Category Archives: Economics

Book Review: The Carbon Crunch

The Carbon Crunch: How We’re Getting Climate Change Wrong—and How to Fix It, by Dieter Helm, Yale University Press 

“If the future of our climate rests on the ethical outlook of Vladimir Putin and the emerging Chinese leadership of Xi Jinping and Li Keqiang, then there can be little grounds for optimism.” 

Dieter Helm has met the enemy, and he is coal. The rap-sheet against coal is long, of course, and starts with mass murder: the thousands of coal miners who die in China every year, gruesomely, in explosions or of asphyxiation, the thousands more in other countries who die similarly, the tens of thousands of miners whose lives are ended prematurely by coal dust. Then there are the hundreds upon hundreds of thousands of miners who have died in coal’s bloody two-century rampage, a quarter of a million in the UK alone, to say nothing of the millions of civilians even now in Beijing and Ulan Bator whose lungs wheeze and breath rasps from sooty, sulfuric smog. But unchecked coal, abetted by its lesser accomplices oil and gas, has yet more murderous plans in store: ruinous climate change.

Coal these days is mostly about China, whose share of current world coal-burn is close to half, which is adding electricity capacity equivalent to the entire UK grid every year, most of it still coal, and which plans to add coal capacity equivalent to Europe’s total coal capacity this decade. Then there’s India: between the two of them, Helm claims, they are adding three coal plants a week. The World Resources Institute’s Global Coal Risk Assessment report lists c1,200 coal-fired power stations planned globally, three-quarters in China and India, with total capacity of c1,400GW, about seventy times Europe’s solar capacity.

Then beyond coal and China, there’s a wall of new energy demand that will be stimulated by economic growth and population growth: as Africa’s population doubles over the coming couple of decades, it is far from immediately obvious that the main energy sources of the newborn will be carbon-neutral windmills and solar panels. Try severing oil subsidies in Nigeria and you’ll be in for a nasty surprise from the Lagos street.

(All of this renders Fukushima the silly little storm in a nuclear teacup that it was.)

You might then expect the enlightened leaders of our Western and Eastern democracies to be eagerly discussing—and acting on—the real threats of coal, China (and coal in China), and economic and population growth, but instead we are led a dance of denuclearization in Japan and Germany and fobbed off with tumultuously expensive turbines in the Thames estuary and photovoltaic panels in unsunny Potsdam, which will have negligible anti-carbon impact. Helm caustically asks, “What is the question to which offshore wind and rooftop solar is supposed to be the answer? It can’t be global climate change.”

As Helm surveys the two decades of utter failure since Rio in 1992 to seal a binding international agreement on emissions and the dismal but absolutely certain prospect that nothing will be done this decade, the reader is treated time and again to the swooshing of the author’s word-sword scything into the comfy shibboleths of all concerned. Wind? Crippled by its miserable load factor, the need for “Goldilocks wind”—not too strong, not too weak, and not too gusty—the requirement for an entire parallel generation system for those nasty no-wind days, and the zero-marginal cost problem, which forces all other competing power suppliers off the grid, to name but a few. Biomass and biofuels? Leaky carbon loop. Corn ethanol for E85? Needs more acres of corn than there is farmland in the US. Nuclear? Shale gas has “pulled the economic rug from under nuclear’s feet,” with even the risk, waste, and proliferation issues overshadowed by the wonky economics of new nuclear, whose capital intensivity renders it hypersensitive to the cost of capital and needy for long-term contracts, bringing immense political risk. Energy efficiency? So sorry, just leads to increased demand via the substitution effect—a drop in the price always results in an increase in demand (the Jevons Paradox)—and the income effect, whereby income saved on energy bills is spent on stuff, and the production of such stuff naturally involves energy consumption.

Some fondly hope that the world will run out of fossil fuels before they cook us all. Not a chance, says Helm. Peak oil? Perhaps, but new finds, unconventional, offshore, the Arctic, and technology that wrings more out of existing wells will keep the tail fat. Doesn’t matter much, anyway, because of the shale gas revolution, unconventional gas in the shape of coal-bed methane and tight gas, and our old friend, super-abundant coal, supplies of which are ample enough to get us to the next century, with “the embedded carbon in that coal … sufficient to bring about catastrophic climate change.”

Why have two decades of international talk-fests on climate change yielded next to nothing? Because carbon targets are “a classic case of free-rider incentives” and climate change negotiations are a textbook real-world instance of the prisoner’s dilemma from game theory, in which betrayal is always more advantageous than cooperation—except that with climate change negotiations, the true prisoners (unborn future victims of climate change) aren’t even in the room and the ultimate penalty (the rise in temperature) is unknown, rendering betrayal even more likely than cooperation. “The realistic conclusion,” Helm sighs, “is that there is going to be no legally binding, international, and enforceable, deal for at least a decade, and possibly never.”

So what, as Lenin asked, is to be done? Helm offers a three-tined proposal: impose carbon taxes, in particular carbon border taxes, to properly price the negative externality of carbon and stop “carbon offshoring”, something at which the EU has excelled; dash for gas as a transitional solution, the least-regret way of swiftly cutting carbon; and the Hail Mary of investment in R&D into next-generation no-carbon technologies. Of these, a dash-for-gas seems most achievable but no ultimate panacea; carbon border taxes, while not, Helm insists, protectionist, are unlikely to be perceived that way by noisome free-riding polluters; and hopes for next-gen tech sees Helm at his most rosy-tinted—“my email inbox is full of excited reports of the latest ‘breakthrough’”—and a tad too harsh on current renewables, as opposed to future, pie-in-the-sky ones.   

Despite the inability of shilly-shallying humanity to halt the march of its beloved carbon in its tracks and the exceptional “wickedness” of the climate change conundrum, Helm concludes with the declaration that he is an optimist (do publishers insert a Mandatory Optimistic Conclusion Clause into authors’ contracts these days?Ed). All—all!—that needs to happen is for politicians to stop lying to their electorates that we can waltz effortlessly and painlessly into a carbon-free future: “the cost of the decarbonization of entire economies is likely to be very high, and it is going to involve sacrifices,” as “decarbonizing requires the coordinated replacement of almost all of the capital stock—of the world.” The pain of investment in that from savings is bound to mean less present consumption. Consumers, in their turn, “must … be willing to vote for politicians who will force them to pay.” All that, though, to purloin and amplify one of the author’s favorite expressions, is going to be a very big ask.

In praise of…Optimists

The chances that a small business will survive for five years in the United States are about 35%. But the individuals who open such businesses do not believe that the statistics apply to them. … If you interviewed someone who recently opened an Italian restaurant, you would not expect her to have underestimated her prospects for success or to have a poor view of her ability as a restaurateur. But you must wonder: would she still have invested money and time if she had made a reasonable effort to learn the odds—or, if she did learn the odds (60% of new restaurants are out of business after three years), paid attention to them?

The Engine of Capitalism, in Thinking, Fast & Slow, Daniel Kahneman

A shaggy dog story

Dusk rolled down the shutters of the day as we were botanizing inland of the Okhotsk Sea on an old dirt-track logging road, Route 1055, in the borderlands between Monbetsu and Okoppe. Our supposed destination that evening, the windy city of Wakkanai at the northernmost tip of mainland Japan, lay still over 200km and at least three hours’ away. As usual, we were running late.

“How about going back to Monbetsu and getting up early to knock off the drive?” optimistically volunteered Dr. T, who in his natural habitat is rarely known to rise before ten.
“Why don’t we try and get halfway up the coast?” I groped on the map for a settlement of any size. “Say to Esashi?”
“Will there be anywhere to stay?”
“There’ll be somewhere,” I replied without conviction.

The Osaki Ryokan had been built not long after the war, volunteered a scion of the extended family who run it, and it showed, in the time-burnished floorboards and the plywood doors to our rooms.

“Are those where they keep the dead relatives?” quipped Dr. T, pointing to the row of chest freezers. To judge from the glimpse I had later of the family drawing room, with its row of severe oil portraits of deceased forebears above the fireplace, hung at an angle so they frowned down on the living, it was a plausible enough hypothesis. Dr T. declared that he needed an hour to process the fruits of the day’s pillaging and made it my mission to scout out somewhere to eat—and, more importantly, drink.

It was Saturday night but the streets of Esashi, famous—if famous for anything—famous for its kegani horsehair crabs, were deathly quiet, as quiet as the graves in which many of its residents already have one foot. You don’t by now, I’m sure, need me to rehearse the demography, but I will anyway: 1970 population 15,800; 2010 population 9,100 (down 42% in 40 years); projected 2035 population 5,900 (down another 36% in 25 years).

“It’s crunch time now for Japanese politics,” bellowed the enigmatic because unsponsored sign above a shop that, the two wall-mounted pillboxes hinted, had just made it into the age of the credit card. Was this a heartfelt cry from a lone individual, sick of petty politicking far to the south? What, if any, thoughts or actions was it intended to provoke? And how soon, exactly, was now?

Plaster and signboards were falling away to reveal the ancient woodwork below: this had once been a ceramic-ware store, but half of the Aegean sailboat sign had vanished. The sake-swilling pot-bellied tanuki badger reminded me of Dr. T—and myself.

There was something starkly heads-and-tails beguiling about the Suntory Bar Toi et Moi.

Back to the quest: spatters of chuckles and cackles filtered out through the cracks in a few red-lantern joints, but these joints I rejected, knowing of Dr T’s intense predilection for the alcohol of the grape over the grain. Almost next door to the ryokan, though, was a restaurant whose name, 4Quattro, betrayed Italian pretensions and the presence of wine. Inside was a revelation: the interior had plainly been very recently and very expensively kitted out in a chorus of chic beiges and blonde woods, with Marcel Breuer cantilevered-steel and cane-backed Cesca chairs from the heyday of Modernism (yes, I confess to a chair fetish), expansive tables with immaculate white tablecloths and dun under-tablecloths, and sensitive spot and recessed ceiling lighting. The assemblage would not for a moment have looked out of place in one of the world’s major metropolises—indeed, it would put many restaurants in many of them to shame.

4Quattro was run by a young local couple, perhaps on the cusp of their thirties, with gender roles entrenched: he manned the counter and cooked, she, baby strapped to breasts, flitted around the dining area, toting the near-unreadable moveable feast of the day’s handwritten blackboard specials. In the depraved lands from which Dr. T and I hail, she would be filed as a “yummy mummy” or more crudely as a MILF. The Esashi Tourism Board (yes, such a body exists), does 4Quattro no favors and underscores the highly gendered nature of the Japanese dining experience by making reference to a “chic interior perfect for women”. For a while, we had the restaurant to ourselves, but maybe a dozen diners had come and mostly gone, all but a couple of them female, by the time we drunk-tumbled out.

We were more interested in matters oenological than gastronomical, and the wine list—red or white, glass or bottle—was a let-down, but Dr. T, more of a globe-trotting gourmand than I, declared the grilled sea bream to be as fine as anything routinely rustled up in the better kitchens of London or New York. How long, I asked mummy, had they been open? About eighteen months. I didn’t have the heart to ask her to estimate her chances of surviving the next eighteen.

Subsequent investigation, courtesy of the Food Business Research Institute and other luminaries, suggest that the Japan bar and restaurant bankruptcy rate is only half that of the US, with a fifth of those founded in the three years previous to 1999 (but a quarter of rameneries and the like) having gone out of business. This might, paradoxically, be due to the greater caution of the Japanese entrepreneur. Still, the industry is contracting, with the number of bars and restaurants peaking at a scarcely credible 846,000 in 1991 (one for every 150 or so people) and falling to a still staggering 673,000 in 2009 (down 21%) and the market value peaking in 1997 at Y29.0trn and falling to Y23.6trn in 2010 (down 19%), a decline in both nominal and real terms, and 4Quattro is a very unlikely restaurant (in 2006, only about a tenth of all restaurants were classified as Western) with very high overheads in a very unlikely place, from whose already threadbare catchment area we can exclude the old, the young, the poor, the fisherfolk, and most men. I wouldn’t want to wager on 4Quattro’s chances of long-term survival but I am selfishly grateful for the optimistic bias of its instigators, even though that bias may ultimately come at great personal cost.

Furiously botanizing, toward Hamatonbetsu up the Okhotsk coast we trundled, as backward ran sentences until reeled the mind.

**********

Most of us view the world as more benign than it really is, our own attributes as more favorable than they really are, and the goals we adopt as more achievable than they are likely to be. We also tend to exaggerate our ability to forecast the future, which fosters optimistic overconfidence. In terms of its consequences for decisions, the optimistic bias may well be the most significant of the cognitive biases.

Thinking, Fast & Slow, Daniel Kahneman

Wake Wakkanai, or Cinema Paradiso, Hokkaido style

Although Wakkanai (from the Ainu yamu wakka nai, the swamp with the cold drinking water) features in all the best guidebooks, few Westerners ever make it there for the night. How few? In the year to end-March 2012, 30 Britons, 18 Germans, 123 Americans, 25 Canadians, and 46 Australians (ever the adventurers), that’s how few, according to the city’s preposterously comprehensive website.

“Everything’s brand new!” exclaimed Dr. T, gesturing with an arc of the arm at the 12-storey ANA Hotel (1994) and the sparkling station complex, which had been razed and rebuilt since my last visit three years before. “I’m beginning to suspect that Spike has been spouting guff all this time about the decay of rural Japan.”

