Archive for the ‘Japan’s Economy’ Category

Spring Comes to Japan

Thursday, April 14th, 2011

Just over a month has passed since the devastating earthquake and tsunami that pulverized and washed away small villages in Northeast Japan, a freak natural disaster that the Japanese government has officially named the “Higashi-Nihon Dai-Shinsai,” or “Great Eastern Japan Earthquake.”

News sources, both domestic and international, have spotlighted the plight of the refugees who have lost their homes. Over ten thousand people have been killed, and an even greater number remain missing. Many towns are still without electricity and aftershocks coupled with the unstable condition at the Fukushima Nuclear Reactor facility have caused even more headaches to the Japanese people.

Yet despite the crisis, people in the Tokyo region were still able to muster the vitality to welcome the arrival of spring. Last week the cherry blossoms within the metropolitan region were in full bloom, and many pedestrians were seen stopping to take a picture of the trees, a scenic yet evanescent event that Japanese look forward to all-year.

At Yoyogi Park, one of the largest parks in Tokyo, thousands of people gathered for the “hanami” or “flowering viewing,” a traditional Japanese custom of watching the fragile, idyllic, and scenic beauty of the cherry blossoms—beautiful pink flowers that fall relentingly with the subtlest wind.

Yoyogi Park was abuzz with the youthful vitality of people eager to enjoy life, something that few Japanese have been able to do since the tragic events that have been continuing since “3/11.” At a lake in Yoyogi Park, one couple began to dance together, almost instantly sparking a social movement. Other couples began to join the fun, and soon enough even shy couples began to dance together, hands held.

People smiled.

To add to the troupe, performers were seen in the afternoon, with comedians and musicians entertaining passersby. One talented group of musicians playing African drums lured a big audience, while cosplayers got nearby people to quickly brandish their cameras to take pictures. Elderly couples walked together silently, gathering their surroundings as if they were relishing the serenity of the cherry blossoms and the energy of the youth.

Amidst all of the eclectic shows, eccentric acts, and ethnic groups of every age and nationality, perhaps most noticeable was the raucous cheer of young people sitting down on mats, chatting, laughing, and drinking merrily.

How long has it been since people in Japan were seen smiling?
For one, fleeting moment, Japan enjoys a moment of tranquility.

//By Ryo TAKAHASHI

Japan’s One-shot Deal: Permanent Employee or Precariat

Thursday, December 2nd, 2010

In its special report on Japan issued on November 20th, The Economist prudently prescribed Japan’s condition as going “Into the unknown.”

Japan is growing old. It is also getting weaker, both in relative and absolute terms. Japan’s population, which peaked in 2005, currently stands at 127 million. This number is expected to dwindle to around 90 million in 2050, one-fourth of which will be above 65 years of age. This precipitous population freefall will be so remarkable, so fast, and so devastating that The Economist called it a “demographic vortex.”

So much for bright times ahead.

More worryingly, Japan’s youth will not only shoulder a burgeoning financial deficit, but will also find themselves increasingly unable to find a decent job with which to pay off Japan’s swelling government debt. According to University of California Professor Robert Reich—who coined the term “New Economy”—only about 10-20% of today’s youth will manage to land high-paying white-collar jobs. The rest of the younger demographic will be underemployed, most likely as members of the service industry who are taught from manuals.

A less convoluted description that’s easier to picture would be “someone who’s flipping burgers when he could potentially be helping people file tax bills.”

Of course, people who work at fast food joints are satisfying societal demand for on-the-go food, and in this regard their work is by all means a socially noble cause (as textbooks economics is quick to point out). But let’s admit it, it’s not the most creative job in the world, and it’s definitely not something you should do for 40 years—and certainly not something you want your kids to be doing all their life, either.

Although over 40% of Japanese youth today will come out of the nation’s schooling system with a newly-minted B.A., as has been stated earlier, decent “permanent employee” positions in white-collar jobs will only be comprised of roughly 10-20% of the labor force. Simple math reveals the rude awakening—less than half of college grads will garner such sought-after jobs.

Doom literally awaits the rest, at least in today’s Japanese employment system. As The Economist’s special report points out, Japan is “a ‘one-shot society:’ those who fail to get a good job upon graduation can be frozen out for life.” The increasing number of well-educated youth who aren’t one of the lucky ones are usually “stuck”—they wander from one part-time to another as “irregular workers,” who are “easy to hire and easy to fire.” Without the OJT (On the Job Training) that their “permanent employee” counterparts enjoy, those who couldn’t find a full-time job upon graduation will be unable to polish their skill-sets for the rest of their lives (unless, by some stroke of luck, they do manage to land a “permanent position”—which is, needless to say, an increasing rarity).

