STEVE PIECZENIK TALKS

Japanese Prime Minster Shinzo Abe has Courageously tried to Restart the “Lost Decades of Economic Stagnation” and has Failed Miserably!

The staid Japanese Ministry of Finance and its demands for so-called “budgetary” discipline win a pyrrhic victory---leading Japan into a massive economic depression. Japan is entering in to what I call a “ZOMBIE ECONOMY”[TM].

Many of you have heard rumbles of world-wide recession, starting in China and the Far East, and spreading all the way to the European Common Market [where unemployment ranges around 25% for the youth]. Unfortunately, there is a very real chance that one country, Japan, may well be headed into depression, even after the valiant attempts of Abe to stimulate the twenty year old no growth economic malaise that is structural, often described as ‘recession’, ‘stagnation’, or ‘heading to depression’.

Why do I call it a zombie economy?

This particular term is based on the fact that the Japanese people possess some very unique national character features that are particular to that nation. This feature of the Japanese culture makes change of any sort almost impossible to effect on a mass level. The Japanese are group oriented in terms of requiring consensual agreement on any re-alignment of the status quo. Therefore, it is close to impossible for any leader, particularly a proactive, aggressive political leader with extensive experience to change the Japanese economy when he is pitted against the embedded interests of the most recalcitrant bureaucracy in Tokyo, the Ministry of Finance.

Abe had pressured the Central Banks of Tokyo to flood the economy with easy money and credit in order to increase consumer spending and, therefore, improve the GDP.  However, on April 1, 2014, April Fool’s Day, the Ministry of Finance thwarted Abe’s attempts to stimulate the GDP as the best way to increase annual revenues to pay down the bloated national debt. This Ministry of Finance decided to impose an 8% tax on an already deflationary economy primed with quantitative easing of money. The impact: consumer spending stopped abruptly, dragging down a $5 Trillion economy with 220% of GDP in debt.

Sound familiar?

In some ways, Americans had been heading toward the same problem where we needed to infuse cash into a stagnant economy. The major difference is that Americans, by proclivity and habit, are used to creating new businesses in very quick time. That is what makes America an exceptional country.  In contrast, Japan’s economy is largely based on huge vertically integrated conglomerates, called Zaibatsus—Mitsubishi, Nissan, Toyota, et. al. which guarantee lifetime employment for their respective workers who cannot be fired, despite the shadow presence of so-called ‘fake unions’. Similarly, farmers refuse to follow the economic mandates of an energetic financially proactive leader like Abe, because they do not want to impair their century-long traditions of farming and agriculture.

It was not an accident that we, Americans, had to send in our own nuclear scientists during the Fukushima Nuclear Power plant disaster. No one in the Japanese power plant management hierarchy wanted to take any responsibility for the nuclear disaster.  At the same time, the shame that they experienced as a result of this self-induced accident, made it much harder for anyone tell the truth as to what was really happening.  Like the fall-out from nuclear disaster, the effects of a Japanese Recession will impact the rest of the world.

I am not writing to whip the Japanese people. I have a lot of respect for them and their culture. I am only warning them that if they don’t act ASAP to correct their anti-growth fiscal policies proposed by the Ministry of Finance as well as MITI [Japanese bureaucracy that rules over their corporations] Japan will sink into vortex of inescapable financial pain which might lead them to assume, once again, a nasty course of action that no one would like to see—War with China over the Spratly Islands in the South China Sea. 

I hope that this type of conflagration does not happen.  Japan has the third largest naval force in the world and the Spratly Islands (I wrote about this area 20 years ago) are still an attractive excuse for conflict with China.  The Japanese, like Americans, may resort to the tenuous rationalization that in order to make money, the political elite will inflame nationalistic feelings to extract the promise of victory by attacking a falsely manufactured enemy. 

This type of inexcusable behavior is often called “Wars of Opportunity” or Unnecessary Wars just like our wars in Iraq (3 times) and our war in Afghanistan (12 years).

As Henry Fielding, the writer said:
“Money is the fruit of evil as often as the root of it.”