Declining Savings, Rising Inequality in Japan
Here is a NY Times article Revival in Japan Brings Widening of Economic Gap and that has a nice chart that shows just what a decade of ultra-low interest rates and ultra-cheap money has done.
Keynesians like Paul Krugman have given the usual “Print Lotsa Money” advice to Japan, which the Japanese mostly adopted. The zero interest rate policy was adopted to fight deflation, but the reason the deflation happened was the monster bubble of the 1980s in Japan (remember how the Imperial Gardens in Tokyo were supposed to be “worth” more than all the land in California?) So instead of letting the bad investments of the bubble get cleaned up, Japan chose the path of propping up and bailing out zombie companies. In the process, the government debt in Japan has reached “world-class” levels. Japan faced the ignominy of its debt being rated lower than Botswana’s.
The chart above shows one consequence of this. A substantial segment of the population say they have no savings for retirement. In a rapidly aging society, with a heaviliy indebted government, this is not a good thing.
But Japan has one thing going for it that most western countries don’t. As the NY Times articles puts it, in a somewhat negative tone:
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“The reason that there are no riots in Japan as in France is that most of these young people live with their parents,” Mr. Yamada said, pointing out that even 12 percent of Japanese between the ages of 35 and 44 lived with their parents in 2004. With free housing and food, those with temporary jobs can still afford to pursue personal interests. |
This is consistent with most Asian societies, and I think of it as a good thing, while NY Times reports as if this were a problem. Here lies a potential solution to the problem of an aging population, without bankrupting the government; children take care of their parents post-retirement, oh, what a quaint notion. In fact, it is not some uniquely Asian phenonmenon - government social security programs have broken that inter-generational bond in the West, so much so that the practice itself looks quaint to NY Times. I hope Asia doesn’t blindly emulate the West in this.