Dr. T claims to be a depressive realist, usually prefacing references to optimists with an Anglo-Saxon expletive, but I was beginning to suspect that he had an unacknowledged streak of optimism buried deep within. Or that he was falling under the spell of the Potemkin Village bias that is one of Kahneman’s profoundest insights: What You See Is All There Is, or WYSIATI to its friends. Or that he simply delights in winding me up.

As Dr. T sieved fruit and catalogued the day’s plunder, I moseyed around the glossy new station.

Tell me what’s wrong with this picture. Give up? Allow me. Where do I start? First off, there’s noone on the bus. Not too surprising, you might think—it was a seven on a Sunday evening after all, and this could be taken as a sign of prosperity. Fair enough, let’s move on. Second, there’s only one taxi in the ranks; that there is one at all is a triumph of hope over experience, as the next—and last—train is not due in until 22:47, nigh on four hours’ maudlin wait away. Third, there is absolutely noone about, in vehicle or on foot. Fourth, and most intriguing, is that little neon-orange sign that blares out the single, magical word “CINEMA”. No, I tried to wrestle-reason with myself, no, no, noooo, surely nobody, however beholden to the opiate of optimism, could have… But they had.

I bought a platform ticket and eyed the timetable. Eight arrivals a day, eight departures a day, the last of which, the 19:24 to Horonobe, 60km to the south and with a 2010 population of 2,700, was idling away its last moments of leisure before chugging off. There were no passengers.

Later I was to discover that in fiscal 2009 Wakkanai station served just 266 train embarkers and disembarkers a day, that this number was down by a quarter in five years, that the platform count was reduced to one from two in the 2010 remodeling, and that the station, home to massive marshalling yards as late as the seventies, cannot now muster even a single set of points. To channel my imaginary potty-mouthed Jewish grandma superhero: and on this facelift you spent exactly how much?

About $50mn. Sorry grandma, I just couldn’t help it. B-b-b-but, I didn’t spend much of my money, please understand, most of the construction was financed by bonds and subsidies, so the bill will fall on future generations. “Putz!” Thwack! “Owww!”

Before I talk you (and myself) through the minutiae of the economics of movie theaters in Japan, let me take you by the hand and lead you through the (other) streets of Wakkanai, the ones that Catherine the Great—and Dr. T—didn’t see. Let’s start with a couple of aerial views, looking north from downtown.

The gaps that make the chessboard, now gone to grass or gravel, many being hawked as pay-by-the-month parking spaces, are empty lots filled with the specters of torn-down buildings—central Wakkanai was sardine-packed tight in the sixties—and give the district the air of a scaled-down rustbelt inner city in the US, although without the gun-toting, crack-peddling hoodlums. Level the many disused or underused buildings and the chessboard would open up further.

This grotty gem of a multi-tenanted zakkyo building, where we dined at the appropriately named Karaku (“Flower Pleasure”) on sashimi, is more representative of the architectural jewels of downtown Wakkanai than the new station complex.

Two very drunk men from the suburbs of Tokyo, celebrating their liberation from salaryman serfdom at sixty with a whistle-stop road-trip circuit of Hokkaido, discussed past and future routes with a passion I would not have been able to predict it was possible to possess. On noticing us, the more voluble of the pair established our native place and raised a wobbly glass.

“Aaah, Igirisu, totemo ii kuni da! Ōshitsu ga aru kara! Japan, ōshitsu! England, ōshitsu! Very good!”
“What’s he saying?”
“He’s saying that England and Japan must be united in friendship because of their royal family and imperial household.”
“Why on earth does he think that?”
I was tempted to offer a republican toast, “Up the ōshitsu!”, but restrained myself.

Suddenly, the man’s face grew serious. He uttered a guttural growl and fell off his barstool.

To the right of Karaku is a bar emblazoned with declarations of fan fervor for four of Hokkaido’s pro and semi-pro sport teams: the Nippon Ham Fighters (baseball), Consadole Sapporo (soccer), Levanga Hokkaido (basketball), and Espolada Hokkaido (futsal). Sport fans are prey to the most optimistic of biases—the blind conviction, in the face of often onrushing lava streams of evidence to the contrary, that this season the pennant will come to its rightful home—but aside from the Ham (or the Meat Packers, as their sponsors unromantically call themselves in English), who are a regular presence in the Japan Series, the performances of this quartet must test the sunniest of dispositions. Consadole Sapporo oscillate between the first and second divisions, have never won anything other than promotion, and are about to be demoted to the second, demotion determined more swiftly than it has been for any J-League team, on a current record of played 29, won four, drawn two, lost 23, and a -49 goal difference. Levanga Hokkaido have only once tasted more victories than defeats in the five seasons since they were formed, have finished last twice and second-to-last twice in the eight-team Japan Basketball League, and started the 2012-2013 season with five straight losses. That the team features a guard who is 42 years old does not inspire confidence for their prospects. Espolada Hokkaido finished last season in ninth place in the ten-team Futsal League. Testosterone levels in the bar must be semi-permanently depressed.  

Out-of-the-way spots like Wakkanai are the last bastions of that endangered species, the unchained coffee shop. The intense slab-serif font is for me a madeleine ticket back to childhood.

Fancifully, I like to kid myself that the blue-bonneted woman waiting for the bus in Wakkanai, 2012, is the child in this photo, waiting for the bus in Wakkanai half a century before, and that the bus, like Godot, never came—and never will.

It’s the contrast between public-sector affluence and private-sector squalor, precisely the opposite of what prevails in the West, that’s so mesmerizing. To drape this trio with a negligee of statistics, the number of shops in Wakkanai fell by a quarter between 1999 and 2007, the number of people they employed fell by close to a fifth, and their aggregate annual sales fell by a sixth.

Historically, the Wakkanai economy rested on three planks: the fisheries, farming, and tourism. The fisheries were the first to be hit, with the Soviet Union’s 1977 imposition of a 200 nautical mile exclusive fishing zone; the catch fell by four-fifths between 1976 and 2008 and its value by two-thirds. The implosion of the fisheries coincided with the population peak in 1975, at 55,500. By 2010, the population had fallen by close to 30%, to 39,600, due mainly to an exodus of young people in search of work. If you are going to run a successful cinema, young people are what you need, and Wakkanai does not have many of those, or at least not nearly as many as it once did: the population of 15-29 year olds more than halved in the three decades between 1975 and 2005 and fell by more than a quarter in the decade between 1995 and 2005 alone. As measured by production value, farming—mostly dairy cattle—peaked in 1985 and has been gently ebbing ever since, with the number of farm households falling by a third between 1990 and 2005. Fickle tourism stepped in to fill the breach.

That this ghastly 1952 trawler owner’s residence has been turned into a museum should be enough to convince that Wakkanai itself is bereft of tourist charm: its appeal lies chiefly as a portal to the Rishiri-Rebun-Sarobetsu National Park, and in particular the volcanic-dramatic  island of Rishiri, seen here at dusk.

Wakkanai then fell prostrate victim to one of the cruelest and oddest of boomlets, the remote island boom (離島ブーム) of 1998-2002. The total tourist count, including day-trippers, peaked in 2002 at 818,000 and fell 43% to 456,600 in 2011, while the total number of nights spent in Wakkanai accommodation peaked in the same year at 473,700 and fell 25% to 356,500 in 2011, as tourists were lured away by whatever the TV wide-shows told them was hot that season. In 2002, Wakkanai was declared a kaso chiiki, a district of underpopulation, and by 2007, according to an admittedly unsourced comment at the Wakkanai Wikipage, 29.9% of Wakkanaikers were telling municipal pollsters they either wanted to move out of the city or were actually planning to do so.

“And into this you built not just a cinema, but a miniplex with three screens and 250 seats?”

On the day after I returned to Tokyo, an optimistic article in the Nikkei—and the Nikkei, which sees its primary responsibility as being to rustle those pom-poms as a cheerleader for corporate Japan, always likes to look on the bright side of life—enthused about how entrepreneurs are endeavoring to infuse fresh life into smaller cinemas, defined here as ones having fewer than five screens (a category into which T-Joy Wakkanai most definitely falls) by making them more distinctive, but even the optimism of the Nikkei could not disguise the bleakness of the outlook for smaller cinemas, whose nationwide screen-count, it reported, had fallen by 60% in the last decade, from around 1,250 to 500. Another Nikkei article I unearthed revealed that annual ticket sales had been pancake flat at 160mn-170mn last decade, before cratering to 145mn in the crisis year of 2011. As go ticket sales, so go box office revenues, which held steady at around Y200bn for a decade before slumping to Y180bn last year.

“And into this you built a miniplex and have the temerity to charge Y1,800 ($22.50) a ticket, when incomes in Wakkanai are half those of Tokyo, where tickets cost the same?”

My rule-of-thumb—whence it came I know not—has always been that no cinema, either miniplex or multiplex, is viable in a Japanese city with fewer than 100,000 potential cineastes. Was I right, though? Anoraks on and away we go! There are only three places on Hokkaido with fewer than 90,000 people that have cinemas: Wakkanai, Nayoro (31,000), home to a magnificent 1973 single-screen flea-pit, the Nayoro Daiichi Denkikan (the Nayoro Number One Electric Pavilion, 名寄第一電気館), named in tribute to the first cinema in Japan, and Urakawa (14,000), home to the 93-year old, 48-seat Daikokuza (Big Black Theater, 大黒座), both of which are firmly on my next Hokkaido itinerary. In contrast, everywhere with more than 90,000 people has at least one multi-screen movie house.

Anorak aglow with excitement, I expanded my unscientific analysis to 10 randomishly chosen ruralish prefectures and found just four cinemas in places smaller than Wakkanai: two were in the suburb-shadows of biggish cities, one was a 96-seater relic in the Tochigi town of Motegi (14,000), and one a true mystery. (If anyone can explain why there is an eight-screen, 1,494-seat multiplex in the Ishikawa city of Kahoku [34,000], do please get in touch). Between them, these 10 prefectures have 46 cities with populations between 40,000 and 90,000, but just six have commercial cinemas. However, there are only five cities with more than 120,000 folk that are cinema-less, the largest being Ashikaga (152,000) in Tochigi. My rule-of-thumb, it turns out, was more or less on the money.

There are two ways of forensically examining the viability of a cinema: from the inside and from the outside. Not having access to the books of T-Joy Wakkanai, which is owned by a subsidiary of one of the old Golden Age Big Six movie studios, Toei, we’ll have to go for the outside approach. Time to brush up that kindergarten maths… T-Joy manages to squeeze 20 showings out of its three Wakkanai screens (wring that asset dry!)

Theater 1: 66 seats, seven showings = 462 people/day
Theater 2: 86 seats, six showings = 516 people/day
Theater 3: 98 seats, seven showings = 686 people/day
Total: 1,664 people/day

At the 2010 census population of 39,600, it would take just 24 days for whole of Wakkanai to go to the cinema once. Assume 1.33 cinema visits a year, the national average of late, and it would take 32 days for the whole of Wakkanai to complete the ritual of its annual movie excursions. What happens in the other 11 months of the year?

Alternatively, look at it like this: 1,664 seats/day x 365 days a year = 607,360 people/year capacity; with 52,669 visits @ 1.33/year = seat occupancy rate of 8.7%.

So now you know: if you turn up one icy February day in Wakkanai, when the wind chill makes it feel like twenty below, and fancy catching a matinee, you probably won’t need to book ahead. Whoever said that Spike serves no practical purpose?

Eight point seven percent. That is a vanishingly low occupancy rate for a bums-on-seats operation: hoteliers, railway operators, and airlines only stop sweating and start smiling when their occupancy rates hit 60%-70%. As it turned out though, I had more to learn about the business model of the movie world, and learn it I did, from Entertainment Industry Economics: A Guide for Financial Analysis, by Harold L. Vogel, writing here of the US:

It can be determined that in 2009, the maximum theoretical annual gross, based on 39,717 screens, was about $286 million per day or about $104 billion per year. The industry obviously operated well below its theoretical capacity, because there are many parts of the week and many weeks of the year during which people do not have the time or inclination to fill empty theater seats: in 2009, the industry’s average occupancy rate per seat per week was roughly 2.3 times, and box office receipts of around $10.6 billion in 2009 were thus only around 10.2% of theoretical capacity.

So T-Joy Wakkanai might after all be only a percentage point or two from normality—and, presumably, profitability! Don’t get too optimistic. This begs the question of why small-city Japan isn’t stuffed to the gills with miniplexes, to which my best, uninformed, answer is that the economies of scale only kick in at above, say, a 500-seat, five-screen level: much of what little money there is to be made from showing movies comes from the food and beverage (F&B) concession, with its 80% (my guess) cola and popcorn margins, which can be run by one uneconomically for 100 punters or economically for 500. (Should you be interested, by the way, T-Joy Wakkanai is hiring for its F&B concession, although at the low end of the Y680-Y850 hourly wage range, it will take you more than two-and-a-half hours to coin the dough to watch a flick). And what of the future? The projected 2035 population of 26,700, which may need to be cut given recent rates of outflow, and only one cinema visit a year yields a seat occupancy rate of 4.4%, at which point, presumably, T-Joy would pull the plug—although subsidies (and parent earnings) can soothe the sting of failure for so long…

Back in the sixties, Wakkanai had four cinemas—here you can see the Wakkanai Nippon Gekijo in all its tatty glory, showing a 1961 Michael “play it, Sam” Curtiz/John Wayne oater, The Comancheros (no wonder so many with a shred of sense gave up on the movies)—but the last one closed its doors in 1988, done in by the usual suspects.

All that was left, then, was to track down the optimists behind the cinema revival. They had, I figured, to be local, and they had to be dreamers.

