Observations from your future

It’s a bank holiday today. If you’re on the way to work, we hope your train was cancelled in time.

They don’t cancel trains here in Japan. When I say that the trains run on time, you have no idea how true that is. But that’s not where the story ends.

As the train leaves, the platform attendants send it on its way with a wave that looks like a softball pitch or an encouraging push. They even add a resounding “whoooooshhhhh” for good measure.

When Japan’s pervasive silence returns to the platform, digital bird noises twitter in the background. Before the next announcement, a rendition of “Old MacDonald had a farm” echoes through the station. I’m told each station has its own tune.

And that’s just catching a train. Lining up to get on one is a whole ‘nother story.

You sometimes have to sidestep in unison with the rest of the queue. And pay attention to the circles and triangles on the floor to get in the right queue for the right train.

Next thing, another Australian and I found ourselves in a “women only carriage”, much to our partners’ delight. Funny how cultural barriers fall when your boyfriends embarrass themselves.

It’s very overwhelming. And that makes it extremely difficult to untangle the future of the UK from Japan’s bizarrities.

Your Japanese future

Half the reason I’m here is to witness what demographic change does to a country. The other half is the better half. We’re notifying all the family members of our intention to marry in person. And half the neighbourhood.

You’ve probably heard about what happened to the Japanese economy when its demographics shifted in 1990. And the stockmarket. And the property market.

Well, Britain is in for the same sort of demographic decline. In my opinion, that’ll sink our stock and property market over time too. Zero Hour Alert readers will discover exactly how in a few weeks’ time.

But today, I want to share some of my observations about Japan that I think might come to pass in the UK over the next 20 years. Societal changes that are tied to demographic decline.

Keep in mind, I’ve barely been here a few weeks in total.

In fact, you need to be aware of a few qualifications about my observations.

My Japanese is limited. My future father-in-law greeted me at the airport by saying “Irrashai,” which means “Welcome.” I replied with “Ittekimasu,” which means “I’m off, see you later.”

Things only got better.

At the Onsen Spa hotel two days later, we changed into the provided yukata. It’s like a luxurious and fashionable bath robe worn in the summer. Most foreigners think a yukata is a kimono.

As we’d be bathing in the nude, I asked my trusty bilingual future wife whether I should take off all my clothes under the yukata. I got an absent minded “Yes.” But Japanese people supposedly distinguish between “clothing” and “underwear”.

What happened next will go down in family history.

My future father-in-law later consoled me by pointing out that it was perfectly normal to wear nothing under your yukakta…”in the Edo period”. That’s between 1603 and 1868.

Incidentally, it’s the Onsen Spa hotel industry that was hit hardest by the end of the “bubble economy”. That’s what the Japanese call it, with suddenly perfect English pronunciation.

All around the lake you could see formerly glorious Onsen hotels that used to be filled with stockbrokers and vice-presidents, supposedly discussing the booming Nikkei index, or how their imperial palace’s real estate was worth more than all the real estate in California.

Suddenly, around 1990, they stopped coming. Onsen hotel prices crashed and my fiancé and her friends and cousins could be found crawling and rampaging through the hallowed halls once reserved for the country’s elite.

These days, a lot of places have gone broke. Everyone in the area knows a family devastated by the loss of their Onsen hotel.

Things are hopefully looking up for the Onsen hotel industry as a corporate chain buys up the places still running. “But the service is terrible now,” says my future father-in-law. Which is an odd thing to say given he’s travelled to Spain a lot.

The idea that satellite industries are hit hardest by economic crises isn’t new. When Australia’s mining boom falters, it’s the equipment suppliers that hit the skids.

The trouble is, the UK economy, government and employment are incredibly reliant on our financial centre status. Without it, the entire nation falters. We’re like one big Onsen Spa. And a demographic decline is coming our way.

Financial market psyche

At the Onsen hotel, we talked about how the neighbour committed suicide over her financial losses in the 1990s.

Many people mortgaged their houses to invest in stocks. The banks encouraged the process actively because the brokerages were part of the same conglomerate as the bank.

The New York Times reports how many Japanese people can’t move house because it would realise the losses on the value of their homes.

Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan’s six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives.

But because of unaffordable housing in the late 1980s, these people are also stuck way out in the suburbs, unable to commute to work reasonably. It’s a catch 22.