Masahiro Yamada, the pop-sociologist (perhaps comparable to Malcolm Gladwell in terms of readability, minus the literary flair of Gladwell’s New Yorker prose) who coined the term kakusa-shakai (an unequal society), calls such youth unable to secure a full-time job Japan’s new “precariats.” The term is a play on the word “proletarian” and “precarious,” signifying both the low expected lifetime earnings and high amount of social risk that such people are exposed to.

The window of opportunity to become a “permanent employee” is closing fast, and Japan’s “precariats” will become a huge problem a half-century from now when they age—since most of them defer the 15,000yen monthly pension insurance, they will not be benefactors of the state-sponsored pension system.

Today, Japan’s baby-boomers are aging and retiring, causing the tired, jaded, and overworked labor force of 66 million to live with less benefits for themselves when they age. In 50 years not only will the benefits be less, but many of today’s youth will be ineligible to receive them.

Turbulent times lie ahead, as Japan plunges deeper and deeper into the unknown.

//By Ryo TAKAHASHI

Why Japan Can’t Woo More Moo’s

Saturday, November 27th, 2010

Cash Cows. They’re the kind of killer-products that every company craves.

Yet Japan’s premiere blue-chip companies have become increasingly unable to provide “the next big thing.”

Take Sony for example—a decade ago Sony seemed impervious to skeptics of its continued growth. Sony’s walkman and high-resolution televisions were taking the world by storm, and it seemed like no competitor could match Sony’s sleek, hip products.

But now Sony’s grip on all-things-electronic has been attacked by all fronts: Apple has taken the lead in portable music players, Samsung’s LG has taken home the winning gold in preferred television units, and to add insult to injury, Sony’s Vaio laptops have become increasingly MIA from store shelves around the world (no, they aren’t going Dell’s way of online custom-orders, they’re simply deep in the red.)

For all of Sony’s dismal performance of late, Sony still has incredible technological capabilities. The Play Station 3, like the Play Station 2, set the world-standard in next-generation video recording through its Blue-Ray ready drives. Sony’s laptops, though increasingly harder to come across, are so sleek they’d serve as paper cutters. The company’s R&D labs have some of the world’s finest engineers, many of them with decades of experience in the audio, visual, and entertainment industries.

Why then, are Sony’s products doing so poorly? Seth Godin, a marketing guru, says that to conceptualize, create, and market a cash cow, one has to get rid of all the P’s in marketing (like Pricing, Promotion, Positioning, Packaging, etc.)

All companies have to focus is the new P—the Purple Cow.

Here’s Seth’s anecdote about Purple Cows, in—surprise!—his book Purple Cow:

“When my family and I were driving through France a few years ago, we were enchanted by the hundreds of storybook cows grazing on picturesque pastures right next to the highway. For dozens of kilometers, we all gazed out the window, marveling about how beautiful everything was. Then, within twenty minutes, we started ignoring the cows. The new cows were just like the old cows, and what once was amazing was now common. Worse than common. It was boring.” (p.2).

He then goes on to drive his point ruthlessly to the reader, just in case anyone missed his point the first time around:

“Cows, after you’ve seen them for a while, are boring. They may be perfect cows, attractive cows, cows with great personalities, cows lit by beautiful light, but they’re still boring. A Purple Cow, though. Now that would be interesting.”  (p.2).

The point that Seth Godin is trying to make is that a good product just doesn’t quite cut it anymore. The product has to be remarkable. Sony’s walkman had good design and offered good sound. Apple’s iPod may not have delivered better sound quality (in fact, it was probably worse), but the clickwheel? Now that was remarkable, and that was worthy of being called a Purple Cow.

What do today’s remarkable companies all have in common? They’ve got Purple Cow mindsets. They aren’t playing it safe. They aren’t kissing up to the status quo. They are, as Seth Godin observes, “outliers. They’re on the fringes. Super-fast or super-slow. Very exclusive or very cheap. Very big or very small […] the leader is the leader because he did something remarkable.” (p.20).

Sony’s predicament provides a case in point for Japan’s economy as a whole—Japan has all the technological expertise to make a plethora of remarkable products. Yet it just can’t seem to deliver, and it’s because Japan played it safe for the past two decades.