Yukihiro Fujita, chair of the company, Saihoku Cinema (a consortium of eight local construction companies), that administers the nuts and bolts of the miniplex, and Ippei Takahashi, the president, first meet in 1992 when Takahashi, who was running a video rental store, calls on Fujita, the boss of a construction company, Fuji Kensetsu, to expand his store. Takahashi had long been hurt by criticism that he and his ilk had killed the cinema, while Fujita was shocked when his young son misidentified the local culture center as a movie theater. In 2001, the pair take undubbed anime movies without subtitles to Sakhalin, where they receive a rapturous reception from the local children, and they awaken to the presence of cinemas everywhere on the island. What exactly happens next is glossed over in the sole interview with them I was able to dig up, but with Fujita the chair of the Wakkanai Construction Association and thus a pillar of the community, it’s not hard to imagine. Fujita claims that breakeven comes at 60,000 bums-on-seats a year (so I was, gratifyingly, not at all far off in my guesstimate), which would require 1.5 cinema visits/year from the good burghers of Wakkanai, but he defines the catchment area as anywhere within a 90km radius of Wakkanai, in which 78,000 live, and aims for annual attendance of 100,000. Much as I sympathize with the aspirations of the optimist, I struggle to conceive of anyone in, say, Esashi making a 180km round-trip on roads treacherous with ice half the year for the disposable visual and auditory pleasures of—what’s on this week?—The Bourne Legacy, The Hunger Games, or Bayside Shakedown: The Final.

Yet on they dream, the optimists, and on they build.

**********

The evidence suggests that an optimistic bias plays a role—sometimes the dominant role—whenever individuals or institutions voluntarily take on significant risks. More often than not, risk takers underestimate the odds they face, and do not invest sufficient effort to find out what the odds are. Because they misread the risks, optimistic entrepreneurs often believe they are prudent, even when they are not.

Thinking, Fast & Slow, Daniel Kahneman

Bitter oranges

“There’s a place just over the road that’s calling itself a bistro and looks like it’ll have a decent enough supply of Chateau Chunder.”
Dr T’s Aomori City hotel room floor was strewn with scores of seed-filled Manila envelopes, while the bathroom floor had sprouted a muddy volcano of soil, leaf-litter, and amorphous forest detritus. Had the room been fitted with ceiling-embedded surveillance cameras, he would have faced instant arrest as a one-man mobile drug laboratory.
“With you in ten!”

Bistro Daidai, we learned at the end of yet another wine-trodden evening, was named after the bitter orange (aka 橙, “the climbing tree”, Citrus aurantium var. daidai, Seville orange, sour orange, bigarade orange, and marmalade orange). Why, I never got so far as to ask. It had three tables seating four and half-a-dozen seats at the counter. We were the first customers that Friday night. There were three twentysomethings behind the counter, a woman and two men, one of whom cackhandedly spilt wine all over the table—and me. The table was mopped clean and toweled dry but I was left with bruise-blotched trousers. How long had they been open? About four months, came the reply.

Dr. T grew glum. “You know, we don’t do these micro-restaurants in the UK.” Dr. T likes to claim that sauce-soaked years of depression have dulled his sense of empathy, but as a former junk-bond analyst well versed in the ways and woes of troubled enterprises, a man who once described himself in an essay titled On Optimism as “Mozart to the Salieri of really bad decisions”, a twice married (“the triumph of hope over experience”) part-owner of a London trattoria, and a (necessarily optimistic) nursery entrepreneur who flirts with failure the way a lothario flirts with the ladies, I could tell that, as we wolfed down pâté de campagne that would not have disgraced a prix fixe menu in the Dordogne, he was sizing up the bistro’s chances of survival—and was pained at the message the mental spreadsheet sent.

Conversation turned to the contrasting approaches to bankruptcy in the US, the UK, and Japan, with Dr T sagely concluding that the UK offers the worst of all worlds: in the US the banks are quick to call in loans but there is little stigma attached to bankruptcy, in Japan there is stigma but the banks are infinitely forbearing, while in the UK the banks are brutes and the stigma remains acute.

Later, alone, I cradled a glass of red up to one of the city’s busiest intersections and loitered awhile, tallying up the percentage of taxis with passengers this Friday night—about one in ten. It was hard, I felt keenly, to be optimistic about the fate of Bistro Daidai. 

To the outsider, Japan, with its stratospheric suicide rate and sober demeanor, is not obviously a hotbed of optimism, and indeed the Japanese delight in telling pollsters that they will cede to noone in their pessimism about their nation’s prospects, but I would invite you to take the three case studies above, and the optimism embedded in the sundry acts of creation, as evidence, albeit fragmentary and partial, to the contrary. This should come as no great surprise, though, as psychologists and neuroscientists have made great strides in recent decades in the study of the enigma of optimism, and the evidence is mounting that we have been hard-wired by evolution to be genetically (more or less) optimistic. Here’s Tali Sharot, neuroscientist and author of The Optimism Bias: Why We’re Wired to Look on the Bright Side, on our ingrained propensity for optimism:

How is it that people maintain this rosy bias even when information challenging our upbeat forecasts is so readily available? Only recently have we been able to decipher this mystery, by scanning the brains of people as they process both positive and negative information about the future. The findings are striking: when people learn, their neurons faithfully encode desirable information that can enhance optimism but fail at incorporating unexpectedly undesirable information. When we hear a success story like Mark Zuckerberg’s, our brains take note of the possibility that we too may become immensely rich one day. But hearing that the odds of divorce are almost one in two tends not to make us think that our own marriages may be destined to fail.

Why would our brains be wired in this way? It is tempting to speculate that optimism was selected by evolution precisely because, on balance, positive expectations enhance the odds of survival. Research findings that optimists live longer and are healthier, plus the fact that most humans display optimistic biases—and emerging data that optimism is linked to specific genes—all strongly support this hypothesis.

Perhaps you’re an optimist—or at least some of your best friends are optimists (likely). Perhaps you think that tomorrow really will be better than today, and the day after tomorrow will be better still (unlikely), or that, like Charlie Brown, this time Lucy really won’t take away the football at the last moment (very unlikely), or that the Japanese stock market really will one day recapture its Bubble luster (still more unlikely). [Finance industry wisecrack: “What’s the definition of an optimist?” “A Japanese equity portfolio manager who irons five shirts on a Sunday night.”] Perhaps even I, guilty as I am of entrepreneurial acts, perhaps even I am an optimist. If you are an optimist, then I wouldn’t want you on my team if I were planning something novel and resource-intensive—bring me the morose and misanthropic. But praise be heaped on the shoulders of those who sacrifice their wealth, if not their health, to bring us, however fleetingly, eateries where none, in a world of depressive realists, would be, and on the shoulders of those who conspired to restore the simple magic of projector, screen, and dark expectant hush to a struggling city at the end of the world.

Idiot Wind: Thomas Pascoe

Idiot wind, blowing every time your move your mouth,
Blowing down the backroads heading south,
Idiot wind, blowing every time you move your teeth,
You’re an idiot babe,
It’s a wonder that you still know how to breathe.

Idiot Wind, Bob Dylan

Sometimes I get tired of doing all the heavy lifting. So welcome to an occasional feature in which you get to do it for me! Here’s an “article” from The Telegraph, which I believe once used to be a semi-serious, if comically Conservative, newspaper (remember them) in the UK. Tell me what’s wrong, after the bio, with the following (link to the full article at the headline). Or you could tell Mr Pascoe directly at his contact details below:

Thomas Pascoe worked in both the Lloyd’s of London insurance market and in corporate finance before joining the Telegraph. He writes about the financial markets. His email is thomas.pascoe@telegraph.co.uk and his Twitter address is @PascoeTelegraph

At last, Japan may be about to abandon its disastrous Keynesian consensus

The world’s third largest economy is in crisis. That, in itself is not news. The world’s largest economy is also in crisis, as is its second, as is…

What is newsworthy is that, having tried and failed with every other option, the Japanese government may be taking a remarkably novel approach. It appears as though they are going to try to spend close to what they receive in taxation. The Keynesian consensus is coming to an end in Japan, although not before it has wrought enormous damage to one of the world’s great economies.

“The government running out of money is not a story made up. It’s a real threat,” said Japan’s finance minister Jun Azumi on Friday. Opposition parties in Japan are blocking a deficit financing bill which would allow the government to continue to drive its debt levels above 200pc of GDP. If the opposition holds firm, the government has threatened the unthinkable – it will spend less. Tax rises are also on the table, although the doubling of sales tax to 10pc will not come fully into force until 2015.

(abridged)

However, Japan’s horizons have been blighted by cloud for much of the past two decades. If anything, those clouds are now blackening. The long-term impact of the Fukushima explosion, in terms of public health, is anyone’s guess. The clean-up work undertaken in and around the plant since the explosion has been exceptional. However, there is every chance that the generation coming to maturity in the next two decades may be blighted by significant levels of incapacity, hampering the economy and requiring even greater state spending.

The Japanese may have arrived at the idea of moving towards a balanced budget both 20 years late and by accident, but it offers them a chance to consolidate and restore order to the public finances. At a time when public appetite for government debt has fallen to a seven-year low, reducing borrowing is not just the sensible option, it’s the only one left.

The end of the line?

The Iwaizumi line, a spur which runs for 38km and nine stations up the rugged middle of Iwate prefecture in Northeastern Japan, from the hinterland of the fish city of Miyako, mauled by the tsunami, to the cow town of Iwaizumi, whose 10,400 residents are spread out across a territory of 992km2, half as large again as Tokyo’s 23 wards, with their nine million residents, is notorious—at least among observers of these phenomena—for being the least trafficked line in the whole nation, with average daily ridership per kilometer of 46 people in fiscal 2009, one 23,000th the ridership density of the Yamanote loop line in central Tokyo. Half of it was built during World War II, prompted by military demand for clay for flame-resistant brick for industrial purposes, but it was not completed until February 6, 1972, an astoundingly late date and one by when the demographic future of Iwaizumi, then home to some 21,000 people, was already on the wall, as scrutiny of the photo below of Iwaizumi station on opening day (and also in 2003) might suggest.

The line, up and down which three trains a day trundle, led for many years a charmed life: it was targeted for the axe at the privatization of Japanese National Railways in 1987, just 15 years after completion, but escaped because the road that runs more or less parallel with it and is the only route into Iwaizumi from the south is not wide enough in many places for two cars to pass and is treacherous in winter. East Japan Railways (JR East), which inherited the line post-privatization, tried again to get rid of it in 1996, but was rebuffed. Then, on Saturday July 31, 2010, at 07:33, disaster struck. Loosened by hours of torrential rain, rocks had fallen at the end of a tunnel 24km up the line, and into them the single-carriage northbound morning train ploughed and derailed.

Most accounts say there were seven passengers and two crew—astoundingly the line was never converted to driver-only operation—on board at the time, although my fourth-hand sources tell me that at a recent presentation, JR East asserted that there were only three passengers, and all of them were train-spotters. The Japan Times reported the incident the next day thus:

A 63-year-old man suffered a graze, while a 48-year-old man badly hit his shoulder and leg, the officials said. Another passenger who felt ill and the 28-year-old driver, whose back was slightly injured, were sent to a hospital.

Naturally, the derailment featured prominently on the national evening news broadcasts and in the pages of the national press the next day. “Naturally,” I hear you scoff, “a derailment in which four people were slightly injured on a railway line of no consequence in Iwate, so far from the centers of power, why the media hype?” Well, Saturday is a slow news day and Japan is a slow news society, it is true, but let’s take a little detour to explain the prominence afforded the derailment.

You could do worse, in attempting to explain much of what happens in modern Japan—and nearly everything that doesn’t—and by extension Korea and China, than by holding the event up to the light shone by five interlocking words, all of which share a common character: anzen(sei), (安全[性], safety), anshin (安心, peace of mind), antei (安定, stability), fuantei (不安定, instability), and fuan (不安, unease). Safety is an integral component of stability, which leads to peace of mind. Its absence leads to instability and hence to unease. These words exist like the parallel strings of a guitar: a single string can be plucked or several can be strummed at once. The Iwaizumi derailment was a clear violation of the prescription of anzensei, safety, and an infringement of anshin, peace of mind, not only of the injured but of the townsfolk of Iwaizumi, engendering in them fuan, unease, that the derailment would be consequential enough to knock the line out of commission, with the antei, stability, of the “natural” order of things, replaced by the fuantei, instability, of change–even though a replacement bus service running the length of the line was inaugurated just two days after the derailment.

On March 30 this year, JR East held a press conference at which it formally announced plans to axe the Iwaizumi line. The accompanying briefing materials, available in Japanese here and in sadly truncated English here, make for astonishing reading. Passenger numbers, never elevated to begin with, have fallen to a quarter of the level they were at in 1987 at privatization. In fiscal 2009, the line generated Y8mn (about $100,000) in revenue, not appreciably more than the annual income of a family of four (about Y6mn), yet cost Y265mn (about $3mn) to run in operating expenses, resulting in an operating loss of Y257mn, so the line loses Y32 for every Y1 it takes in. The report identifies 23 places along the line where rockfalls are possible, a further 88 where rockslides are possible, and puts the cost of ensuring the safety of the line and the safe running of trains—those words again—at Y13bn (about $150mn), mostly through the time-honored method of spraying concrete on rockfaces. To put that cost into perspective, assume that every last yen the line generates could be hypothecated to payment of the construction bill—which it cannot—and that revenues will remain static—which they will not—then it would take 1,625 years, or until around the year 3637, for the bill to be paid, or roughly a thousand years after the last inhabitant of Iwaizumi, at the current population rate to halve, pops his or her geta.

