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Nov 24, 2022·edited Nov 24, 2022Liked by Noah Smith

I agree it's weird. Back in early 2000s when I first went to live and work in Japan I picked the place because it was (still) seen as cool and cutting edge. The newest technology, the craziest big city culture, anime, video games, movies, J-Pop. And then all that stopped sometime in last 5-15 years. I still remember being kinda shocked realizing circa 2007-08 that Samsung now made better TVs than Sony. Part of this is I agree due to poor corporate culture (it should not be forgotten that a lot of the corporate titans of post-war Japan were led by mavericks, and the system subsequently put in place of lifetime employment, seniority based promotion system, hierarchical desirability ranking of companies from big to small etc. really made repeating that trick very difficult). My own experience working at the R&D center of one of their big electronics conglomerates made it very clear very quickly that despite the vast resources being deployed no real innovation was ever going to come out of there.

But what about something like J-Pop (cool in early 2000s) being utterly supplanted in global consciousness by K-Pop? Even if K-Pop is arguably more an industrial than an artistic product and so maybe also subject to corporate culture differences, am still befuddled by why latter overtook former so completely.

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Excellent article. There was a section on a lack of Japan bringing their products to other nations to promote exports. I have worked in the Sourcing departments of major US manufacturers (industrial goods, pharma, and medical device) for the past 10 years. My job is to find manufacturers of items we need. For large US businesses, demand for parts and finished goods is a process of seeking out vendors to make custom items. In my experience, Japanese companies were absent or not focused on the main marketing platforms for international business-to-business sales (Alibaba, Thomasnet, Pharmacompass). When you can find a Japanese company online, more than 75% do not have an English version of their webpage which makes getting an idea of a companies technical prowess dependent on Google Translate. This is opposite of Chinese companies. They are hyper present on these platforms and they have English versions of their websites. This makes it super easy to do business with Chinese companies.

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From where I sit, Japan's export problem is even worse than you make it out to be. Basically, the Japanese don't make _anything_ any more. My Sony cameras and lenses? All made in China. Sharp is owned by a Taiwanese company, and LG has won the TV/PC monitor wars. The Omron blood pressure gizmo at hand was made in China. Of everything* I've bought in the last 10 years, only my manual focus (camera otaku) camera lenses (Cosina. But no one other than camera otakus have ever heard of them) were actually made in Japan. Peecees are all China. Etc. Etc. Etc. (And Japan lost the semiconductor wars years ago. (Renessais (or however it's spelled) is still running their ancient Japanese fab lines, but all their new technology stuff is fabbed in Taiwan.))

*: Truth in advertising: the Tanita bathroom scale we just bought claims to be made in Japan!

So what happened? Dunno, but I think that the enoumous profits that the trading companies have been making of late _may_ have something to do with it. This year's corporate profit results (announced in March and April, prior to the Yen crash) were at record highs, by large amounts. So the sectors of (and actors in) the economy that the folks in the government are most interested in (i.e., their corporate friends), are doing just fine, thank you. Frog in boiling water syndrome: they can't notice that there's a problem until it's too late. And the LDP folks simply aren't very smart: the only thing they can think to do with the cheap Yen is tourism. Which is a horrific industry in terms of labor productivity: except for management, it's pretty much all minimimum wage labor. (Employment in Japan has always been a scam: Japanese labor laws only apply to companies with over 300 employees, so the protections (such as they are) provided labor don't apply to the majority of the labor force. The LDP has been promissing to increase wages, but they're only talking about wages at the large companies, again, leaving most Japanese workers out in the cold. (Minimum wage is pitifully low and there's no talk of raising it. There's a disaster lurking here in that a lot of Japanese minimum-wage labor is by immigrants (like Qatar!), but with the yen at 140 to the dollar and the wages so low, it doesn't make sense for folks from Sri Lanka or Nepal to come, or even stay. From agriculture to construction to retail, Japan's day-to-day operation is quite dependent on foreign labor, and Japan hasn't realized that this is going to stop working in the near, if not immediate, future. (Again, the LDP's friends are all big company management, and they hate paying wages, so they've been increasing the number of low-wage foreign workers of late.))

And this is in a context where median income has been falling for the last 25 years, while every other industrialized country has seen rising median incomes.

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Nov 24, 2022Liked by Noah Smith

Interesting article since I happen to be in Tokyo for a few days. Any recommendations for a couple of restaurants? Thx!

