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Unlike the heavy criticism leveled by the Obama administration against S&P when America’s credit rating was lowered by that agency, Prime Minister Kan had nothing to say about the downgrade. Finance Minister Yoshihiko Noda declined to answer direct questions posed by reporters in Tokyo on Wednesday. However, Noda did defend Japan’s overall credit worthiness. “The smooth sales of Japanese government bonds at recent auctions show that confidence remains unshaken,” Mr. Noda contended.
Despite that confidence, serious problems in addition to debt must be addressed. A soaring yen threatens Japan’s critical export competitiveness, a revamped approach to energy policy in the nuclear power-dependent nation must be found, and the conflicting priorities of reigning in debt even as massive amounts of financing are required for reconstruction (possibly as high as $130 billion), and an aging population evermore dependent on government services, must be reconciled.
Toward those ends the government has already enacted tax increases to cover social welfare costs, put together a $100 billion emergency credit facility making it easier for Japanese companies to purchase foreign firms (a moved aimed at stabilizing the currency), and sent requests to major financial firms to report their currency positions through September, as a means of curbing speculation.
Moody’s noted that Japan must bring its nominal growth (growth without inflation factored in) up to 3 percent annually in order to get its debt under control, citing the reality that the government’s intention to double the 5-percent sales tax by mid-decade “would not be enough to achieve fiscal rebuilding.” Japan is aiming for nominal growth of 3 percent and real growth of 2 percent by 2020. Such a level is far higher than what the nation achieved in the so-called “lost decade” leading up to the financial crisis.
Yet amidst all of its troubles, including that lost decade, where economic recession became a way of life, Japan has remained stable. No doubt much of that stability is attributable to a cultural stoicism highlighted during the tsunami, when Japan remained enviously immune from the kind of cultural breakdown such disasters have precipitated elsewhere, including the United States. It is a stoicism reflected in the reality that Japan’s 127 million people have amassed $15 trillion of household savings to weather their ongoing economic storm. It is also reflected in the fact that Japan has managed to fund almost 95 percent of its debt domestically, via banks and pension programs, which help to keep yields lower than they would otherwise be.
Joe Biden, who visited Japan on Tuesday, took notice of that stoicism. “I came to express not only my commitment to say we will do whatever we can to help, but to tell you how much the president, how much I, how much the American people admire your character,” he said. Biden also used the visit as an opportunity to express the contention that neither Japan nor the U.S. was in decline. “While you’re struggling to deal with one of the greatest natural disasters any country has faced and we are dealing with getting our budget in order, there are voices in the world who are counting us out,” Biden said. “They’re making a very bad bet,” he added.
Unfortunately, Mr. Biden is comparing apples and oranges. The cultural factors that keep anti-social behavior to a minimum in Japan are in critically short supply in America, where shame is almost non-existent, and a sense of self-entitlement has become endemic. Japan is a valuable reminder that culture, good or bad, may be the ultimate factor in determining how well a nation can handle adversity. Despite all of its financial and political troubles, Japan remains largely united as a nation.
America? Perhaps the Obama administration, dedicated to stoking divisions within the public for the purposes of political gain, might want to reconsider such a profoundly misguided approach.
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