Smokey Mountain, Sinking Japan

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.


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