It’s time Japan decided to take one big, audacious gamble.
It’s time Japan decided to become a Purple Cow.

//By Ryo TAKAHASHI

Japan’s Graying Democracy

Friday, November 19th, 2010

Of the many problems Japan faces today, a graying democracy is one crucial yet oft-overlooked malaise. The term “graying democracy” refers to how Japan’s political decisions are increasingly being controlled solely by the older generation. This phenomenon bodes ill for Japan’s younger generation because the government’s expenditures are currently heavily lopsided in favor of the elderly.

The de facto preferential treatment of the older generation at the cost of marginalizing the younger demographic has far-flung ramifications. One egregious case lies in the government’s expenditures: of every 35 yen spent for social security, only 2 yen is allocated towards childcare support. While this may allow Japan’s senior citizens some level of modest living (although the elderly have also begun to feel the effects of Japan’s financial squeeze), this also renders young mothers with very little support when the time comes to raise a child.

Such lack of government-sponsored childcare support is undoubtedly one factor that contributes to Japan’s dismally low fertility rate and is also an explanation for why many women in Japan hesitate to give birth. The women are certainly not to blame—with so little help from the government—such as the lack of financial assistance along with the dearth of daycare centers—young women today are faced with the crushing choice of a “child or career.” This particular predicament that Japanese women are facing is unique, or at least anachronistic to say the least; most liberal democratic countries provide for the childcare needs of young mothers.

Fueled by the cozy relationship between the government and the older demographic, Japan’s graying democracy has also distanced the younger generation from politics. Such disinterest only exacerbates the problem of “a graying democracy”: the younger generation is becoming increasingly disinterested in political affairs, and less than 20% of Japanese youth vote. The absence of the voice of the younger generation in the Japan’s politics allows the government to continue to earmark its expenditures in a way that will benefit the older generation, all at a cost to the next in line.

So then, what can be done to ameliorate this lamentable situation? One thing that must be done is to bring the younger demographic back into the political realm. After many years of being “unrecognized” by politicians, many of today’s youth are now not only being socially disenfranchised by a government that clearly favors the eldest generation, but have also unconsciously silenced their own voice by losing interest in politics altogether.

This rift can be narrowed by garnering the political interest of those in their twenties and thirties. The Japanese government must show that it genuinely concerned with the problems that today’s youth are facing—such as the economic instability and a weakening sense of community—and intends to take on a leading role in addressing such issues.

One doesn’t need to look at social indicators like the Gini coefficient to see that the level of intergenerational inequality is rising in Japan—young people mired in poverty is no longer a rare phenomenon. For all its metropolitan allure, in recent years people who seem to be in their mid-twenties can be seen in tent-villages to survive the winter cold in Tokyo’s major parks. Increasing rates of unemployment, underemployment, and a precipitous decline in living standards amongst Japan’s youngest generation will prove costly over the long-run: after a while, it will be nearly impossible to turn these people into productive tertiary-sector workers.

Only when the Japanese government finally provides the catalyst for political concern amongst the younger strata will we finally begin to see real changes in Japan’s graying democracy, and thus a turnaround in a country headed for long-term decline. Without addressing Japan’s fatally flawed “democracy,” future prospects for the country will undoubtedly remain bleak.

Two decades of pitiful economic growth have certainly taken their toll on people’s spirits. Without the energy and activism of the young, the rays of a brighter future will never penetrate the omnipresent gray clouds that have been looming over Japan’s populace for far too long.

//By Ryo TAKAHASHI

[Poem] A World Unseen

Tuesday, October 26th, 2010

If I could choose to be a being of the past
I’d be a Native American.
I could talk with the trees,
Have quarrels with the squirrels,
And dance with the flames.

The Great Spirit is guardian to all,
On his land we are bound together.
So hello mother who peers out from the logs.
Hello father who sleeps all winter.

My horse and I are twin brothers.
We explore the land from water falls to rocky ledges.
I pet his mane and call out his name.
He carries me home from day to day.

Come and see my cousins, the deer.
They graze and prance and say hello
With small ears and beady eyes beckoning you
Into their welcoming homes.

But who are these white-skinned newcomers
Who wear sturdy looking armor?
Well behold my immaculate skin,
Reflecting the smile of my sister the sun.

Their axes hack at my elders the trees
Their guns kill my cousins the deer,
So let loose my fearsome uncles, the arrows
And protect this world which cannot be seen.