It is in many ways a marvel that something as gloriously, anarchically, emphatically antithetical to the rules of economics and the regimen of the bean-counters as the Iwaizumi line should have staggered on for as long as it has. If it is indeed axed, it will be an epochal event, marking the first closure of any JR East line since privatization and potentially opening the floodgates to other closures—of JR East’s 67 conventional, non-shinkansen lines, just 16 were profitable in fiscal 2007. The language of the briefing materials, though, is apologetic, not defiant, for the company must know that it has a fight on its hands. The Mainichi Shimbun, a national newspaper, reported on the closure the day following the press conference, in an article wholly sympathetic to the defenders of the line, under the headline, JR Iwaizumi line to be axed, users despair. After briefly recounting the history of the saga, it turned to the locals:

Users and related parties have been voicing their discontent and despair about the plans to axe the line. Shunya Kawamura (17), who took the line to get to Iwaizumi High School, said, “I’m using the bus replacement service, but there are lots of corners on the highway and I get carsick.” Most of the users of the line are Iwaizumi High School students or the elderly visiting hospitals in Miyako. It was reported that, at a residents’ rally in Iwaizumi in January, some older people said that being shaken around in a bus without toilets made them feel awful. The Hotel Ryusendo Aisan, which takes in about 3,000 railway fans and other tourists a year, has been hit hard by the disappearance of tours since the accident. Hotel boss Sadaji Nakamura warned that, “If the railway is wiped from the map, the town will gradually lose its appeal as a tourist attraction.”

As an unsentimental friend who shares my fascination with the tale snorted on reading this, “JR East could lay on a fleet of luxury coaches, hand out free motion-sickness pills, hire a troupe of can-can dancers to entertain the passengers, and still come out ahead!”

Still, a cleanly professional website to defend the line has been set up and inundated with messages of support, petitions have been organized, rallies have been held—the one mentioned above and pictured below attracted some 900 folk—and cakes no doubt have been baked.

On May 10, the Iwate Nippo reports, the deputy governor of Iwate and the mayors of Miyako and Iwaizumi lobbied the deputy president of JR East for the swift and complete restoration of the line and then met with the vice minister of Land, Infrastructure, and Transport to request that the ministry “guide” and “advise” (read: browbeat and coerce) JR East into seeing the error of its senseless thrift, to which the vice minister’s guardedly noncommittal response was to acknowledge the importance of the line while stating the need for the local authorities and JR East to talk fully to each other and search for a resolution. Conjecture it can only be at this stage, but there may be as good as an even chance that JR East can be cajoled into spending the $150mn and saving the line.

All of this fascinates but does not surprise: the love for local, loss-making lines, a fiercely nostalgic love for a past that never existed but which is no less a valid love for all that, flames in inverse correlation with the economic utility of the line. I have never had, and may never have, the pleasure of the Iwaizumi line’s acquaintance, but during the spring Golden Week vacation last year, I rode—both ways—the Tadami line, which runs 135km from Aizu Wakamatsu in western Fukushima through snow country to Koide in Niigata, which itself was only completed in 1971, and which, if the Iwaizumi line is axed, will be crowned with the twin titles of the least trafficked and most money-losing line in the empire of JR East—and just in time I was too, for torrential rain three months later swept away bridges and services have still not been fully restored. Although no commemorative run, just a regular scheduled train, it was packed with rail buffs achatter with excitement, and along the rail-side banks were dotted throngs of hobbyist photographers who vied for the best shots. Truly, madly, deeply, Japan is geek heaven.

(With thanks to A.P. for the additional reporting)

Spike: The weekend wrap

[Welcome to a new, occasional Spike feature, inspired by links kindly sent by readers that weren’t getting a sufficient airing, as well as by the miscellany of articles, graphs, book excerpts, and academic papers that I run across that don’t fit neatly into the mosaic of a regular Spike piece. I’ll try and keep the writing breezy and newsy, so as to be able to complete it over a glass of wine—or just conceivably two—on a weekend evening.]

Everyone, including me, seems to be an amateur demographer these days. It behooves us amateurs to occasionally listen to the professionals, and one such is Nicholas Eberstadt, a political economist at the formidably right-wing American Enterprise Institute (AEI). There are two sides to Dr. Eberstadt: the first is the uncontentious descriptive demographer with a powerful turn of phrase. He casts an unsparing eye over Japanese demography in his most recent piece, Japan Shrinks, in the spring 2012 edition of The Wilson Quarterly (link here, reading time approximately 15 minutes). Much of what he says is familiar enough territory to regular readers of Spike, but it’s always refreshing to have the demographic picture painted so forcefully and accurately. It’s also good to be reminded that Japan, of course, is not alone in being at the apex of a momentous demographic transition and that Germany, indeed, arrived there earlier: interestingly, the German expression for the phenomenon, schrumpfende Gesellschaft, or shrinking society, has a close parallel in Japanese, chijimu Nihon, or shrinking Japan, the title of a recent series of NHK programs on the implications of population aging and decline, although the phase is not yet in very common currency, perhaps because of widespread denial and perhaps because, unless you live on the furthest flung fringes, the shrinkage is not yet obvious. Dr. Eberstadt also throws out the odd intriguing comment that calls for further research, such as the observation that there is a “near perfect correlation between the demise of arranged marriage in Japan and the decline in postwar Japanese fertility”.

Japan’s demographic issues pale in comparison with those of Russia, and for a better understanding of those, I highly recommend Dr. Eberstadt’s 2011 article in Foreign Affairs, The Dying Bear: Russia’s Demographic Disaster (link here, approximately 30 minutes). Here’s a taster:

By various measures, Russia’s demographic indicators resemble those in many of the world’s poorest and least developed societies. In 2009, overall life expectancy at age 15 was estimated to be lower in Russia than in Bangladesh, East Timor, Eritrea, Madagascar, Niger, and Yemen; even worse, Russia’s adult male life expectancy was estimated to be lower than Sudan’s, Rwanda’s, and even AIDS-ravaged Botswana’s. … The country’s fateful leap backward in health and survival prospects is due to an explosion in deaths from cardiovascular disease and what epidemiologists call “external causes,” such as poisoning, injury, suicide, homicide, traffic fatalities, and other violent accidents. Deaths from cardiovascular disease and injuries account for the overwhelming majority of Russia’s spike in mortality levels and for nearly the entire gap separating Russia’s mortality levels from those of Western countries. At the moment, death rates from cardiovascular disease are more than three times as high in Russia as in Western Europe, and Russian death rates from injury and violence have been stratospheric, on par with those in African post-conflict societies such as Liberia and Sierra Leone.

Is there an elite on earth more cravenly corrupt and more openly contemptuous of its subjects than the Russian oligarchy?

The other side of Dr. Eberstadt is the prescriptive, rather than the descriptive, demographer, the opponent of Al Gore and other neo-Malthusian proponents of population stabilization—whom he damns as the “old anti-natalist crowd”—the self-appointed flayer of supposed shibboleths about the determinants of fertility rates and other population nostrums such as “overcrowding”, on display best in his 2002 AEI essay Population Sense and Nonsense (link here, approximately 20 minutes). I happen not to share his sunny demographic optimism, but it’s always constructive to read the well-rehearsed views of an adversary, even when you can drive a coach-and-horses through their lacunae, and also to be reminded of the root cause of the 20th century global population explosion: it was “not because people suddenly started breeding like rabbits—rather, it was because they finally stopped dying like flies.”

Remaining on demographic turf, my chart of the week is below (click on it for a clearer resolution). It shows nothing more—or less—than the Japanese total fertility rate by prefecture at selected intervals from 1925 to 2010. For what is merely a collection of 765 numbers ranging from 6.47 (Aomori, 1925) to exactly 1.00 (Tokyo, 2005) in a grid, this chart provides the flab-bellied armchair demographer with a feast of fascination and speculation.

Start at the very bottom row, which is the nationwide figure, and note that the fertility rate has been rising off the 2005 low. Memo to self: remember to haul out the BS detector every time I hear someone talking about Japan’s “falling birthrate and aging society”—they are either ignorant, lazy, or deliberately trying to mislead.

Moving up a row: Okinawa. Why is it such a perennial fertility outsider, going from having the second lowest fertility rate in 1925 to the highest fertility rate for every single survey year from 1970 to 2010? Is this somehow a legacy of the 1945-1972 US occupation?

Moving up to the top seven rows, which show Hokkaido and the six prefectures of Tohoku, why is the 2010 fertility rate so generally low, with Hokkaido, Miyagi, and Akita being three of only four rural prefectures with rates below 1.30 (the other is Nara), why has their bounce off the 2005 low been so weak (indeed, it hasn’t occurred at all in Akita and Yamagata, where the fertility rates have continued to decline, the only prefectures aside from Yamanashi for which this is true), and what are the implications for post-earthquake recovery?

And finally, note that the prefectures with the highest fertility rates (over 1.6) are all in Kyushu (Miyazaki, Kumamoto, and Kagoshima), and that of the 13 prefectures with fertility rates over 1.5, all but two (Fukui and Fukushima—all those once stable nuclear power industry jobs?)—are in the west of Japan, which all things being equal, would suggest a barely perceptible but relentless shift in the population center south and west, as is occurring in the US.

Finally on the demographic theme, another chart, this one home-made. It occurred to me, rootling through the data last week, that the population tipping-point was creeping ever closer to the capital, so I ran for myself the numbers on the greater Tokyo metropolitan area, the shutoken, for which I used the 2005 and 2010 census data and the April 2012 population estimates (suikei jinko) that are compiled, I believe, by each and every municipality, based on the census and simply adding or subtracting births, deaths, in-migrants, and out-migrants (demography, although important, is not by any means rocket science…) As for accuracy, we can be sure that next to all births are registered and that all deaths—apart from the odd mummified centenarian whose avaricious relatives want to continue claiming the welfare benefits of the deceased—are registered. Some inaccuracy may result from underreporting of changes of domicile, however, so a measure of caution is warranted. Nevertheless, the results speak of a momentous change afoot.

October   2005 October   2010 April   2012  %   chg
Yamanashi 884,515 862,772 852,855 -1.15%
Gunma 2,024,135 2,008,170 1,994,309 -0.70%
Tochigi 2,016,631 2,007,014 1,993,283 -0.69%
Ibaraki 2,975,167 2,968,865 2,945,505 -0.79%
Saitama 7,054,243 7,194,957 7,204,353 +0.01%
Chiba 6,056,462 6,217,119 6,195,643 -0.34%
Kanagawa 8,791,597 9,049,500 9,052,730 +0.00%
Tokyo 12,576,601 13,161,751 13,182,509 +0.01%
TOTAL 42,379,351 43,470,148 43,421,187 -0.01%

The real surprises here are Kanagawa (Yokohama and its hinterland) and Tokyo itself, whose populations were not projected to peak until 2015 and 2020, respectively, and it may be that we are still a few years away from the Great Stall. It may equally well be, though, that the last six months or so has seen a definitive end to the thousand years of expansion in which an anonymous fishing village was plucked from obscurity to become the largest city in the world by the early 18th century and again, after World War II, the largest megalopolis and the most intense concentration of wealth the world has ever seen, with an economy twice the size that of the nearest challenger, New York, an economy that would, were it independent, give it a GDP about the size of Russia.

I learned a neat little demographic trick this week: how to use the Rule of Seventy (the natural log of two is 0.693) to calculate a population’s halving (or doubling) time. For Yamanashi, the most rural and most demographically challenged prefecture in the greater Tokyo metropolitan area, for instance, the maths looks like this: 69.3 ÷ ([-1.15% ÷ 18] x 12) = 90.4 years. For Akita, the prefecture where population decline set in first (1980), has been greatest (-15.1% from peak to date), and is steepest, the time to halve is currently 58.6 years. (Note that in the case of a population with rising net mortality, time to halve in years is not static, but contracts as the decline accelerates).

Well, that was rather dry, wasn’t it? Time for lashings of humor and violence. Here’s an assortment of titles of self-help books inspired by the Japanese mob: Yakuza Techniques for Overcoming Business Hurdles through Successful Speaking and Listening (2006), Modern Yakuza Tips for Making Cash (2008), Choosing your Man: Yakuza Tips for Telling a Winner from a Loser (2008), Management Skills of the Yamaguchi-gumi (2005), and my personal favorite, Yakuza Techniques for Dealing with Complaints (2010). Initially, I had a hard time believing these books really exist, but a moment at amazon.co.jp was enough to convince—and there are dozens of other self-help books out there with similar titles. Which goes to underscore what has been long known—that there are too many books being published, and too many self-help books in particular.

These come from a nothing short of brilliant survey of the current state of the Japanese mob by Andrew Rankin, a PhD student (but with a 20-year stint in Japan behind him) at my alma mater, Cambridge University, whom I recently contacted having been misled by the Internet rumor-mill into believing he was writing a new biography of Yukio Mishima. He’s not, but the translation of a Mishima biography penned by Tokyo Deputy Governor Naoki Inose is due out in November.

The two-part yakuza survey is here and here but needs a solid hour of concentrated attention. If you don’t have the time to spare, here’s the summary: less money, less power, less violence, more ingenuity, staying parochial, getting older, going deeper underground, fewer tattoos, and lots fewer missing pinkies. Like Mr. Rankin, I can’t help but feel the yakuza crackdown of the last decade or so is potentially counterproductive: would you rather have organized crime—and the Japanese mob has historically been supremely organized—or disorganized crime? I’d go one wholly speculative step further, too, and say that the crackdown is but one more manifestation of an incipiently totalitarian state that brooks no serious opposition to its crushingly rigid and drearily passé petit-bourgeois ideology.

