Japan.. is collapse inevitable?

Hi Freckle,

I am not going to have time to look at this video at work, but here is a quick opinion about Japan, My view is based from two people (one is my mentor) who own one of the largest logistics company in japan and who sit on a board of a certain car manufactures and owns a Japanese real estate firm

I actually spoke my mentor only two weeks ago, he regularly flies in and out of japan.  Our meeting started about "the logistics business in japan" This business has been operating for over 20 years and he has key clients who i cant name, but from his view the amount of freight leaving the country is diminishing at a quick rate. He showed me some figures (in regards to the amount of containers moved over the last 5 years) and you could see how much the  market has slowed down.

My mentor admitted that the economy is in trouble in Japan and he has had to slash a high number of employees hours from Full time to Part time, Thankfully being such a large company he gets great support from the Japanese government.

But he made a good point, Should fear stop him? Nope he is always looking at ways at improving his bussiness and on the other hand his real estate bussiness remains pretty steady.

I wouldn't write off Japan.

They can always just print money.

They can pay people to breed. Or finally let some immigrants in.

The sales tax can work.

Third biggest economy in the world – unlikely to just collapse…

So what are you saying by "collapse"? The country will cease to exist? Anarchy in the streets? Sure a relative decline is probable, but a collapse will not happen.

Japan has NOT been printing enough money. There's definitely scope to be more aggressive in this regard, just like America has or even more so. Increasing the money supply depreciates the Yen so exports benefit.

Anyway, if you say a "collapse" is inevitable, then the Yen would also "collapse". The economy can't "collapse" without the currency following, so the economy would be partially sheltered from any major downturn by an increase in export competitiveness.

They have huge foreign currency reserves and huge foreign bond holdings. Most of their debt is held locally. They can raise the pension age or abolish the pension altogether if they really get desperate.

Soooooo many reasons why Japan will not just "collapse".

Interestingly, all of the these investors have specifically purchased units and I would say 9 out of 10 have been off the plan.

I don't agree that these articles ignore the problem, on the contrary – I find that they address these problems squarely, and claim that, for one thing, its blown out of proportion, and that releasing central bank deflationary policy for example, in order to "let the market take its natural course", to name one existing policy suggestion that some think may help, isn't exactly the magical cure that the IMF and various central governments around the world hail it to be. Or, in other words, yes, Japan's government has borrowed extensively from its citizens (and will probably do more of the same for as long as global economy remains in the doldrums) – but so what? Or to quote "mindful money" – "…yields can go higher when domestic investors are unable to fund budget deficit fully – but it is highly doubtful that such a scenario would become a debt crisis. It’s far more likely that the Japanese Yen will depreciate strongly for a while – as it has done in the past – without any major implications for the economy as a whole long-term – only to rise again when appropriate corrections or global market forces allow it to…"

not that Japan should sit and wait for these conditions to occur – on the contrary, it should do all in its power to support this scenario – and it plans to. The same links also claim that yen depreciation, for instance, is exactly what's needed now to re-ignite export (something that Australia, for all its merits, hasn't worked out yet, btw), with which I completely agree. Incidentally, Abe, recently re-elected, while not my favorite PM in the world, is what, in my opinion and that of various media outlets worldwide, kicked off that current depreciation (coupled with some attractive stock market hikes) – his doctrine of dropping the nationalistic approach his party has adopted in the past, in order to re-strengthen ties with China severely hurt over the islands fiasco, kick off more public works to strengthen disaster preparedness and stimulate the economy further, (quite different to "printing money till the cows come home", which you wrongly suggest japan has been doing), offer the worlds most attractive renewable energy tariffs, in order to make Japan the world's leader in renewable energy (http://www.nippontradings.com/japan-real-estate/japan-emerging-as-worlds-new-renewable-energy-leader/), which has already began to draw substantial foreign investment into the country as well (Spain's "Gestamp Solar" has just announced a $1.5 bil project in northern japan, and i believe they're only the first of many, now that al of Japan's tech giants are so heavily invested in solar and wind power), extend retirement age to lower the pressure on pension funds and allow them to slightly recuperate, while at the same time raising taxes (I was greatly relieved to hear Abe's maintaining the DPJ's policy of gradually re-introducing goods and services taxes, increasing property taxes back to their original values, etc) – all of the above are a great combination of means to those ends.

the approach you try to perpetrate, as if there is a singular "magic wand" that someone can wave to make things better, and Japan just hasn't found one yet,or has tried all magic wands to find that they don't work, is a very black and white oriented view of economy – just as Japan's borrowing from its pension funds isn't the only reason it got to this state (and I still don't buy the doctrine that claims public debt is the only measure of an impending financial crisis, that's also an very narrow and extreme view of the world in my opinion), there isn't one particular solution that'll fix the problem. There has to be a collective of measures, trials and errors, that react to internal and external conditions and are fine tuned over time – which is exactly what the administration is trying to pull off (hopefully with a bit more of a parliamentary majority, to actually be able to move stuff forward this time around).