//By Ryo TAKAHASHI

Amartya Sen and Sadako Ogata: Their Views on Japan

Sunday, August 1st, 2010

On July 22nd, Hitachi sponsored a forum where Amartya Sen (Harvard professor, recipient of the 1998 Nobel Prize in Economics) and Sadako Ogata (President, Japan International Cooperation Agency) exchanged their views about Japan’s future in the coming century.

Sen, the first to talk at the podium, provided an in-depth analysis of the oft-pervasive “culture-based accounting of economic values” In other words, was Japanese culture – in particular its “samurai tradition” – the explanation for its explosive economic growth, as Eiko Ikegami had proposed?

Drawing upon the words of Max Weber (Sen alludes to the links that Weber saw between Protestantism and economic development in Weber’s book “The Protestant Ethic and the Development of Capitalism”) and Michio Morishima, Sen describes the notion of how the “Japanese ethos” and its emphasis on rule-based behavior values (which can be classified as somewhat Weberian) is one convincing explanation of Japan’s growth.

However, Sen is quick to note that the aforementioned thesis was quickly disproved by the rise of the NIES countries in the 20th century, and added that Confucianism cannot account for the “Asian Miracle” considering how Thailand is a Buddhist nation.

Sen concludes his observations regarding the culture-based assertion that the “explanation of economic dynamism [through cultural explanations has] clearly strong arbitrariness.”

Instead of looking at Japan’s culture as the key ingredient in its growth throughout the past half-century, Sen looks at developments during the Meiji Restoration. According to Sen, Japan’s renewed emphasis on global openness and education were key towards positioning itself as a future economic power to be reckoned with.

Sen added that Tadayoshi Kito put it most succinctly when Kito observed, “it only depends on education, or lack of education.”

By 1910, Japan was almost fully literate, and by 1913, Japan was publishing more books than Britain. A rise in literacy rate, Sen observes, is cardinal towards the “expansion of human capability.”

As such, Sen places great emphasis on Japan’s education-oriented approach to economic development, and notes, “widespread participation in the global economy would have been difficult if people could not read or write,” and that “there is much to learn still in Japanese educational expansion.”

In conclusion, Sen stresses the emphasis on human capability and public dialogue, and warned against the obstructive nature of “dialogic neglect.”

Sadako Ogata, whose speech followed Sen’s, was no less visionary and deeply rooted in political realism.

Asked what is meant by “human security,” Ogata first responded that “it started in the 1990′s when the question was, ‘what is needed for development?’” and then added, “it was this background that Kofi Annan saw the need for ‘freedom from fear and freedom from want.’”

Ogata, one of the most well-known figures in Japan for her continued diligence towards overseas aid and her work towards alleviating the woes of refugees, repeatedly emphasized the importance of education, such as when she said during her concluding remarks, “education will have a big role with human equality [...] people should become a bit more sensitive to inequalness, to insecurity,” and noted the role of JICA by adding, “my organization JICA [advances] inclusiveness [...] bring all the people who need more help into the equation – our slogan is inclusiveness.”

Sen was quick to contribute his final words towards stressing the importance of education as well. He proclaimed, “basic education is absolutely essential for living an intellectual life [...] it’s a huge value [...] literacy is a tool for political participation and economic participation.”

Two individuals who both command enormous respect, both Sen and Ogata realized not just the importance of education, but Japan’s success in embracing it.

Geopolitically, Japan is sandwiched between America and China, two polarities vying for the reins of global authority. But Japan’s importance as a role model in the world cannot be overlooked – it has shown itself to be a clear leader in economic growth through the “educational approach,” and still offers a sound method of growth for other like-minded countries to follow today.

//By Ryo TAKAHASHI

Delicious Coffee, Doused Hopes

Saturday, July 10th, 2010

The goal to “halve global poverty by 2015,” along with a slew of equally zealous objectives encapsulated in the UN’s Millenium Development Goals seem more forlorn now than ever before.

Mounting global unrest, becoming ever more conspicuous as different interest groups rally in the streets to protest international institutions like the WTO, have caused policymakers to bring the issue of poverty reduction to the fore.

It is glaringly obvious that the rules of global governance are skewed heavily in favor of developed countries. Global civil unrest continues to grow, and yet the winds of change have yet to show even the slightest breeze.

What keeps the winds of change at bay?