Causing a bit of a media brouhaha in recent days has been a report, Global Japan: 2050 Simulations and Strategies, by the 21st Century Public Policy Institute, a public policy think-tank (dread words!) affiliated with Keidanren, which for those not in the know is a pro-business lobbying organization akin to the Confederation of British Industry in the UK or the Chamber of Commerce in the US. The link is here (approximately 10 minutes). The eccentric English (“if perchance financial collapse does occur”) suggests that, for all of the hot air about internationalization and globalization, no native speaker had a hand in its production. The two key takeaways are that the debt-to-nominal GDP ratio sails blithely past 300% in the early 2030s and on up to around 600% by 2050, even if the consumption tax is doubled to 10% by fiscal 2015, and that under all four scenarios, even the rosiest, GDP turns negative by the decade from 2031 to 2040. That rosiest scenario sees women’s labor force participation rate rise to rank on par with that of Sweden, and indeed, the very first (nebulous) policy recommendation is: “Promote labor participation of women and the elderly, and strengthen the workforce from young to senior workers.”

Keidanren may be practicing what it preaches about labor force participation by the elderly—shaggily-eyebrowed Chairman Hiromasa Yonekura is a sprightly 74—but as for labor force participation by women—at least in roles less menial than pourers of tea and makers of photocopies—not so much. Of the 18 chairs and vice-chairs, how many are women? Ah yes, none. Of the 17 chairs and vice-chairs of the Board of Councillors? None again. Among the 108—108!—chairs of policy committees, we might hope to find at least a token woman, right? Wrong. As a wag once quipped of Japanese corporate boards, the higher echelons of Keidanren make a Brigham Young University graduation photo look like a Benetton ad…

That alone is enough, I think, to cast doubt on the rosiest scenario and reason to expect a post-growth society to set in, to the delight of the degrowther advocates of décroissance, sooner rather than later, perhaps as soon as the coming decade. As is the overall quality of the report, with the strident alarmism—Japan is going to lose developed country status, Japan is going back to the Third World!—of the first slide undermined by the last slide, which has Japan sandwiched between the UK and Germany in 2050 per capita GDP. Presumably the alarmism is designed to foster public backing for the Keidanren agenda, but it’s hard to see what it contributes to the public debate, save to expose the think-tank’s vacuity. Still, as a friend forever likes to remind me when I point out the pointlessness of much developed-nation economic activity, we all have to put food on the wolf and keep the table from the door.

To return to demography (not that we ever really left it), here’s a demographic quiz. There’s a free lifetime subscription to Spike for the closest answer! (Oh, wait…) At the 2010 census, there were 253 cities across the nation with populations under 50,000. They form the backbone of rural Japan, ranging in size from Masuda in Shimane, at 49,925, to poor old Utashinai on the Sorachi coalfields, at 4,390, less than half the size of the next smallest city, and from Wakkanai, at the northernmost tip of Hokkaido, where the population has fallen by about a third from its 1975 peak, to Ishigaki, south of Taipei, where the population rose by about a third from 1970 to 2010 (trite moral of the story—people prefer living in subtropical paradises to wind-blasted and snow-swept fishing towns). Here’s the question: since the 2010 census, how many of the 253 have experienced population growth? (And no, the answer’s not none).

Finally, the photos of the week. One of the consequences of stopping shopping, as I did many moons ago, is that you eventually run out of clothes, which is inconvenient, as nudism as a hobby can only be practiced in the summer months, and also of footwear, so lately I have been down to three pairs: work shoes purchased around 2004, hiking boots purchased around 2002, and these Indonesian-made Nike trainers, purchased around 2000.

Tiring of gluing and regluing the soles to the uppers, I surrendered last weekend and splashed out on some new ones. Allow me to do something endearingly characteristic to animist societies such as this one, and address these inanimate objects directly with a funeral oration before consigning them to the incinerator of history.

So, dear shoes, I bid you a big old otsukaresama—you must be tired—and thank you so very much for carrying me to every single place that Spike has visited, to the northernmost, easternmost, southernmost, and westernmost tips of mainland Japan, to Brunei and to Bali and—many times—to Britain, for the untold millions of footsteps we have trodden together, for protecting my feet from snow and slush, from torrents and rivers of rain, and from mud and rubble, to name just a few of the host of threats to which an unshod foot is prey. You’ve had a hard life in my hands, I know, but I’d like to think it was a long and fruitful one. Goodbye, my faithful friends, goodbye.

Next time, there’ll be no demography, I promise. Until then…

Spiked: Eamonn Fingleton

The inability to change one’s mind in light of new evidence is perhaps the greatest obstacle—bar stupidity—to attaining the wisdom with which our evolved psychologies burden us.

Alphatuosity blog

When the facts change, I change my mind. What do you do, sir?

J. M. Keynes (attributed)

The Myth of Japan’s Failure
The New York Times, January 6, 2012

DESPITE some small signs of optimism about the United States economy, unemployment is still high, and the country seems stalled.

Time and again, Americans are told to look to Japan as a warning of what the country might become if the right path is not followed, although there is intense disagreement about what that path might be. Here, for instance, is how the CNN analyst David Gergen has described Japan: “It’s now a very demoralized country and it has really been set back.”

But that presentation of Japan is a myth. By many measures, the Japanese economy has done very well during the so-called lost decades, which started with a stock market crash in January 1990. By some of the most important measures, it has done a lot better than the United States.

Japan has succeeded in delivering an increasingly affluent lifestyle to its people despite the financial crash. In the fullness of time, it is likely that this era will be viewed as an outstanding success story.

How can the reality and the image be so different? And can the United States learn from Japan’s experience?

It is true that Japanese housing prices have never returned to the ludicrous highs they briefly touched in the wild final stage of the boom. Neither has the Tokyo stock market.

But the strength of Japan’s economy and its people is evident in many ways. There are a number of facts and figures that don’t quite square with Japan’s image as the laughingstock of the business pages:

• Japan’s average life expectancy at birth grew by 4.2 years — to 83 years from 78.8 years — between 1989 and 2009. This means the Japanese now typically live 4.8 years longer than Americans. The progress, moreover, was achieved in spite of, rather than because of, diet. The Japanese people are eating more Western food than ever. The key driver has been better health care.

I only really have one word to say to this: Cuba, which according to the WHO had an average life expectancy at birth of 74 in 1990 and 78 in 2009, despite being an “economic basket-case”. Manifestly, the strength or otherwise of a developed country economy only has the scantiest of bearings on longevity or life expectancy gains. Indeed, hampered by a high initial starting point for life expectancy, Japan’s gain over the last two decades looks distinctly mediocre on an international comparison.

                            1990    2009      Gain

Japan                  79          83            4

Australia             77          82          5

Brazil                   67          73           6

Canada                77          81           4

China                  68          74          6

France                 77          81          4

Germany             75          80          5

Italy                      77         82          5

Korea                   72          80         8

New Zealand      75         81         6

Spain                   77         82          5

UK                       76          80          4

US                       75          79          4

I particularly relish Fingleton’s breezy explanation, unsubstantiated by any evidence (of course), for the cause of the gain in life expectancy over the last two decades, even though isolating the factors at work in changes in life expectancy is widely regarded to be notoriously difficult. The Japanese may well be “eating more Western food than ever”, but they are doing so in moderation; given the startlingly low levels of obesity, which have next to nothing to do with “better health care”, it is surprising that Japan has just a one-year lead in life expectancy over, say, Italy or Spain.

For a bias-free and more disturbing interpretation of the recent Japanese longevity picture, I recommend turning to an expert. Here’s Christopher J. L. Murray, Professor of Global Health at the University of Washington, writing in The Lancet in an article titled Why is Japanese life expectancy so high? 

The third and more troubling phase for Japan begins in the mid to late 1990s. Since that time, the pace of decline in mortality for adult men and, to a lesser extent, adult women (aged 15—59 years) has been slower than other nations. Japan has fallen behind Sweden, Italy, and Australia for men and behind Sweden for women. If recent trends continue, other nations are likely to achieve lower rates of adult mortality than Japan. Given the previous two decades during which Japan remained in the top rank, this recent change is dramatic. Many explanations for this worsening relative performance are offered by Ikeda and colleagues, including high tobacco consumption compared with other high-income countries, a modest rise in body-mass index, and high and rising rates of suicide. Unstated is the hypothesis that although Japan has a universal health-care system, the quality of the care delivered might be low. Treatment coverage for high cholesterol, for example, is much lower than in other high-income countries. Given poor measures on quality of care, further reduction in mortality may require that Japan revamp its health-care system. Economic stagnation and rising income inequality could also be part of the explanation of recent trends. 

• Japan has made remarkable strides in Internet infrastructure. Although as late as the mid-1990s it was ridiculed as lagging, it has now turned the tables. In a recent survey by Akamai Technologies, of the 50 cities in the world with the fastest Internet service, 38 were in Japan, compared to only 3 in the United States. 

You can access Akamai Technologies’ State of the Internet Report by registering here. The most recent one that seems to be freely available is for 2011 Q2. Our first lesson is on the use and abuse of statistics. That the Japanese city with the fastest average Mbps, Shimotsuma, ranked 3rd in the world, is a small Tokyo dormitory community to which very few Japanese could point on a map, and that one of the Japanese “cities” in the top 50, Marunouchi, is not a city, nor even a ward of Tokyo, but a few blocks of office buildings clustered around Tokyo station, make it readily apparent that if you are a largish country for which Akamai has a lot of data collection points and you have a highish average connection speed, then of course you are going to dominate the city rankings. For a more truthful picture of Internet infrastructure, we need to turn to a country-level analysis.

In 2011 Q2, Japan ranked third for average connection speeds, at 8.9Mbps, behind South Korea at 13.8Mbps and Hong Kong at 10.3Mbps. Impressive, to be sure, but not quite the picture of global leadership that Fingleton insinuates it has. Indeed, the broader the metric becomes, the worse the picture looks for Japan: for high broadband connectivity (above 5Mbps), the Netherlands ranks first at 68% of all connections, Japan ranks 6th, at 55%, and the US 13th at 42%, while for good old-fashioned broadband connectivity (above 2Mbps), 10 mostly European countries have penetration rates over 90%, the US ranks 35th at 80%, and Japan is actually behind the US, coming in 39th place at 76%. What’s more, Japan’s high broadband connectivity actually fell 8.9% YoY and its broadband connectivity fell 12% YoY, while the rates of almost all other countries surged. Not all that stellar a performance at the broadest end of the spectrum, especially given how suited relatively small, very densely populated Japan is to the build-out of broadband.

This Akamai saga, I should add, is a textbook example of Fingletonian deceitfulness, whereby he cherry-picks a data set that severely distorts the truth and ignores the evidence that is inconvenient to his case. 

• Measured from the end of 1989, the yen has risen 87 percent against the U.S. dollar and 94 percent against the British pound. It has even risen against that traditional icon of monetary rectitude, the Swiss franc. 

The strength of the yen has absolutely no relationship with “the strength of Japan’s economy and its people”. All that yen strength is doing, on the liability side of the ledger, is to hollow out those domestic “hard industry” jobs beloved of Fingleton—an astounding 550,000 manufacturing jobs were lost in just the three months to end-November 2011, according to the latest Labor Force Survey (Japanese only)—while on the positive side of the ledger, yen strength makes agricultural and energy imports cheaper and Mr. and Mrs. Watanabe can take that retirement cruise for which they have been saving for so long a year or two earlier. I challenge Fingleton to explain the mechanisms whereby yen strength works to the sustained net benefit of the Japanese economy.

• The unemployment rate is 4.2 percent, about half of that in the United States.

Japan’s Hidden Jobless Hits 4.69mn, Worse Than After Lehman Shock
Nikkei, November 16, 2011
TOKYO (Nikkei)—The number of Japanese that want to work but are not actively seeking employment has surpassed levels from after the global financial crisis erupted, according to government data released on Tuesday. …
The hidden jobless in Japan jumped by 190,000 from a year earlier to 4.69mn in the July-September quarter, excluding the three prefectures hit hardest by the March 11 disaster, the Internal Affairs Ministry said.
The figure is nearly 70% larger than the number of officially unemployed people. It is also higher than the 4.61mn in the July-September quarter of 2009, when the employment market deteriorated sharply after the financial crisis. 

Adding the 2.80mn officially unemployed and the 4.69mn hidden unemployed together and dividing by the number of employed (62.60mn) yields a “real” unemployment rate of very close to 12%. Of course, all countries have their hidden unemployed, to a greater or lesser extent; my intention here is merely to highlight how the Japanese employment paradise that Fingleton would have his poor readers conjure up from a single statistic is not by any means as rosy as he claims. Japan’s artificially low jobless rate, kept down by a tacit agreement among players in “Japan, Inc.” (for which there is ample indirect evidence), may look attractive from the US, the UK, or any other unemployment blackspot, but paradoxically it gravely weakens the competitiveness of exporters, impedes productivity growth in the service sector in particular and economy as a whole, and serves as a massive barrier to wealth creation.

Even the headline unemployment number, while low, has more than doubled, to 4.5% in the latest Labor Force Survey, from 2.1% in 1990. And Fingleton would rather not let you in on some of the other features of the Japanese labor market in the “outstanding success story” of the last two decades: the rapid growth in the number of poorly paid non-regular workers (now approximately a third of the workforce), the evisceration of the middle class, stagnant or falling real wages, and rising inequality, all extensively, indeed exhaustively, documented in the vernacular press and readily apparent in the data. 

