Japan Is In Recession (Again!) — Why This Matters To Americans

Today “unexpectedly” Japan slid back into recession. Some people say it is only the “first shoe” of many to come. The world economy seems to be falling apart again.

Both The Huffington Post and Bloomberg?today ran stories calling Japan’s recession unexpected. Both articles made the following points:

  • Both articles blamed, “the impact of an April sales-tax boost” (Bloomberg) or “investment declined following a tax hike” according to Huffington.
  • Japan had “across-the-board weakness in demand among consumers, manufacturers and builders” (Huffington) while “no part of Japan’s economy looks encouraging” (Bloomberg.)
  • ?Japan is in recession — was pushed into recession by the VAT hike,” (Bloomberg) and is “dragging the country into a recession and further clouding the outlook for the global economy.” (Huffington Post)
Not What It Used To Be
Not What It Used To Be

The Bloomberg article gave a basic nuts and bolts approach to this story with no real explanation as to how a modest rise in the VAT caused exports, imports, and all sectors of the Japanese economy to do worse than expected. If anything since the VAT is not applied to goods for export that sector should be immune. But the experts have spoken and once again the culprits are high taxes and too much government debt!

However the Huffington piece points out a few other points that Bloomberg missed that may tell more of the story:

  • Many manufacturers have shifted their production lines offshore to cheaper workers.
  • Japanese incomes peaked a decade ago and workers aren’t finding “new” jobs that pay the same.
  • Many workers “make do” with contract, short term work, or part-time work.
  • Wage increases have not kept pace with historically low inflation.

And then there was this:

…a government decision to shift a large share of the public pension fund investments out of government bonds and into higher yielding but riskier shares.”?Huffington Post

Now where have we heard all this before? A bad economy blamed on taxes and debt? Government debt that would disappear if the “bad” economy grew or income was distributed more evenly which would encourage more consumer spending. Japan’s solution sounds much like the American solution that banker friendly politicians, mostly Republicans, keep recommending for America! Bad economy? No growth? No problem! Just take the taxes citizens are paying and put them into the magic stock market! Problem solved! What could go wrong? Japan’s stock market fell 2.6 percent today.

Before suggesting that Japan is simply going through the “new normal” as Christine Lagarde suggested high debt, low growth and unemployment are becoming for Europe we should notice that all of the problems these advanced economies have is ?basically the same one: We have a somewhat wage based capitalist system competing against a slave based capitalistic society. The real question economists SHOULD be asking is, “Have we come to the point to where the world is so awash in slave made goods that wage workers can no longer compete at all?” It is no accident that Americans with full time jobs started declining the same year China joined the WTO in 2001 and that we now have a lower percentage of eligible working age people in the workforce than at any other time in the modern era.

It is clear that a decision must be made about slave labor and it must be made before the world economy completely collapses. The time we have to be proactive rather than reactive is increasingly small and our options are getting fewer and fewer.

Japan is “officially” in a Recession. Maybe it’s because they’ve been following the same bad ideas we’ve been using.

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