January 2005
On this Globe in this Era
It is 50 years ago that a Japanese elite diplomat first came to America. He was a little shocked to see that Americans were using jet planes to travel from New York to Washington D.C. as if they had been using shuttle buses.
Today, he has recalled it, thinking that those jet planes were actually a kind of Greyhound bus; thus the Japanese shinkansen bullet train system should be introduced between New York to Washington.
More disappointing is that there are still many poor New Yorkers who have no business for which to fly to Washington so frequently.
CHAPTER I: State of Japan - 10 Facts You Don't Know
Check economists or journalists around you talking about the so-called fall of Japan on their knowledge about the 10 important facts concerning the Japanese economy.
1) As of the end of fiscal 2008, Japan has net external or overseas assets reaching 266 trillion yen or $3.2 trillion. Japan is the largest creditor nation in the world, which is seldom mentioned by the Western media.
2) In the decade from 2000 to 2009, earning retained by Japanese businesses or their internal reserves increased from 142 trillion yen to 229 trillion yen or $2.8 trillion.
3) The corporate tax rate in Japan is going to be reduced by 5%, but it has been about 40% while the corporate tax rate in EU is about 23% and the global average is 26%.
4) The indirect tax rate (consumption tax rate) in Japan is 5%, while it is 19.5% in EU and 11% in the Asia-Pacific region, though the rate is 5% in Taiwan, too.
5) The ratio of the total individual income tax revenue over national earnings in Japan is 7.6%, the lowest level in the world, while the ratio is 10.3 % in France, 10.9% in Germany, 12.0% in the U.S., 12.6% in Sweden, 13.5% in the U.K., 14.4% in Italy, 16.8% in Canada, and 22.2% in Sweden.
(This low rate of individual tax in Japan must be viewed in light with the total individual financial assets in Japan of 1500 trillion yen ($18.3 trillion) including 770 trillion yen of cash and savings.)
6) The ratio of interest payment for outstanding government bonds over GDP is 1.3% in Japan in 2010. It is 1.9% in the U.S., 1.9% in the U.K., 2.2% in France, 2.3% in Germany, 3.3% in Portugal, 3.4% in Ireland, 4.6% in Italy, 5.4% in Greece, and an average of the EU area is 2.6%.
If the interest rate should increase twice in Japan, it would be still 2.6%, at a level of EU.
(On the other hand, the long-term government debt of Japan is 653 trillion yen or $8 trillion, while Japanese GDP is 477 trillion [nominal] or 540 trillion [real] yen.)
7) The ratio of total trade over GDP in Japan is 22%, the one in Korea is 82%, and the one in China 45%. The Japan has the fourth lowest ratio among 178 countries in the world.
8) Among 1689 companies listed in the 1st section of the Tokyo Stock Exchange, 1031 businesses (about 60%) have branch offices or plants in China.
9) The total number of Japanese companies operating or investing in China is 10,778, among which small companies with 10 to 50 employees account for 33%.
10) In 2004, among the top 500 foreign-affiliated companies in China, 86 are established by Japanese businesses as No.1, 82 by Hong Kong as No.2, 76 by the U.S. as No.3, 51 by Taiwan, 50 by Korea, and so on. However, in terms of the total revenue, those established by he U.S. are NO.1, those by Japan No.2, and those by Hong Kong No.3.
Traditionally, the Japanese Government has adopted policies and implemented measures in favor of businesses, though the corporate tax has been relatively high due to some historical reasons. While being in deflation and recession over 20 years, the number of millionaires in Japan has been increasing along with an increase of earning retained by Japanese businesses.
However, along with domestic and global competition being intensified, Japanese businesses started to leverage cheap labor in China in a larger scale around 1990. As a consequence, prices of goods went down, but wages in Japan also fell or the raise of wages was avoided. For this reason, tax revenue of the Government fell, causing a big budget deficit. With income growth suppressed, downturn in spending and consumption became clear in Japan. Together with the birth rate falling, Japan has been in deflation for almost 20 years.
But, Japanese companies still continue to keep business in China, though a shift to India and other Asian nations have clearly started.
Anyway, deflation is not a big problem for Japanese companies and Japanese millionaires. The big budget deficit is also not a big issue for big Japanese companies and Japanese millionaires. In other word, the lost 10 years, the 15-years long recession, or 20-years long deflation in Japan is all for benefits of Japanese businesses facing challenges of the era and Japanese millionaires whose financial assets have been increasing due to globalization of the money market.
(The United States had by far the most millionaire households (4.7 million) followed by Japan, China, the United Kingdom, and Germany.
http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-49877)
President Mr. Clinton and other anti-Japanese politicians in America were once glad to see Japan in hardship after the so-called Money War between Japan and the U.S. in the 1990's. But, now the U.S. is in the worse state than Japan is.
The key to solution of economic and financial problems in Japan and the U.S. is cooperation between the two countries rather than competition among them in leveraging cheap labor force in China.
Of course, domestically, the Japanese Government should shorten the gap between the rich and the poor. By doing so, it can rectify the skewed balance of the national finance and budget.
CHAPTER II: What You Need is a Single Figure
We need a very simple figure to confirm the state of economy and finance of a nation.
"Politically realized zone" means that the economic state corresponding to this zone cannot be easily realized but can be if a government has a strong political intention to control the economy. In this case, it is probably no more a democratic, free, and open nation.
*** *** *** ***
There is one important political question in Japan: whether Japan should bring in a new constitution since the current one was enacted in 1947.
My concern is whether Japanese economy would be invigorated if a new constitution should be introduced.
In China, their implementation of a new policy of openness and reform in 1980's invigorated their economy, since it abolished the ban on pursue of capitalist's interest.
In the new constitution of Japan, it should be provided that every enterprise and business must contribute to realization and maintenance of sound national finance and economy.
And, the Government must print and issue yen notes if need arises.
Joh 1:5 And the light shineth in darkness; and the darkness comprehended it not.