You say you don't believe xenophobic Japan will allow more immigration – fortunately you're plain wrong. Immigration laws have already gone through one major overhaul, and there's another in the pipes, the amount of foreigners one sees in the streets of not only Tokyo, but far away cities like Fukui and Fukuoka is growing by the day (and I'm not referring to Chinese and Koreans either), and even the US ambassador, recently interviewed in Tokyo, is expressing amazement at the amount of entrepreneurship and cross-cultural initiatives that have been taking pace in the country recently (http://www.nippontradings.com/japan-real-estate/japan-opens-up-to-foreigners/ – http://www.mercurynews.com/breaking-news/ci_21708023/q-us-ambassador-japan-john-roos-entreprenurial-culture). And I'm sure you realize people migrating to Japan aren't doing it for the marvelous social benefits, like so many of them do in Australia, for instance – they work, hard, build families and stimulate not only the economy, but the country's industries and, most significantly, its non-procreating society in many magnificent ways.

Turning challenge to opportunity, another thing Japan is extremely good at, also means that the robotics industry, boosted here tremendously in recent years due to the tough requirements placed on the country's resources by the ageing population, is also becoming a huge export (and again, yen depreciation is only helping in that regard when it occurs). So are smart and electric cars. There are just so many bullets Japan still has in its arsenal, and only a minority of them have anything to do with government intervention and BOJ policies, that your attempt at portraying the end of the world as we know it in this regard is just ludicrous in my view.Ccertainly, Japan has its issues, xenophobia and public debt being just two of the bigger ones among them – but the apocalypse you're predicting is only one of a myriad of scenarios that can play out here – and not a very likely one in my opinion.

And again, as mentioned (at least we agree on that much) – there's really nowhere else I'd rather be active and invested in at this global day and age. The alternatives, from a financial, personal and social perspective, are far worse in my view when things go downhill. but again, I'm biased – I love this place with all my heart, and have huge faith in it.

yes, hedging is investing 101 basics (and believe me, I do, although not in gold and silver, my heart's a bit too faint for that one, I prefer something far less volatile and liquid, such as real estate in other countries or plain ol' cash deposits bearing reasonable interest, and easily accessible for exchange rate fluctuation action when its profitable, but to each his own)- but so is the long-term view. Real estate investment at its best (as opposed to wild speculation and gambling) is a long term endeavor. A year or three of price drops or currency depreciation is nothing to fear – thinking that it won't happen is preposterous, and a sure recipe for disaster. Sure, the yen may depreciate for a year or two (although there are still enough ups and downs in those periods to make some nice profits or quickly bring income home, too) – but the huge advantage in Japan is the cashflow. When you're making 10-15% p/a pre-tax in yen, with money that you're in no hurry to liquidate, and on investments that, to begin with, are at $20-50k a piece (which means you can spread them out over 10 properties to the typical Australian 1-2, for instance), you really have very little to lose – even if the yen depreciates for a decade (which I very much doubt it will).

if, on the other hand, you're investing for your day to day income, and your family starves if you can't withdraw your rental income on a monthly basis, with no reserves, alternative sources of income and/or exit strategies, you're in the pits – but I honestly don't think this has anything to do with which country you're invested in, and everything to do with being plain stupid. I try to belong to the first school of thought, and strongly advise my clients to do the same.

In regards to blogs about social issues, racism, xenophobia etc – I have sooooo much to say about this guy's observations and opinions and his understanding of Japanese mentality and culture – but I hardly think this is the forum to raise these issues. Suffice it to say that to take this guy's opinion and experience, as unpleasant as they sound, as an indication of what Japan is like for foreigners as a whole and why raising immigration as an economic solution has no future is clutching at straws. 

Lets not get into this argument, please, as its endless and completely subjective. I can show you a gazillion blogs by foreigners in Japan who experience QUITE different sentiments, as well as a gazillion ones similar to this. It has no bearing on this discussion, and serves very little – it's certainly not as "revealing" as you may think, quite the contrary. I've also lived in Japan and sent my child to public education institutions here – my experience is substantially different to his, lets leave it at that for now.