Perhaps Jeffrey Sachs, professor at Columbia University and the man behind the MDG’s, has an answer. In his book “The End of Poverty” Professor Sachs eloquently depicts the unfathomable ills globalization has caused to many living in the “Third World.” In particular, Sachs shows how the juggernaut character of corporate globalization has eroded both the economic independence and cultural spheres of many living in less developed regions.

Coffee, a drink that rose to prominence thanks to Islamic traders, is now one particular commodity that underscores exactly how faintly reminiscent of colonialism modern-day policies are.

As Ryuichiro Usui, a former professor at The University of Tokyo notes in his essay “Coffee and Globalization,”

“coffee, a world commodity which ranks number two in world trade after oil, demonstrates quite well what globalization is about [...] suppose 500 grams of coffee sold at a German supermarket costs four euros [...] of the four euros, only about 0.8 goes to the producer of the coffee. In contrast, 1.0 euros will go to the German government. It’s strange that the country that produces the coffee gets less than the country that consumes it, but that’s how the world market works.”

It is strange indeed, but provides a good case in point. Zimbabwe, other African countries, and many Latin American countries voice their grievances against modern global governance because all of these countries have the ability to be independent if they were only given the ability to export their goods to the global market on fairer terms.

Professor Usui cleverly Christens today’s globalizations as “grotesqualization,” and by this he means that “the global and the local are collapsed together in such a way that colonialism and postcolonialism, the premodern and the postmodern, have been blended horribly together.”

There is, however, one country that has managed to rise above modern-day globalization’s influence: Bangladesh. A country that has shown strong economic growth, Bangladesh is also a country that’s on a firm course to be able to actually realize the goal of halving poverty by 2015.

Here’s the real catch: it’s economic growth and domestic system of wealth distribution didn’t arise from the paternalistic guidance of developed countries.

Rather, the goal was attained by allowing local villagers to bring their commodities to the market and be able to sell their commodities under fair terms. In particular, banks that issued microcredit loans to the poor, like Grameen bank, empowered these individuals with the ability to become entrepreneurs.

Muhammad Yunus, an economist who studied at Vanderbilt University and who is also the founder of Grameen bank, has shown the world that it doesn’t take an MBA to be a successful entrepreneur.

With better trading practices and fairer trading terms, more countries can enjoy newly created wealth and enjoy better standards of living. Now is not the time to increase the amount of money we dole out through the form of ODA’s, now is the time to revamp a system that is heavily beneficial to some, and largely detrimental to many.

//By Ryo TAKAHASHI

Lee Kuan Yew, Abstraction, and the Limits to Human Knowledge

Saturday, July 3rd, 2010

1997—Amid cheers, wails, toasts, tears, triumphs, and treachery, the financial battle between Thailand’s government and the world’s hedge funds had been settled.

The hedge funds had won. As their managers and clients toasted to newfound wealth, Thailand and much of Asia was sent reeling into one of the worst economic recessions of the century.

Stanley Fischer of the International Monetary Fund was one man amongst many who watched the chaos unfold. As he recalls, “I went to Bangkok in 1997 […] Thailand had fixed the value of its currency in dollars [and] people began to wonder ‘do they really have enough dollars to always be able to give me dollars in exchange for the baht, the Thai currency I have?,’ and when they begin to wonder about that, they start asking for the dollars, and then they attack the currency.”

And attack the Thai currency they did. The method? Shorting—an investing practice of “selling” something you don’t have and promising to buy the original amount later. People shorted the Thai baht in large droves, testing the Thai government’s limits. Investors all across the world who shorted the Thai baht placed a bet that the Thai government wouldn’t have enough foreign reserves to keep the baht pegged to the dollar.

Overwhelmed, the Thai government was forced to unpeg the baht. Investors, who could now “buy back” the baht at a steep discount, made millions. To use Thomas Friedman’s words, the “electronic herd” had pounced upon the baht mercilessly.

But the story didn’t end there. The collapse of Thailand’s economy—a very small portion of the global economy—made perky investors wary of neighboring countries. If Thailand’s currency was destabilized, what about all the other South-East Asian countries?

As Lee Kuan Yew, the senior minister of Singapore lamented, “the fund managers didn’t know the difference between Indonesia and Malaysia, Thailand, Singapore. They just said, ‘I want out.’ Property prices collapsed; companies collapsed. And in the case of Indonesia, the social fabric collapsed. Churches have been burnt; mosques have been attacked; they have killed each other. This will take years to heal.”