These days, housing in Japan is a consumption item, not an investment. You have to knock it down every few decades to rebuild a more modern house, and the land might be worth less by then. This is a vast change in how people see the world.

Not many people are interested in the stockmarket.

It’s odd how fast perceptions of the world can change. Japan shows how the assumptions that make our life function can shift suddenly.

And how relying on the old assumptions can destroy you financially, or worse.

Spoiling the labour market

My observations about Japan’s demographics and their implications are also sabotaged by my choice of location. I seem to be spending time in the parts of the country with the highest fertility rates.

I’ve been to a few local schools on parent open days to see a cousin and a family friend in class.

In the year 1 class I learned to count lists of objects from the top, bottom, left and right in Japanese. In the year 2 class we subtracted double-digit numbers in exactly the same way you and I were once taught. “Borrow the 10” and all that. High school featured an English lesson using a speech from Barack Obama.

My future wife pointed out that I had learned most in year 1, and clearly belonged there.

After school we skateboarded around a suburb of Osaka. With three of us sitting down on one board. There were kids everywhere, completely unsurprised by what rolled past them. It reminded me of the Germany I grew up in at the same age.

The value of children surges in countries with demographic declines. It’s great to be a spoiled brat at times like this. None of this “seen but not heard” rubbish.

You see the consequences all over the news in the Western world too, where the demographic change has already happened among the young. Boomerang kids, gender-neutral militarism and school shootings, for example.

But the young seem to get a shock as they hit the real world. Things like getting a job and buying a house appear to be a matter of course when you’re in school. An entitlement, the young would call it.

Turns out, it’s actually quite hard. Which is not “fair”.

As the British young continue their lives, Japan has some more interesting features they should be aware of.

In Japan, there’s a severe labour shortage. But wages aren’t rising much. In fact, Japanese people are used to taking pay cuts each year, unless there’s a promotion. Deflation is odd.

There are upsides too. What would go down as menial job in the West is a steady career path with a liveable wage in Japan. A Starbucks attendant earns a similar wage in small town Japan as in central London, despite a vast difference in the cost of living.

If you go to a Japanese supermarket at a busy time, parking attendants will wave you to your carpark spot. There are plenty of other “make work” initiatives and rules around. It’s odd in a technologically advanced society where taxi doors open and close automatically.

We’ve been having a debate behind the screens at Southbank Investment Research, the publishing company behind Capital & Conflict. Will technology destroy jobs?

My answer is that this is simply impossible, by logic and history. If technology destroyed jobs, we’d have seen rising unemployment since the Stone Age. Japan is partially an illustration of what does happen.

Demographic decline will increase labour’s share of income as capital makes it more productive. That’s why Japanese wages are high relative to the cost of living. The same sort of thing happened after the Plague swept Europe, reducing the labour force.

And last but not least, technology frees up labour to do other things. In the end, more is produced, which makes us wealthier.

The future of demographic decline isn’t bad, it’s just different. Unless you rely on the financial sector holding up. Then it’s bad.

Can culture trump economics?

Japan makes the point that cultural factors can heavily influence economics.

That’s true in another sense here in Japan. People do not assume they’ll job hop in their life. If they pick a career, that’s it. Over. Finished.

Which is why my future sisters-in-law are in Spain and Australia, soon to move to the UK. They’re content taking menial jobs overseas instead of the very highly paid jobs they qualified for here in Japan. Because it’s like a prison once you’re in.

Of course, to them the jobs aren’t menial because in Japan they’re respected. Until they realise they are treated as menial by customers and employers. Then they long for Japan, where people actually get paid reliably.

The use of cash is also startling here in Japan. I’d forgotten all about having to count your money. I very rarely used cash in Australia or the UK.

Finding a cash machine is incredibly annoying. In Japan, it’s polite to have the correct change when you pay too.

Is it a coincidence that the country with a steady financial collapse for 30 years has avoided the transition to electronic payments?

Perhaps. Germans favour cash too, and their monetary history is messy too. The UK’s war on cash adds evidence. The government knows its power.

Enjoy your bank holiday. No doubt there’ll be more observations to come…

Until next time,

Nick Hubble
Capital & Conflict

Category: Geopolitics

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