The Japanese Yen holds on despite huge domestic and global economic turbulence, despite weak economic indicators, despite bad or mismanaged government policies. All the evidence is that Japan’s economy is back in shape and growing stronger every day, despite very negative external economic and political trends.
Japan has experienced two recessions over the last two decades, but these are atypical of most industrialised economies. By international standards, Japan is known for being one of the most stable countries in the world. Its main export, the Toyota business, has had positive returns in almost all industries, unlike most developed economies that have experienced international recession.
But, you would be hard pressed to find a problem with Japan’s economy. Japan’s economy is expanding at a record pace. It is the only country in the G7 leading economy group that is growing without causing any deficit in demand for goods and services.
After suffering its long-time nightmare in the 1990s, where the Japanese market’s sentiment suffered a sharp plunge during the Asian Financial Crisis, the Japanese economy is on the rebound again. Foreign investors have been turning their attentions back to Japan and more US dollar purchases are now being seen as currency buyers rather than speculators.
At the same time, Japan’s debt continues to rise as the government pushes the economy to raise taxes and cut spending to sustain growth, even as they raise welfare spending. In this environment, the Japanese people, as in so many other countries facing the same problems, are finding it increasingly difficult to pay back their debts and their wealth continues to increase.
In Japan, this growth has left politicians having to cope with the perceived needs of the Japanese people. In a recent article, I pointed out that the major difference between the results of politics in Japan and the US was the fact that the Japanese were unwilling to listen to the promises of politicians, but instead found practical solutions for paying off their debts. So, you can see that even though the economic situation is tough, this is not the end of the road.
I pointed out that the reason why growth in Japan was at record levels was because of the absence of the fear of bankruptcy, which has allowed the Japanese people to pull together and take on the problems, despite the intense stress brought about by the loss of so much of their personal and national wealth. So, what can we learn from this? A lesson from history is that there are several times when any country’s economy faces a crisis, but the people remain strong enough to overcome them.
This is the big lessons from the Japanese economic story. No matter how desperate the outside situation may seem, the Japanese people always show their resilience and ability to turn the adversity into something positive. History tells us that this is a country of hard working people, who tend to take charge when things get tough.
So, what should be done in the world today? Is the truth that a small country can keep itself afloat through its own efforts? Well, the answer is yes, if the people of the country have faith in their leaders and accept the changes, and can manage their way out of the economic problems.
Another important lesson from Japan is that political leaders need to make tough decisions and this is important for the economy as well. But no matter what the circumstances, the people should know that they have a say, that they have the ability to vote their government back to power, and that, once the economy recovers, they will receive generous payouts from the nation’s treasury. This will give them a vision of what they can achieve, and will encourage them to work hard to ensure that Japan’s economy recovers fully.
I am always in favour of governments spending to stimulate the economy, but Japan has demonstrated that this approach is never the right one. Instead, the answer is for governments to spend wisely, knowing that the bigger the budget, the greater the benefits of stimulus will be. and that the state should spend wisely so that it can maintain its high standards of living.