What began as a scheme by investors to create a rupture in market stability and earn easy money triggered a regional phenomenon. Millions of people in Asia saw their livelihoods change for the worse.

It would be easy to say that this episode is just another example of investors’ greed and seemingly mechanical lack of empathy.  But as Lee Kuan Yew so perceptively saw, there’s more to the story. To investors, “South East Asia” wasn’t a cartographic area demarcating an area brimming with a variety of different dialects and distinct cultures.  In their eyes it was a homogenous bloc—a lump of countries of little notable differences—and when Thailand went sour, they were quick to assume that others would too.

What’s particularly frightening about the Asian financial crisis is the limit of human knowledge. No matter how cautious investors are, they must accept some level of abstraction because it’s impossible to know everything about a particular country. In fact, from an epistemological perspective, people make abstractions every day for the sake of molding their knowledge into something that’s easy to organize and understand.

As many economists and politicians are already aware, the 21st century will see a rise in Asia’s growing importance in the world. Thus it is more important now than ever before to realize the differences between each country, each region, prefecture, city, town, and village—no matter how daunting the task may be—lest we dare trigger a catastrophe of even greater proportions.

Japan is no anomaly in the matter. Eisuke Sakakibara, commonly known as “Mr.Yen” notes: “one sector of the Japanese economy is an export-oriented sector which is highly competitive, consisting of Toyota’s and Sony’s. And the other is [the] domestic manufacturing sector which is extremely uncompetitive. We have a market-oriented capitalistic system on one hand; we have a very socialistic, egalitarian sector on the other.”

While most of the world only knows the former aspect of Japan, it is precisely the latter that has derailed Japan from its phenomenal growth in the 80’s and continues to be a nagging problem today. Japan is still an industrial giant, but at the same time it also has highly inefficient domestic industries. Both are part of Japan, but eventually Japan will have to pick one course over the other. This is one particular kind of diversity that Japan cannot afford to harbor for long.

//By Ryo TAKAHASHI

Smokey Mountain, Sinking Japan

Monday, May 31st, 2010

Every morning, tens of thousands of Filipino slum-dwellers flock in droves to what has now become known as “smokey mountain” – an outrageously large heap of waste located in Manila, Philippines. It has become somewhat euphemistically known as “smokey mountain” in reference to how the decomposing rubble occasionally catches fire.

For Filipinos mired in poverty in Manila, there is little other option than to salvage whatever they can from the “mountain” and survive. Though the Japanese media has repeatedly shone much spotlight on the issue, little real progress has been made in lifting Filipinos out of poverty.

What’s worst about it all is the number of young children who manually sort through the garbage looking for edible grub: a sight quite worthy of being included in Dante’s Inferno. Philanthropy-dollars do help, but without long-term programs to enable slum-dwellers to become self-sufficient, marked progress is forlorn at best.

But while the Japanese media scrutinizes every grime-clad child scrummaging “Smokey Mountain” for today’s grubby meal, there lies another entity with equally zealous eyes meticulously examining a far larger mountain of rubble.

Who is this entity, and what is he after?

After spending a week dining with top-brass executives from renown companies including Goldman Sachs, Morgan Stanley, and McKinsey & Company in Japan (their names will remain undisclosed), they seem to be in accordance with one seemingly undisputable fact: within 20 years, Japan will be awash with foreign capital.

Of course, not in a good way.

Overthe last 20 years, roughly 2/3rds of Japanese companies listed on Fortune 500 – all multinational companies that no one thought would tank – simply vanished. And within 20 years, Japan’s labor force will shrink relative to the total population as the population continues to age – sure signs of mounting fiscal deficits as government pension schemes are stretched to their limits.

That means an absolute decline in the savings rate in Japan. Without the ability to issue government or corporate bonds within national borders, there’s only one other investor that the Japanese, who have been reluctant  to do so thus far, can rely on: Mr. Gaijin-san (gaijin: a somewhat derogatory term used in reference to foreigners.)

Odds are, as many economists predict (and as current trends already indicate), Japanese medium and small-scale parts makers will “detatch” themselves from their parent companies and begin selling their parts to overseas companies and investors eager to absorb Japanese technology and precision. When that happens, Japan’s comparative advantage in high-tech goods and Japan Inc.’s brand for safety, reliability, and precision will be for sale.

