WSJ: Asia’s Promise Gives Way to Its Growing List of Troubles

The Wall Street Journal ran an essay entitled “Asia’s Promise Gives Way to Its Growing List of Troubles”. Here are a few sections (not in order) and my disagreements:

Asia’s second looming problem is demographic. Japan began losing population in 2011, after decades of dropping birthrates, according to World Bank data. The country’s health and welfare ministry and other experts worry that the number of Japanese, which stood at 127 million in 2014, could fall by as much as a third by 2060. One result of this failure to reproduce is that Japan, according to the U.N., “is home to the world’s most aged population,” with 33% of its citizens 60 or over in 2015; the country is thought to have more than 58,000 centenarians. No modernized society has ever faced such a challenge.

TK: Of course, Japan’s demographics are similar to many European countries. The writer typically uses extrapolations out to 2060 and concludes “No modern society has ever faced such a challenge.” But no modern society has ever seen health care of the 2020s to 2050s either: CRISPR type technology, nanotech, anti-aging pills and treatments, etc. that are coming just around the corner — in the 2020s.

Perhaps the greatest risk is the dramatically slowing Chinese economy. When trading opened on the Shanghai Composite Index on June 12, 2015, its value had skyrocketed more than 100% since the summer of 2014. Then the bubble popped. Fueled by fears of a slowing economy, a weakening currency and an unsustainable debt bomb of some $30 trillion, China’s markets went into free fall.

TK: China’s growth is not “dramatically slowing” down. Growth oscillated over the past three decades, and it’s GDP growth rate has been around 7% for the past few years, about the same as in the late 1990s/early 2000s when it was at 8%.

Asia’s advanced economies face their own problems. Japan continues to search for ways to end 25 years of economic torpor. An asset and property price bubble nearly brought down the country’s financial system in the 1990s, and the economy has limped along ever since. Most Japanese have a comparatively high standard of living, but decades of stimulus packages and a focus on exports have failed to nudge Japan beyond an average annual growth rate of barely 1%, according to World Bank data.

TK: As I’ve pointed out before, on a per capita bases – which is what matters, Japan’s growth has been almost the same as U.S. growth since 2000 and almost the same going back 25 years apart from 1996 to 2000 when the U.S. grew and Japan was stagnant partly due to Asian financial crisis.

Japanese corporations once led the world; now they struggle with shrinking market share, growing inefficiency and waning innovation… Prime Minister Shinzo Abe’s reforms have neither changed Japan’s risk-averse corporate culture nor eliminated enough regulations to unleash entrepreneurship and innovation.

TK: Abe II has only been Prime Minister for three years. Bloomberg still places Japan at #3 in terms of innovation – after another Asian nation, South Korea, that has continued to grow to where they have caught Japan, although workers put in much longer hours. South Korea is now similar to Japan in standard of living without as much leisure time.

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