Will This Make Japan a Bellweather Nation?
California was once considered a "bellweather" state. Trends that
were spotted there were touted to be the new thing that would soon come
to your neighborhood. That's not so true any more (if it is at all), as
California society no longer attracts and intrigues the rest of the U.S.
masses. Take away the cutting edge technology emanating from Silicon
Valley and it's hard to see what about California the rest of the nation
is just itching to imitate.
Switching from states to countries, we may have a bellweather in Japan. Beginning in the 90s, with the collapse of the Japanese real estate and stock markets, their economy has fought against powerful deflationary forces, basically to no avail. Those few who saw this as a harbinger of things to come for the U.S. and the rest of the developed world were eventually proven right. Whether those powerful forces continue or not will be one of the interesting and important stories in coming years. We've already seen hints of inflation, although nothing so definitive as to change the basic deflation story longer-term.
On the other hand, the demographic picture for Japan may provide a reliable vision of where things are going in developed nations. The Japanese population has decidedly begun to shrink. Of course, the trend to demographic extinction has been firmly rooted in Europe for years now, so that's not news. But what may be news, or at least a growing trend, may be this:
Switching from states to countries, we may have a bellweather in Japan. Beginning in the 90s, with the collapse of the Japanese real estate and stock markets, their economy has fought against powerful deflationary forces, basically to no avail. Those few who saw this as a harbinger of things to come for the U.S. and the rest of the developed world were eventually proven right. Whether those powerful forces continue or not will be one of the interesting and important stories in coming years. We've already seen hints of inflation, although nothing so definitive as to change the basic deflation story longer-term.
On the other hand, the demographic picture for Japan may provide a reliable vision of where things are going in developed nations. The Japanese population has decidedly begun to shrink. Of course, the trend to demographic extinction has been firmly rooted in Europe for years now, so that's not news. But what may be news, or at least a growing trend, may be this:
"You ask the head of any company these days what their No. 1 problem is, and it's labor shortage and higher (wage) costs," said CEO Masatsugu Nagato. "We have 400,000 employees, so this is a huge problem for us."Of course, Japanese resistance to immigration plays a big role here. Japan continues to be populated by Japanese. Few outsiders are invited in; less get a foot-hold. But we're seeing a resistance now in Europe to the kind of free-wheeling immigration that has helped them meet their needs for labor in the past. If that trend takes hold, deflation may finally be seeing its last days.
"In the long run, the labor shortages could cause cost-push inflation or stagflation, in which the cost of doing business keeps on rising, while the economy stagnates," said Masaki Kuwahara, senior economist at Nomura Securities.What about the U.S., still the worlds #1 economy? Well, so far our people have been at least replacing themselves when it comes to birthrate, although we've been close to neutral on occasion. And immigrants have (despite what the media has been blaring lately) continued to pour in. So we can't really say the same trend has taken hold here - yet. Then again, it wasn't that long ago when it was considered improbable that the U.S. would suffer the sort of weak economic growth teetering on outright deflation that Japan has since 1990.
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