With all that is good (and there is a lot of it) I think Hugh does himself a disfavor with the cheap shot at the what may be the most important goal of the creation of inflationary expectations: pressing savers to convert their assets in to real goods or put them into higher risk/higher return investments. A critic would point out that "Uh, that's sort of the point of the program. Duh."
The demographic angle of the story is that while there is a vast pool of cash that could be deployed in lifting the economy to a higher level of activity, almost all of it is in the hands of persons over 60 years of age. Seniors are very, very conservative about their assets and cash, clinging to low-or-negative return real estate or money kept in bank accounts...or in the safe at home.
The government is trying some direct methods to get older citizens to turn over their savings to younger citizens, the most famous/infamous being the tax free accounts for the education of grandchildren (a plan which has been widely derided as just a tax avoidance scheme for the extremely wealthy). Increased taxation of the assets of retirees would be the one, absolutely effective, politically lethal (those damn retirees vote, a lot) solution.
Debasing the currency and creating the desire to convert cash into something that is meaningful and useful is an actual, non-ridiculous goal of induced inflation...the caveat being "but what if instead of increased consumption and domestic investment the result of debasing of the yen is capital flight, with savers sheltering the current value of their money in overseas accounts and assets?"
I guess we have to keep an eye on the yen. I am sure if someone popped an inquiry into Richard Katz's mailbox he would have something to say about what the yen level should be, using trade-adjusted figures.
Later - Richard Katz responds in comments. He corrects my incautious claim that he would know at what level the yen should be.
No one knows this, save, supposedly Mr. Market.
What Richard Katz can tell you is what the long-term average real exchange rate has been, and whether or not the Abe governments disengenuous program to crush the "high yen" has firm intellectual roots.
Nota Bene: All comments to Shisaku are moderated, except my own.
Tuesday, February 05, 2013
A Little List Of Labor, Love
The Economist Buttonwood blog has posted a table published by Denis Chavez of Research Affiliates (inexplicably attributed to Chris Brightman) of the net labor workforce ratio -- the number of persons 20-64 years of age minus number of the number of those 65 years and older divided into the total population.
(Link)
While I do not buy the analysis accompanying the table, it is nice to see someone as having done the calculations showing the basic pointlessness of Abenomics. Economic growth will require more people working doing meaningful work. Neither the stimulus bills nor the new Bank of Japan monetary policy will attack this issue.
I do admit surprise at the healthy bulge in the 2010 net labor workforce figure for China, given the one child policy and increases in longevity. Perhaps the Chinese economy has a few more years of growth in it after all.
(Link)
While I do not buy the analysis accompanying the table, it is nice to see someone as having done the calculations showing the basic pointlessness of Abenomics. Economic growth will require more people working doing meaningful work. Neither the stimulus bills nor the new Bank of Japan monetary policy will attack this issue.
I do admit surprise at the healthy bulge in the 2010 net labor workforce figure for China, given the one child policy and increases in longevity. Perhaps the Chinese economy has a few more years of growth in it after all.
Saturday, January 26, 2013
Since 1974
Lifted from comments -
Following up on my post casting doubt on some of the assertions made in Jesper Koll's "I'm The Last Japan Optimist" TED presentation, commenter Troy has produced a graph of the the population data and populations projections for persons in their earnings upswing years in both Japan and the United States. (Link)
Pretty sobering is it not?
Japan, on the way down (gently) since 1974.
Sure, you can put in a lot of robots to make up for the decline in available workers -- but those robots are really lousy consumers.
Following up on my post casting doubt on some of the assertions made in Jesper Koll's "I'm The Last Japan Optimist" TED presentation, commenter Troy has produced a graph of the the population data and populations projections for persons in their earnings upswing years in both Japan and the United States. (Link)
Pretty sobering is it not?
Japan, on the way down (gently) since 1974.
Sure, you can put in a lot of robots to make up for the decline in available workers -- but those robots are really lousy consumers.
Friday, January 25, 2013
Many Thanks
Many thanks this morning to commenter "Troy." He has increased the value of my hastily-set down, half-formed opinions with links, supportive statements and counterarguments.
Though I value all of his comments--and hope my readers do likewise--I would like to highlight two of his most recent contributions.
The first is the link to the Ministry of Finance's English-language brief Japan's Fiscal Condition. While an update is due, the paper nevertheless provides an invaluable review, in just a few pages of graphs, of the background to the decisions being made regarding the country's finances. If you ever want, as I do, to rid yourself of the "It is my understanding that..." disease, going over this paper is a great first step.
The second contribution is a graph of the size of Japan's 25-45 years-of-age cohort (Link). While I for selfish reasons despair at the narrowness of the window described, Troy's graph does show the fundamental macroeconomic problem: the swiftly falling numbers of persons in the top consumption years. Reductions in Japan's productive capacity can be made up with increased participation of women in the workforce, delayed retirement and increased productivity. However, the loss of domestic consumption is an issue the government and business either fail to grasp or want to face.