• According to skyscraperpage.com, a Web site that tracks major buildings around the world, 81 high-rise buildings taller than 500 feet have been constructed in Tokyo since the “lost decades” began. That compares with 64 in New York, 48 in Chicago, and 7 in Los Angeles.

Now we enter the realm of the surreal. No one of sound mind would take skyscraper construction as anything other than the loosest conceivable proxy for economic vitality. Take Rome: no skyscrapers at all by the 40-storey/150m/500ft definition, with the tallest building being the 22-storey Palazzo Eni, constructed way back in 1962. Yet who would dispute “il miracolo economico”, Italy’s equivalent of France’s long Les Trente Glorieuses post-war boom. The pace of skyscraper construction is dictated by a myriad of factors, among them cultural predilections, population densities, technical considerations, the already installed skyscraper base, and the availability of land, to name a few, with the state of the economy—as long as it is not in a state of utter collapse—at best a bit part player in the drama.

And of course Japan was busily building skyscrapers in the 1990s and beyond: the Earthquake Nation was very much a latecomer to the skyscraper party. There was no skyscraper by the above definition in Japan until arrival of the Tokyo World Trade Center Building (1970), and it was not until the 1980s that quake-resistance technologies advanced to the extent that Tokyo skyscraper designers pushed past the 150m mark with confidence. Even by 1990, neither Osaka nor Nagoya had a single skyscraper, and Tokyo a mere handful.

Fortunately I have some numbers to hand that gives a more nuanced view of the Tokyo office market than Fingleton cares to concern himself with. They slice the data a different way: here we are dealing with office buildings with gross floor areas of over 10,000 meters squared. As the Bubble inflated, the number of these buildings going up rocketed, and remained in the 40-50 annual new build range between 1989 and 1994, before collapsing to around 15 annually in 1999-2001. There was a spike up to 42 in 2003, which was the consequence of large tracts of former Japan Railways marshalling yards becoming available at Shiodome and Shinagawa in the late 1990s, coupled with the colossal Roppongi Hills complex, but the 1994 Bubble high of 47 buildings (I count 1994 as part of the Bubble era for these purposes because of the three to five years it takes to build a large Tokyo office block) was never regained. Mori Building, a major property developer, expects the supply of office buildings of this size to collapse over the next few years, falling to just five in 2015.

There’s another way of slicing the data, too: total office space in Tokyo’s 23 wards. Let’s compare 1980-1994 (the end of the Bubble for real estate) and 1994-2009. For the former period, office space rose from 33.2mn meters squared to 65.7mn, effectively doubling. For the latter period, it rose from 65.7mn meters squared to 89.6mn, up by just over a third, a marked slowdown in growth indeed, with the annual percentage gain between 1999 and 2009 exceeding 2.0% in only one year, very much what you would expect in an economy with nominal GDP growth closing in on zero.

Skyscraper demand has been driven by the shift to service industries (another belated phenomenon in Japan that helps to explain why the skyscraper boom came late), more office space per worker (a trend that has gone into sharp reversal if my experience is anything to go by), and of course population growth (up by a quarter in Tokyo and its three key surrounding prefectures between 1980 and 2010). But the Tokyo Metropolitan Government, in its Tokyo Worker Projections, expects the number of office workers in Tokyo’s five central wards, which had been rising last decade, to flat-line between 2010 (1.88mn) and 2020 (1.86mn), which does not bode well for asking rents, which are now at a post-1990 low, vacancy rates, which are now at a post-1990 high, nor the future of skyscraper construction, apart from the odd replacement one, in Tokyo. 

• Japan’s current account surplus — the widest measure of its trade — totaled $196 billion in 2010, up more than threefold since 1989. By comparison, America’s current account deficit ballooned to $471 billion from $99 billion in that time. Although in the 1990s the conventional wisdom was that as a result of China’s rise Japan would be a major loser and the United States a major winner, it has not turned out that way. Japan has increased its exports to China more than 14-fold since 1989 and Chinese-Japanese bilateral trade remains in broad balance.

Though some may say current account surpluses and deficits don’t matter, I’m tempted to give Fingleton the benefit of the doubt on this one—the only quarter he will get from me—as the surplus plays a critical role in funding chronic government indebtedness. But those current account surpluses will not be with us forever. 

Current Account Surplus Down 85.5% in Nov
Nikkei, January 12, 2012
TOKYO (Dow Jones)—Japan’s current account surplus contracted for the ninth straight month in November, falling 85.5% from a year earlier, the Ministry of Finance said Thursday.
The surplus in the current account, the broadest measure of Japan’s trade with the rest of the world, stood at Y138.5bn in November before seasonal adjustment, the data showed. 

As longtime Japan watchers like Ivan P. Hall and Clyde V. Prestowitz Jr. point out, the fallacy of the “lost decades” story is apparent to American visitors the moment they set foot in the country. Typically starting their journeys at such potent symbols of American infrastructural decay as Kennedy or Dulles airports, they land at Japanese airports that have been extensively expanded and modernized in recent years.

As these opinions are wholly subjective and not open to analysis, I will only add a couple of subjective comments of my own. A US informant tells me that both Kennedy and Dulles are still perfectly serviceable airports. Not having had the pleasure of their acquaintance—I don’t get out much—I couldn’t say. But I do know that compared to the sterile, deserted concentration camp that is Narita (Tokyo’s principal international airport), with its scant retail pleasures, I much prefer the teeming souk of my own London Heathrow, for all its shabbiness, as a future vision of the world.

William J. Holstein, a prominent Japan watcher since the early 1980s, recently visited the country for the first time in some years. “There’s a dramatic gap between what one reads in the United States and what one sees on the ground in Japan,” he said. “The Japanese are dressed better than Americans. They have the latest cars, including Porsches, Audis, Mercedes-Benzes and all the finest models. I have never seen so many spoiled pets. And the physical infrastructure of the country keeps improving and evolving.”

We should be grateful to Fingleton, really, for so many belly-laughs in a single piece, but in particular perhaps for this gem of a paragraph, which had me RoFL, as I believe young people say these days. William J. Holstein is not, by any measure, “a prominent Japan watcher”—he is a minor-league journalist and business consultant who doesn’t have his own Wikipage, has never written a book about Japan, almost certainly doesn’t speak more than a word or two of the language, and as far as his career profile reveals, has never spent more than a couple of months in the country at most.

But Fingleton needs Holstein, because there are precious few people left on the planet who will subscribe to his bizarre worldview. Fingleton’s sheer desperation for comrades-in-arms is nowhere better revealed than in his willingness to quote this sentence: “They [the Japanese] have the latest cars, including Porsches, Audis, Mercedes-Benzes and all the finest models.” This is a pitch-perfect instance of what I have come to call the Grand Hyatt School of Journalism, or what we might label “Roppongi Class Syndrome”, a severe deep-vein thrombosis of the mind that results from never leaving a cosseted, gilded circle of central Tokyo, where yes—surprise, surprise—there are lots of expensive German cars on the road, as there are indeed in every single world capital of a country with a per capita GDP of over $25,000 (and in many poorer ones, too). Here’s a modest little challenge to Fingleton and Holstein, though: go and stand in summer clothing on a mid-February afternoon on a street-corner in Wakkanai, Hokkaido, about 200km from any German car dealer, even a VW one, and count me out half a dozen Porsches, Audis, or Mercedes-Benzes before you cry uncle for fear of hypothermia. German cars account for a paltry 3%-5% of the total Japanese passenger vehicle market. 

Why, then, is Japan seen as a loser? On the official gross domestic product numbers, the United States has ostensibly outperformed Japan for many years. But even taking America’s official numbers at face value, the difference has been far narrower than people realize. Adjusted to a per-capita basis (which is the proper way to do this) and measured since 1989, America’s G.D.P. grew by an average of just 1.4 percent a year. Japan’s figure meanwhile was even more anemic—just 1 percent—implying that it underperformed the United States by 0.4 percent a year.

A look at the underlying accounting, however, suggests that, far from underperforming, Japan may have outperformed. For a start, in a little noticed change, United States statisticians in the 1980s embarked on an increasingly aggressive use of the so-called hedonic method of adjusting for inflation, an approach that in the view of many experts artificially boosts a nation’s apparent growth rate.

On the calculations of John Williams of Shadowstats.com, a Web site that tracks flaws in United States economic data, America’s growth in recent decades has been overstated by as much as 2 percentage points a year. If he is even close to the truth, this factor alone may put the United States behind Japan in per-capita performance.

 If “he is even close to the truth”, then the US has been in what must have been an almost relentless recession for the last couple of decades (simply deduct 2ppt from 1.4ppt). It must have been a very strange recession, though, for most of that time, what with employers vigorously hiring rather than firing, inflation-adjusted wages rising (slowly, admittedly) rather than falling, and corporate profits and the stock market soaring (the S&P 500 rose from 360 on January 1, 1990, to 1,277 on January 1, 2012).

Perhaps, then—I just suggest this as an alternative interpretation—he is nowhere close to the truth, and neither is Fingleton. I would also suggest that Fingleton knows nothing at all about hedonic regression, hedonic price indices, hedonic quality indices, and the like, and that his “many experts” are nowhere to be found. Attentive readers and those familiar with Fingleton’s oeuvre will by now be beginning to glimpse the two vast and mirror-image conspiracy theories that motivate the Fingletonian world-view: that there has been a long-enduring conspiracy, at the highest levels of the US government, to manipulate the data to present a falsely positive picture of the economy, so as to blind the US people to their growing immiseration, while in Japan, nebulous elites have been furiously massaging the data to present a falsely negative picture of the economy, so as to “blindside” those dull-witted Americans and secretly overtake the US as the world’s preeminent economy. Those nefarious Orientals!

It only takes a moment’s investigation, though, to unearth a 1999 Federal Reserve Board of Chicago working paper, Measurement Errors in Japanese Consumer Price Index, by economist Shigenori Shiratsuka, who is currently Associate Director-General at the Institute for Monetary and Economic Studies of the Bank of Japan and who is an expert on hedonic regression, in which the author tentatively concludes that the Japan CPI has an upward bias of around 0.9%, a very similar level to the 1.1% upward bias to the US CPI found in the Boskin Commission report of 1996, from which Fingleton would presumably be forced to conclude that Japan’s growth has been overstated by a very similar degree to that which US growth has. I challenge Fingleton to explain why the Japanese CPI data must be accurate and the US data not. 

If the Japanese have really been hurting, the most obvious place this would show would be in slow adoption of expensive new high-tech items. Yet the Japanese are consistently among the world’s earliest adopters. If anything, it is Americans who have been lagging. In cellphones, for instance, Japan leapfrogged the United States in the space of a few years in the late 1990s and it has stayed ahead ever since, with consumers moving exceptionally rapidly to ever more advanced devices.

No, no, Fingleton, stop it, please, I implore you! My sides are splitting, the laughter is too painful now! While it is true that for a brief spell in the early years of the last decade, Japan’s mobile internet and its advanced feature phones were at the cutting edge, the world has long moved on and left Japan trailing in its wake. Here’s wired.com in December 2011, courtesy TomiAhonen Consulting, ranking 42 countries by smartphone penetration rates. Japan, whose consumers are “consistently among the world’s earliest adopters”, Fingleton would have you believe, could well be number one, no? No. Top ten, though, surely? No. In fact, Japan is tied for 33rd place with Romania and Brazil, at 14%, just behind Thailand in 32nd place. The survey sensibly notes a proviso that both Japan and South Korea have advanced feature phones—but then South Korea’s smartphone penetration rate is already 34%, fully 20ppt ahead of Japan. No doubt Japan will play catch-up rapidly over the next couple of years, but catch-up is not exactly what “leapfrogging” Fingleton has in mind.

There are hosts of other fascinating metrics that show how tentative the Japanese embrace of the Internet has really been: online sales as a percentage of retail sales are far lower in Japan than the developed country average, due to credit-card security concerns (which interestingly are not shared by the South Koreans), online media time consumption is lower than it is in South Korea, China, the US, or the UK, online advertising spending as a percentage of total advertising spending is likewise lower, the money that is spent on advertising is more focused on display than on (more sophisticated) search than elsewhere, usage rates of social networking services such as Facebook are far below those of peer countries, and the Internet is used overwhelmingly for its old-school features—news, search, and e-mail—rather than more up-to-the-minute features such as online music, online gaming, and online banking.

Much of the story is qualitative rather than quantitative. An example is Japan’s eating-out culture. Tokyo, according to the Michelin Guide, boasts 16 of the world’s top-ranked restaurants, versus a mere 10 for the runner-up, Paris. Similarly Japan as a whole beats France in the Michelin ratings. But how do you express this in G.D.P. terms?

I think I will retch if I hear once more the “argument from Michelin” from Japan’s professional boosters—and there are dozens of them, in a Baskin-Robbins array of flavors, out there, however much Fingleton would like the world to think he is a lonely, embattled crusader. We could choose, should we wish, to demolish this comparison on demographic grounds—the Tokyo Michelin guide also includes Yokohama and Kamakura, giving us very roughly one three-starred restaurant per million people, while the city of Paris has only a couple of million folk, and likewise Japan has more twice the population of France—or on pedantic grounds—France has 558 starred restaurants, Japan only 509, but I’d prefer to hone in on the complete and utter irrelevance to the culinary habits of 99% of the population of three-starred Michelin restaurants. All that Tokyo’s 16 three-starred restaurants show is that—surprise, surprise—there is a well-heeled elite in a huge and quite prosperous city that takes its food very seriously indeed. For those of us not privileged to be one of the 1%, our dining-out options are necessarily more limited. For every Michelin-starred restaurant, there are countless thousands of hole-in-the-wall purveyors of affordable eats. The real Japanese food experience, for many a harassed salariman or office lady, is to be found in the cheap solace of a convenience-store bento lunchbox. 