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Nov 24, 2022·edited Nov 24, 2022

"Germany, whose economy is almost as big as Japan’s, sits at a whopping 47.5%"

Is this a fair comparison? Like, I'm sure that if you looked at, say, California, and counted what it "exports to" and "imports from" the rest of the US, the size of its trade flows would be enormous. Japan doesn't have the kind of closely integrated relationship with _anyone_ that Germany has with other parts of the Eurozone, or that CA has with the rest of the US.

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Could it be that Japan just got old?

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Good article with some reasonable theories about why Japan is failing to export as much as before. The hydrogen car thing is mostly Toyota and Honda as chief promoters. I think part of this is that for the domestic market, battery electric cars are a hard sell. In cities most dwellings are large multi story buildings whose parking garages aren’t suited for overnight charging, and in the countryside most houses have less than 100amp service (central heating or even central hot water is not common (many use natural gas and electric water heaters are mostly tankless, mainly for the bath and a smaller one for the kitchen) so a high load car charging station would be hard to accommodate. As far as roadside chargers the space required is not available in urban areas, gas stations can accommodate only a few cars at once and if they had to each remain for 20 - 40 minutes each it would not work. With hybrids or hydrogen vehicles these problems go away. I guess the Galapagos syndrome prevented them from considering that many export markets don’t have this same issue.

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Noah does it again -- the Japanese version of the amazing Sri Lanka article, thank you for the clarity. Couple of questions; 1. ‘unlike the U.S., which was pretty much fine running large trade deficit’ - why? 2. Germans huge export as % of GDP, do they run a large trade surplus? If so, assuming this is advantageous but not in times increasingly isolationist/war times.

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"a weak currency can be a big opportunity for a country,"

I remember in the early aughts every time it looked like the economy was heading into trouble and finally Howard was going to be held electorally responsible for his terrible Govt we would see the Aussie Dollar dip down towards 50cents and our mining exports would boom & Howard would have enough money in the budget to keep the surplus and hand out some goodies

While this was obviously good for the country it used to drive me nuts as it was Paul Keating as Treasurer of a Labor Govt who took the brave decision early in the 80s to go to a floating exchange rate (and Central Bank independence) and here was the economic plan working perfectly but to help a Liberal Govt and this after the independent Central Bank made back to back mistakes with interest rates in the last 80s (fear of the 87 Stock Market crash meant they kept interest rates too low for too long which caused some inflation which forced them into putting interest rates to 17% in the early 90s where they then kept it there too long and both these mistakes ended up hurting the reputation of the Hawke/Keating Govt despite the fact we have proof that Keating after the 87 crash did say that he thought that interest rates should go up before the Reserve Bank actually did it, so he was right but got held politically responsible for the mistakes the Reserve Bank made in the Australian political memory)

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Super informative article. I'm living over her in Okinawa right now and I see the consequences of everything in this article on the ground.

Japanese culture seems to have a hard time adopting new mindsets around many things. I'm not surprised to learn exports is one of them.

The aging population is a problem, but the aging mindset is a bigger one.

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It feels like a series of interrelated and self-reinforcing problems that is holding Japan back. The aging population is likely the prime agent and that without it, none of the others are possible.

The corporate culture is a driven in no small part by the relative lack of political clout of Japan’s (tiny) younger generation.

Lack of immigration feeds the small young population and promotes an insular society among those most likely to adopt change, international standards, etc.

A shrinking talent pool means top firms have to dip lower and lower on the talent ladder, preventing the chaotic rebirth that has been the hallmark of my many startup stories in the US.

Population. If Japan wants to grow, it needs to GROW.

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Possible explanation :capital account surplus is going down because of an ageing population plus high infrastructure spending, and that drives a falling trade account surplus.

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Correction. It’s not the BOJ intervention, but the central government. The BOJ has just executed.

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I found this interesting discussion randomly today. Learned a lot about kpop lol.

https://www.reddit.com/r/kpophelp/comments/pu4cn1/which_groups_are_actually_popular_in_south_korea/

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Thanks Noah, this is such a insightful and easy to follow article.

I found it particularly interesting how Japanese car manufacturers have fallen behind in terms of battery technology, given their push towards hydrogen technology. I do wonder though if it could prove beneficial long term, even if hydrogen cars continue to be a flop. The technology seems promising none the less, so it could be worth watching the space especially in terms of renewables etc.

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This was such an interesting article, thanks!

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