One big victim of the shrinkage in the domestic market will have to be keiretsu tribalism. That Japan's markets are not free -- that purchases by either corporate consumers or individuals are guided as much by keiretsu loyalties as price or quality -- can be accepted and acceptable as long as the domestic market is growing or stable. The reality of a shrinking market -- that in order to keep sales on the same level, one must make inroads into a competitor's customer base -- is not something Japan's established businesses want to think about.
However, do not make any investments based upon the above. No matter how inevitable the collapse of a large institutional structure, it will survive longer than reason dictates or suggests.
Though I value all of his comments--and hope my readers do likewise--I would like to highlight two of his most recent contributions.
The first is the link to the Ministry of Finance's English-language brief Japan's Fiscal Condition. While an update is due, the paper nevertheless provides an invaluable review, in just a few pages of graphs, of the background to the decisions being made regarding the country's finances. If you ever want, as I do, to rid yourself of the "It is my understanding that..." disease, going over this paper is a great first step.
The second contribution is a graph of the size of Japan's 25-45 years-of-age cohort (Link). While I for selfish reasons despair at the narrowness of the window described, Troy's graph does show the fundamental macroeconomic problem: the swiftly falling numbers of persons in the top consumption years. Reductions in Japan's productive capacity can be made up with increased participation of women in the workforce, delayed retirement and increased productivity. However, the loss of domestic consumption is an issue the government and business either fail to grasp or want to face.
One big victim of the shrinkage in the domestic market will have to be keiretsu tribalism. That Japan's markets are not free -- that purchases by either corporate consumers or individuals are guided as much by keiretsu loyalties as price or quality -- can be accepted and acceptable as long as the domestic market is growing or stable. The reality of a shrinking market -- that in order to keep sales on the same level, one must make inroads into a competitor's customer base -- is not something Japan's established businesses want to think about.
However, do not make any investments based upon the above. No matter how inevitable the collapse of a large institutional structure, it will survive longer than reason dictates or suggests.
Friday, January 18, 2013
If Pigs Had Wings
Over at the Council for Foreign Relations website, Dr. Jeffrey Hornung of the Asia-Pacific Center for Security Studies Pacific Forum CSIS has posted a contribution to the "Is Japan in Decline?" debate series. Like most of Dr. Hornung's published opinion pieces, the essay presents a "the glass is half full" review of Japan's participation in international security activities, geared toward convincing American audiences* of Japan's possibly increasing security relevance.
While the essay (Link) is a decent review of what Japan has done -- and what Japan has done is not bad -- what I found most interesting was the last paragraph:
As for mounting public debt, given the reality that the Abe administration's answer to Japan's economic malaise is not structural reform but a stimulus package funded by construction bonds, talking about reductions of Japan's debt is a purely philosophical exercise. Indeed, the only method of debt reduction under discussion is default. (Link)
Contrary to Dr. Hornung's assertions, the limits on Japan's engagement in regional and global security cannot be the demographic shift ("implosion" is hyperbole) or public indebtedness. If they were, then the argument would already be over. China's and to a lesser extent North Korea's actions and the government's framing of new Japan Self Defense Forces security initiatives are the two most significant factors -- and will be for the foreseeable future.
----------------------------------------------
* Given the percentage of the world's elites educated in United States universities, writing for American elite audiences is globalization-on-the-cheap.
While the essay (Link) is a decent review of what Japan has done -- and what Japan has done is not bad -- what I found most interesting was the last paragraph:
What should be clear is that, despite talk of Japan's decline, it is actively engaged in the security and diplomatic spheres in an effort to promote regional stability. Continuing this engagement will depend on Japan’s ability to overcome two domestic challenges: demographic implosion and mounting public debt. Both problems will have adverse effects on Japan's economy and the military, which will constrain defense spending and an ability to fund/expand security and diplomatic initiatives. Both require adept political leadership to rectify. If Japanese leaders can overcome these challenges, it would mean continuing opportunities to provide crucial resources to security partnerships and initiatives as well as leadership toward developing institutions and initiatives. If Japanese leaders fail, however, regional security will suffer as the gap left by the withdrawal of Japanese military capacity, expertise, and resources as well as diplomatic vision and commitment to multilateral institutions/initiatives will be difficult to replace. It is in this light that, if we envision a world without Japan, we can see it as being a consequential power.The above is flatulent nonsense. Under no conceivable (pun unintended) scenario can Japan's population decline be arrested. The cohort of women in their peak childbearing years is simply too small (see graph here).
As for mounting public debt, given the reality that the Abe administration's answer to Japan's economic malaise is not structural reform but a stimulus package funded by construction bonds, talking about reductions of Japan's debt is a purely philosophical exercise. Indeed, the only method of debt reduction under discussion is default. (Link)
Contrary to Dr. Hornung's assertions, the limits on Japan's engagement in regional and global security cannot be the demographic shift ("implosion" is hyperbole) or public indebtedness. If they were, then the argument would already be over. China's and to a lesser extent North Korea's actions and the government's framing of new Japan Self Defense Forces security initiatives are the two most significant factors -- and will be for the foreseeable future.
----------------------------------------------
* Given the percentage of the world's elites educated in United States universities, writing for American elite audiences is globalization-on-the-cheap.
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