Similar problems arise in measuring improvements in the Japanese health care system. And how does one accurately convey the vast improvement in the general environment in Japan in the last two decades?

How does one begin to know what “the vast improvement in the general environment in Japan in the last two decades” could possibly mean?

 Luckily there is a yardstick that finesses many of these problems: electricity output, which is mainly a measure of consumer affluence and industrial activity. In the 1990s, while Japan was being widely portrayed as an outright “basket case,” its rate of increase in per-capita electricity output was twice that of America, and it continued to outperform into the new century.

Forgive my unparalled ignorance, but I have never encountered anyone other than Fingleton attempting to use electricity output and its rate of change as a(nother) proxy for economic vitality. But let’s have a look at the data, anyway, from the US Energy Information Administration. What follows is electricity consumption in billion kilowatt/hours per million people and the rate of change over the decade, 1990-1999. 

                              1990                    1999                   Pct. chg.

Australia              7.82                     9.08                    16.1%

Canada                15.49                   15.79                   1.9%

France                  5.70                     6.83                    19.8%

Germany             6.14                     6.05                     -1.5%

Japan                  6.25                     7.48                     19.7%

UK                       4.97                     5.57                     12.1%

US                       11.41                   12.38                     8.5%

The first thing to note, obviously, is that the rates of change are all over the place: if we were to apply Fingletonian logic, then France must have been truly flourishing in the 1990s, while consumers and industry in Germany and Canada must have really been suffering. No more than a moment’s reflection is needed to show this up for the arrant nonsense it is. What the high-growth countries—Australia, France, and Japan—have in common is that they are all (mostly) hot in their summers, and I will wager (although for now I lack any hard evidence) that much of the growth in electricity consumption was driven by the—late, compared to the US—spread of air-conditioning. And Japan’s power consumption between 2000 and 2008, years which even Fingleton, I think, could be persuaded to admit were much better for the Japanese economy than the original “lost decade” was, completely stagnated, further undermining his case. 

Part of what is going on here is Western psychology. Anyone who has followed the story long-term cannot help but notice that many Westerners actively seek to belittle Japan. Thus every policy success is automatically discounted. It is a mind-set that is much in evidence even among Tokyo-based Western diplomats and scholars.

Take, for instance, how Western observers have viewed Japan’s demographics. The population is getting older because of a low birthrate, a characteristic Japan shares with many of the world’s richest nations. Yet this is presented not only as a critical problem but as a policy failure. It never seems to occur to Western commentators that the Japanese both individually and collectively have chosen their demographic fate—and have good reasons for doing so.

The story begins in the terrible winter of 1945-6, when, newly bereft of their empire, the Japanese nearly starved to death. With overseas expansion no longer an option, Japanese leaders determined as a top priority to cut the birthrate. Thereafter a culture of small families set in that has continued to the present day.

Japan’s motivation is clear: food security. With only about one-third as much arable land per capita as China, Japan has long been the world’s largest net food importer. While the birth control policy is the primary cause of Japan’s aging demographics, the phenomenon also reflects improved health care and an increase of more than 20 years in life expectancy since 1950.

Fingleton here is referring to the Eugenics Protection Act of 1948, which essentially legalized abortion on demand and felled the post-war baby boom just as it was getting into its stride. But to infer from a single piece of legislation passed at a single point in historical time, now 64 years ago, that—perhaps by some heroic act of the Jungian unconscious unavailable to other, lesser nations—“the Japanese both individually and collectively have chosen their demographic fate” is preposterous. The drafters of that act—politicians and bureaucrats, two species not widely known for their deep foresight—could not possibly have known with any precision what the consequences of their legislation would be five years into the future, let alone a century. They were not by any means burning their midnight candles calculating the ratio of workers to retirees in Japan in 2050.

Two other points, both of them vital: yes, a low birthrate is “a characteristic Japan shares with many of the world’s richest nations”, but this emphatically does not mean it shares a demographic profile with them. Largely as a consequence of the Eugenics Protection Act, Japan is aging far faster than any other developed country and its population will decline far faster. Second, Fingleton insinuates that it is only ignoramus Western commentators who regard Japan’s demographic profile as a “critical problem” (which it is) and a “policy failure” (which it is, and a far too late to rectify one). This does a gross, gross travesty to the depth and breadth of the debate in Japan: presumably Fingleton must believe that the 1.3mn search-engine hits that “shoshika mondai” (roughly, “low-birthrate problem”) generates must be misguided foreigners writing in Japanese in a forlorn attempt to persuade a people that have “chosen their demographic fate” to repent and see the error of their ways. For a real understanding of the Japanese demographic situation, I recommend—as I have done before on these pages—Shrinking-population Economics: Lessons from Japan, by National Graduate Institute for Policy Studies professor Akihiko Matsutani, from which for now I offer the following passage (de-italics mine):

The wrenching demographic change in store for Japan will do worse than slow the pace of economic growth; it will shrink the nation’s economy. Negative economic growth will become the norm in the nation that until recently set the pace for the industrialized world. This is because of the all-too-rapid pace of Japan’s aging and of its population decline. The aging of society at a more moderate pace, as in France, would not push the economy into negative growth. Even Germany, whose demographic profile is more similar to Japan’s, appears likely to enjoy positive economic growth for another 20 years or so.

Technological progress raises labor productivity. Japan’s continuing advances in technology would offset the economic effects of a moderate decline in the workforce and support continuing GDP growth. The problem is that Japan’s working-age population will shrink far too fast for the decline to be offset through technological advances and resultant gains in labor productivity.

The all-too-rapid pace of Japan’s aging is also the villain in the nation’s pension system drama. Everything would be a lot more manageable if the aging of Japanese society was proceeding a little more slowly. As things stand, the number of people who pay into the system will decline rapidly even as the number of people who receive benefits increases rapidly. Something has got to give soon and in a big way. Japan will need to increase premiums, reduce benefits, or devise some combination of the two. The outlook for pension systems is also a concern in the European nations, but the problem there is nowhere near as severe as in Japan. That is because the pace of change in the populations of payers and beneficiaries is far more moderate

Back to Fingleton. 

Psychology aside, a major factor in the West’s comprehension problem is that virtually everyone in Tokyo benefits from the doom and gloom story. For foreign sales representatives, for instance, it has been the perfect get-out-of-jail card when they don’t reach their quotas. For Japanese foundations it is the perfect excuse in politely waving away solicitations from American universities and other needy nonprofits. Ditto for the Ministry of Foreign Affairs in tempering expectations of foreign aid recipients. Even American investment bankers have reasons to emphasize bad news. Most notably they profit from the so-called yen-carry trade, an arcane but powerful investment strategy in which the well informed benefit from periodic bouts of weakness in the Japanese yen.

To which I only ask: if the beneficiaries of “the doom and gloom story” are so numerous and the losers so thin on the ground, why does the predominant economic narrative in all countries and at all times not accentuate the negative? (We’ll leave the ludicrous misdescription of the yen carry-trade for another time…)

Economic ideology has also played an unfortunate role. Many economists, particularly right-wing think-tank types, are such staunch advocates of laissez-faire that they reflexively scorn Japan’s very different economic system, with its socialist medicine and ubiquitous government regulation. During the stock market bubble of the late 1980s, this mind-set abated but it came back after the crash.

Japanese trade negotiators noticed an almost magical sweetening in the mood in foreign capitals after the stock market crashed in 1990. Although previously there had been much envy of Japan abroad (and serious talk of protectionist measures), in the new circumstances American and European trade negotiators switched to feeling sorry for the “fallen giant.” Nothing if not fast learners, Japanese trade negotiators have been appealing for sympathy ever since.

The strategy seems to have been particularly effective in Washington. Believing that you shouldn’t kick a man when he is down, chivalrous American officials have largely given up pressing for the opening of Japan’s markets. Yet the great United States trade complaints of the late 1980s—concerning rice, financial services, cars and car components—were never remedied.

The “fallen giant” story has also even been useful to other East Asian nations, particularly in their trade diplomacy with the United States.

A striking instance of how the story has influenced American perceptions appears in “The Next 100 Years,” by the consultant George Friedman. In a chapter headed “China 2020: Paper Tiger,” Mr. Friedman argues that, just as Japan “failed” in the 1990s, China will soon have its comeuppance. Talk of this sort powerfully fosters complacency and confusion in Washington in the face of a United States-China trade relationship that is already arguably the most destructive in world history and certainly the most unbalanced.

I trust that those who came to this unfamiliar with the paranoid machinations of the Fingletonian mind are beginning to see the light. 

Clearly the question of what has really happened to Japan is of first-order geopolitical importance. In a stunning refutation of American conventional wisdom, Japan has not missed a beat in building an ever more sophisticated industrial base. That this is not more obvious is a tribute in part to the fact that Japanese manufacturers have graduated to making so-called producers’ goods. These typically consist of advanced components or materials, or precision production equipment. They may be invisible to the consumer, yet without them the modern world literally would not exist. This sort of manufacturing, which is both highly capital-intensive and highly know-how-intensive, was virtually monopolized by the United States in the 1950s and 1960s and constituted the essence of American economic leadership.

Those sly Orientals! They have only gone and hidden “their ever more sophisticated industrial base” from prying Western eyes! I challenge Fingleton to explain in what way it is a graduation to shift from manufacturing, say, a car to manufacturing components for it. Let’s wholly invert what Fingleton says to give an alternative and more accurate reading of developments over the last few years in particular: having been beaten back by the competition in a slew of end-products from mobile phones to TVs, Japan’s manufacturers find their last redoubts are in capital goods and precision equipment. Good places to be, admittedly, for a nation on the technology frontier—no one is disputing for a nanosecond that there are deep reservoirs of strength in the industrial base—but beats have most assuredly been missed.

Japan’s achievement is all the more impressive for the fact that its major competitors— Germany, South Korea, Taiwan and, of course, China—have hardly been standing still. The world has gone through a rapid industrial revolution in the last two decades thanks to the “targeting” of manufacturing by many East Asian nations. Yet Japan’s trade surpluses have risen.

Unease As Japan Nears 1st Trade Deficit In 31 Years
Nikkei, January 9, 2012
TOKYO (Nikkei)—Japan almost certainly saw its first trade deficit in 31 years in 2011, and experts warn that unless the gap is plugged with interest and dividend income from abroad, Japan will continue to see an outflow of money and have to rely on overseas funds for its fiscal management, such as by issuing government bonds.
Japan booked a deficit of Y2.3trn in its balance of trade—exports minus imports—in the January-November period of 2011, according to government data. The red ink is attributed to a slowdown in exports due to the yen’s record-breaking appreciation and an increase in imports of liquefied natural gas for thermal power generation to make up for the suspended operation of nuclear plants in the wake of the catastrophe last March.
The last time Japan incurred an annual trade deficit was 1980, at Y2.6trn. …
“Japan’s trade deficit will expand unless the world economy achieves a high growth rate, as it did in 2002 to 2007, and the yen continuously weakens,” said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. …

Japan should be held up as a model, not an admonition. If a nation can summon the will to pull together, it can turn even the most unpromising circumstances to advantage. Here Japan’s constant upgrading of its infrastructure is surely an inspiration. It is a strategy that often requires cooperation across a wide political front, but such cooperation has not been beyond the American political system in the past. The Hoover Dam, that iconic project of the Depression, required negotiations among seven states but somehow it was built—and it provided jobs for 16,000 people in the process. Nothing is stopping similar progress now—nothing, except political bickering.

“Japan’s constant upgrading of its infrastructure”—for which read its insistence on wasting money building roads and bridges and trains to nowhere and airports that no one wants to fly to or from—is no inspiration, merely testament to the last gasps of the Construction State in its death throes.

There are many, many more splendid pearls of ignorance on Fingleton’s website, Sandcastle Empire, one of the top drop-down bars of which proclaims, hilariously, “forty years of foresight” and suggests that Fingleton, to paraphrase Churchill on Clement Attlee, is “an immodest man who has little to be immodest about”. So many pearls of ignorance indeed that I may have to pen a follow-up, but for now I’ll lay my blood-soaked quill aside.

It is a disgrace to the Gray Lady that it should have stooped to printing this gibberish. What’s sad is that Fingleton has half a case—there have been a few rays of sunlight amid the pervasive gloom of the last two decades—a case which he proceeds to ruin through truculence and a remorselessly misdirected focus.

Fingleton was a fool when I first encountered him on the Dead Fukuzawa Society message board in the late 1990s and remains an undiluted fool to this day. I can come up with three explanations, plausible and not so plausible, for his behavior: that he is genuinely, unfortunately stupid; that his mentality is such that once cornered, he can cede no nuance of grey in a debate; or that, to cast a Fingletonian conspiracy theory to work on the man himself, he is in the pay of sinister Fulfordian forces, perhaps the “fascist cabal known as the Bilderbergers”. Readers, what do you think?