This only means one thing: Japan, with its thousands of islands big and small, is now one big “Smokey Mountain” that foreign capital will flock to in droves. Make no mistake: every pebble will be turned over, every shrivel of technology will be eagerly consumed, and everything sellable will sell to the highest bidding foreigner.

That, in itself, is not a bad thing, unless you’re a conservative eager to tout Japan’s supremacy. But it does mean a long-term decline in real competitiveness, and with that a continued chain of bankrupt Japanese multinational-companies, a gradual yet incessant decline in full-time jobs, and a sizeable long-term shrinking of Japan’s GDP.

I leave you with one over-used marketing slogan to mull over:

Coming to a store near you: The secrets to Japan Inc.’s gadgets and wizardry.
Get your reservations in advance.

//By Ryo TAKAHASHI

Neiderhoffer and Nassim: Two People All Investment-Banker-Hopefuls Should Know

Sunday, May 23rd, 2010

A promiment Harvard undergraduate blogger once lamented about how all of her close and smartest friends “wanted to be investment bankers.”

Today, quantiative finance is one of the most popular majors amongst undergrads. Professors capable of teaching and breeding “Quants” – those who study and master the enigmatic mathematical models of quantiative finance – earn a comparatively larger dole than their counterparts who teach other majors.

There is little surprise that investment banking has become so popular in recent years: it is by far one of the most intellectually challenging and lucrative careers available.

In Japan, an increasing number of undergraduates are pursuing careers in “gaishi-kei” companies: that is, foreign companies based in Japan. Domestic firms and government jobs are becoming less-and-less popular as the international clout of Japan gradually but surely erodes. In light of this, many undergraduates (in particular, Japanese polyglots) have set their binoculars on “gaishi-kei” companies that will, in their eyes, provide them with a a brighter future.

Needless to say, that makes foreign investment banks one of the most sought-after jobs in Japan.

But of course, there is a catch.
Japanese undergraduates have very little idea of what the world of finance is all about.

The world of finance is, in short, the intangible world that governs the economy. Though Lenin identifies key industries such as steel, coal, railways, etc. as the “Commanding Heights” of the economy, there is little doubt that in today’s world, the reins of the world economy is held firmly in the hands of the finance industry.

Of course, the description I’ve given above is ambiguous at best and completely unhelpful at worst. But the reality is that there always remains a great divide in opinion whenever it comes to financial parlay.

Take, for instance, two financial titans: Victor Neiderhoffer and Nassim Taleb. They’re both incredibly successful financiers.

Yet the two could not be any further apart.

Neiderhoffer has founded and run several hedge funs, which usually generate astronomical annual earnings, even by hedge-fund standards.

Nassim Taleb, the author of several bestselling books including “Fooled by Randomness” (now a must-read for financial experts) and “The Black Swan,” runs a hedge fund as well. On most days – in fact, just about every single day, it loses money.

But once in a while, Neiderhoffer loses a fortune, while Nassim basks in newfound wealth.

What’s different about Neiderhoffer and Nassim is how they position themselves in the market. Neiderhoffer, after rigorous statistical and mathematical analysis, makes bets that, as far as track records are concerned, are usually right. In other words, in information economic parlance, Neiderhoffer uses information asymmetry to his advantage: he takes his time to gather superior information, which is how he repeatedly makes a killing.

Nassim positions himself completely differently: he bets that he doesn’t know anything at all. To make a complicated story short, he bets on market irregularities; he bets on the kind of things no one predicts will happen: like Sept. 11th and the global financial crisis.

That means on most day Nassim’s hedge fund will be bleeding. But every once in a while, on those days when every trader’s hands are flailing and clawing in despair (including Neiderhoffer), Nassim will be smiling.

Speaking of his hedge fund (which has become enormously successful thanks to the financial crisis) at a conference following the launch of his now much-acclaimed book The Black Swan, Nassim said: “We have billions under management now [...] and we still know nothing.”

The story of investors has a very long history. In fact, tulip futures had been bought and sold in the Netherlands centuries ago. Today, the world of finance is much more complicated, but the rules of the game are largely the same: for every investor’s position, there is an investor taking the opposite position and that only means one thing – someone’s betting on exactly the opposite thing you’re betting on.

And when investors nowadays have MBA’s and Ph.D’s from the most prestigious academic institutions in the world, when investors think they’re smarter than everyone else, when the only person left to out-smart is the genius next door, that only means one thing: get out while you’re still ahead.

//By Ryo TAKAHASHI