Iida: A twitch at the curtains

That summer feeling
Is gonna fly
Always try and keep the feeling inside
Need a crystal ball to see her in the morning
And magic eyes to read between the lines

Teenage Fanclub, Sparky’s Dream, 1995

Geologically, Iida is a place where the bedrock of life’s banalities lies much closer to the earthen surface of works and days than it does in the painted face of the big smoke, which makes her a more honest, death-embracing locus, but she was not somewhere I could hold on to for very long. I treat Iida nonetheless as my furusato hometown, though no parents, siblings, or relatives wait for me there, and truth be told I’m a neglectful lover, rarely returning now. It was with a touch of trepidation, therefore, that I accepted an invitation from Old Bill, fellow Withnail & I obsessive, connoisseur like me of quality knobs (this one a Bakelite beauty from Sato Parts),

electronics tinkerer extraordinaire,

self-styled “Dipso Dad”, now husband to long-suffering Shinako and father to the adorable Lynne (aka 凛, Rin, “dignified”) and Hannah (aka 花, Hana, “flower”) to visit for a sultry September weekend.

We set off on a road tripette in Bill’s lesbian-beloved Subaru Forester, with Lynne, buried in a book, on the back seat. This being rural Japan—and Nagano Prefecture in particular, I can’t help but feel—we were soon in the realm of aerial roadways to heaven

and tunnels

and bridges

to absolutely nowhere at all.

There’s something of a cheap optical illusion and something crassly Freudian about the tunnel and the bridge. Unoriginally, I want to scrawl under the photos in a “steady, painstaking, artificial script”, “Ceci n’est pas une rue”, and be rewarded for my efforts years later with an explicatory and adulatory essay by some soixante-huitard philosopher replete with talk of unraveled calligrams and negations multiplying themselves. To me, at least, the bridge is violent, the hillside vulnerable; the tunnel, its mirror image, is patient, the river ready to be bridged. As they are near neighbors, separated by only a few dales and folds, the bridge and the tunnel could perhaps get it together on an Internet dating site for large ferroconcrete structures.

To return to the mundane: all three form part of what one day, my son, my daughter, will be the San’en Nanshin Expressway, a 100km link between Iida in the interior and Hamamatsu on the coast. The project was given the green light back in 1983; the aerial interchange and the bridge have been in a state of Viagric erection since 1994; only a dozen or so kilometers have so far been completed; much of the rest is scheduled for completion in 2016 or after; and a few crucial sections have no schedule for construction at all, which means they are unlikely to be completed until the mid-2020s, fully four decades after the project left the drawing board of some faceless committee. As a friend loves to say, in Japan we take the long view. The expressway traverses terrain that is about as hostile to the dreams of road-builders as any on the planet, as hereabouts the Japan Median Tectonic Line meets the Fossa Magna, with the trickiest sections costing around $30mn a kilometer and the bill for the whole expressway set to come in somewhere north of $2bn. The leisurely construction schedule testifies both to the unimportance of the road—denizens of Iida can already access Nagoya in two hours and Tokyo in four—and pinched budgets for megaprojects such as this.

The road’s boosters, which encompass the whole of “official Japan” from the Ministry of Concrete—sorry, I’ll read that again, the Ministry of Land, Infrastructure, and Transport—on down, make claims for it alternately nebulous and suffused with the finicky precision of the bureaucrat: of the Iida portion, completion will mean that 88% of outlying towns and villages will be able to reach the city center by car in the event of rainfall of 100mm or more (which must occur, ooh, half a dozen times a year), up from 71% currently! And for this you want me to pay $2bn? Opposition to the road is inchoate, disorganized, confined to the odd squawk of a taxpayer on obscure bulletin boards. Make no mistake, my son, my daughter: the men from the ministry (no women there) will have their way, the bulldozers and pile-drivers and excavators will prevail, bridge will meet tunnel (and maybe fall in love), the San’en Nanshin Expressway will be built.

Our destination was the hundred-soul hamlet of Shimoguri, fancifully known as “the Tyrol of Japan”, the last stutter of civilization in the Southern Alps before boars and eagles and bears take the place of humans at the apex of the food chain, seen fragmentarily here looking north toward the 3,000m peaks of the Akaishi Mountains. 

One blogger, something of an authority on out-of-the-way crannies, calls Shimoguri “the backwoods at the back of beyond” (僻地の中の僻地), and once, before the arrival of the roads—the good roads—in the late 1960s, it might have been. Now it is scarcely an hour from the center of Iida and indeed, courtesy of a 2005 municipal amalgamation, lies within its precincts. So the city stretches its claws out into the country. Nor is it, as he claims, “Japan’s last hidden spot” (日本の最後の秘境), if such a chimera exists: tourists far outnumbered locals when we were there. Still, it’s an otherworldly place, accessible only up and down and around a vertiginous single-track lane 10km long, with fields of cabbage and potato and buckwheat so steep—up to 38 degrees steep—that they have to be tilled from above to stop the soil slipping irrecoverably down the slopes.

We traipsed out through a sad stand of plantation pines, shot through with the slenderest bolts of amber and rapacity, dead to birdsong and itself, for the money shot—our rapacity—of Shimoguri in the glaresquint sunlight.

Architecturally no gem, largely rebuilt after the tarmac was laid, Shimoguri looks best from afar, though it does have some top sheds, the plank-knots a Braille from tree to forester.

Humanity has been fossicking around these valleys for millennia, the archaeological record shows, the earliest modern trace an inscription on a temple bell from 1460. But Shimoguri, school-less since 1980, is locked in a bloody bout with custom and its trainer, time, a bout it is all but bound to lose this coming century.

On the way back, we detoured to the feted baby village of Shimojo. I’d told Shinako we would.
“I hear the birthrate’s really high there.”
“Yeah, but there aren’t any jobs, so everyone has to commute into Iida.”
Guess I wasn’t the only hard-boiled straight-talker in town.

Overheated hacks prone to hyperbole have showered garlands on Shimojo, calling it “the miracle village” (奇跡の村), “a model municipality” (モデル自治体), and “the village where Japan’s future can be seen” (日本の未来が見える村). It’s attracted praise from across the ideological spectrum, from the Japan Communist Party to the right-leaning Nikkei BP, and even won a hat-tip from The Economist in its latest special feature on Japan in November 2010. What’s all the fuss about? Simply this: as the nation’s birthrate cratered to an all-time low of 1.26 in 2005, Shimojo’s was rising, to 2.04 on average between 2003 and 2006, tantalizingly close to the replacement rate and as high as anywhere on mainland Japan. (And yes, the corollary is that not a single municipality on the mainland then had a birthrate above the replacement rate).

Shimojo’s path to celebrity status begins back in 1992, with the election as mayor of one Kihei Ito, a gas station owner, who professed himself appalled by the sloth and inefficiency he uncovered in the village administration. To instill in the flaccid pen-pushers the rigors of the private-sector ethos, so the party line goes, he packed them off to wait on customers at a home improvement center in Iida, humiliating them with their dismal sales performance in comparison with regular employees. To cut spending, the bureaucracy was allowed to wither on the vine through natural attrition, ultimately reducing the number of officials per 1,000 head of population to half the national average and the bill for their salaries by a third from the peak. To free the village from the vicious debt cycle of subsidies (補助) paid for through the issuance of muni bonds (地方債) paid for in turn by tax grants from the state (交付税), Shimojo forewent 1990s luxuries such as the installation of a full underground sewage system, opting instead for much cheaper septic tanks. In a bid to further prune expenditures, one that carries the firm smack of Soviet collectivism, Mayor Ito had his villagers do their own road repairs and build their own roads, especially the farmer’s tracks that lattice the paddies, with the council providing only the cost of materials.

All this thrift was to transform the village’s finances. Bear with me on a brief geeky foray into the intricacies: in 2009, there were 1,749 municipalities across the nation, and lacking a lucrative tax base of the sort provided by, say, the headquarters of a major corporation, Shimojo remains dependent on tax grants from the state, ranking a lowly 1,489 nationally in its fiscal strength index (財政力指数), a measure of a local authority’s own revenue raising ability. But by recurring expense ratio (経常収支比率, very roughly fiscal resources allocated to recurring expenses divided by recurring fiscal resources), a metric of a local authority’s fiscal flexibility, Shimojo ranked seventh nationwide, and by bond expense ratio (実質公債費比率, very roughly muni bond servicing costs divided by general fiscal resources), Shimojo ranked an astounding fourth, behind only three central Tokyo wards.

With the money saved, Mayor Ito set about on phase two of his grand scheme, the audacious “village population doubling plan” (村民倍増計画), which to any Japanese of a certain age would carry overtones of the 1960 “income doubling plan” (所得倍増計画) of Prime Minister Hayato Ikeda, achieved in a mere seven years. Step one was to build cumbersomely named “housing to promote the permanent residence of young people” (若者定住促進住宅). The first three-storey, twelve-unit block went up in 1997, but by Mayor Ito’s account, he slipped up in accepting a state subsidy of half the cost of construction, a subsidy that came with all sorts of inconvenient notions of justice and fairness attached: the right to live in the apartments was decided by lottery and a number of them had to be set aside for low-income families. Well, that was sure to bring in all sorts of undesirables! The good mayor was careful to build the next nine blocks with the village’s money alone, so he could attract only “quality young people” (質のいい若者), ones willing to participate in extra-curricular activities such as the volunteer fire-brigade and village events in that deliciously voluntary-compulsory way I long ago pinpointed as a defining national characteristic.

Notwithstanding the onerous free-time obligations, the mayor’s offer was for many too good to refuse—spanking new 63 square meter (680 square feet) two-bedroom apartments with two parking spaces for Y35,000 ($450) a month, half what one would cost in neighboring Iida, and the applications flooded in. There was more pro-natalist largesse on the way, too: a 20% cut in kindergarten fees, a children’s library with some 7,000 volumes, and free healthcare at any hospital in Japan up to the last year of junior high school. “It’s great,” one young mother of two told the reporter from Akahata (“Red Flag”), the Japan Communist Party rag, in 2005, “We can take the kids to hospital even if they’ve just got the sniffles”, a comment sure to strike unintended fear into the hearts of the opponents of unmetered medicine everywhere. The population of the village, which had peaked in 1950 at around 6,500 and fallen to a low of 3,859 in 1990, began to inch higher, reaching 4,241 in 2006. Mayor Ito had done it! Earnest delegations poured in from every corner of the land—250 alone in the three years to 2009—to study the “miracle village”. It’s impossible to know precisely what lessons they took away, but the national birthrate began to crawl like a toddler higher off the 2005 low, and Shimojo in its own infant way may be fractionally responsible.

We parked up outside one of the breeder blocks, a nondescript dun-colored slab with no trace of the rustic that could have fallen off the drawing-board of any architectural practice in Japan after an hour of slipshod draughtsmanship. While there were no real live children around—perhaps they were at hospital with the sniffles—there were at least traces of them, in the shape of plastic toys in bright made-in-China primary colors stacked under stairwells. A lightly modded Chevy Astro van spoke of the presence of members of the Yankee subcult, renowned for their proclivity to procreate early and frequently (and often in the van), in contradistinction to most of the rest of the nation, which procreates, if at all, little and late. In retrospect, knowing what I do now of the Shimojo story, the block had the stench of the factory farm about it, the odor of the illiberal conceits that lie behind all such crudely gerrymandered attempts to manipulate populations up or down, and, in Mayor Ito’s welcome mat laid out only at the squeaky clean feet of “quality young people”, just the faintest trace of eugenics.

Of late though, some of the sheen seems to have come off the mayor’s great experiment. The population is on the slide again, down to 4,105 as of November 1, and the village website lets on that a few of its apartments are vacant and available to “married men” (妻帯者, itself a superbly gendered expression, combining characters for “wife”, “bind”, and “person”). Sexual minorities, of course, need not apply, though they would no doubt return the insult, had they the grotesque misfortune to be born in Shimojo, by fleeing at the earliest opportunity. It’s not hard to discern what lies behind the flagging of the baby revolution: the village has in essence been filching the youth of Iida, which itself finds it has fewer and fewer of them, due to a demographic profile that’s been described as “waistless” (寸胴型)—missing the middle—and only so many of them will accept the trade-off between cheap accommodation and soporific, stultifying, and claustrophobic village life under Mayor Ito’s paternalist eye.

What worlds can we see in Shimojo’s grain of sand? Three, I think. The first is that the village was lucky to have the autonomy to do what it did. The great Heisei merger boom slashed the number of villages nationwide from 568 in 1999 to 184 today, of which a staggering fifth (35) are in Nagano, even though it accounts for less than 2% of the population, testimony maybe to a stubbornly independent local streak. The second is that there exists across swathes of primarily rural but also urban Japan both a dyed-in-the-bone conservatism, here to be seen in the disrespect paid to the bureaucratic clerisy, and—ignoring the contradictions for a moment—an almost Tea Partyesque resistance to state (federal, in a US context) “interference”. The third is that however valiantly Mayor Ito and his village have fought against population decline, its forces are destined to overwhelm them, not merely because they are 4,000 pitted against 128 million, but because all the fevered construction of an environment purportedly friendly to childrearing misses the larger point, which is that until hiring is more equal in every regard, workplace regimens are redesigned from the ground up around the needs of working mothers, and women’s careers are not deep-sixed by childbirth, there will be no baby-strike solution in sight. Not something an old duffer oyaji like Mayor Ito could be expected to comprehend.

En route home, we passed Iida City Hospital.
“That’s where I’m going to die.” From others’ mouths this would have come with the tonally different melancholies of the honorable exile, the ambiguous émigré, the despicable expatriate.
“No, no,” I strove to reassure him. “I’m sure a clean swift stroke will get you in your bed.”
A little later, I gestured sweepingly at a clatter of drive-ins, superstores, and car dealers on the main suburban drag.
“You know, I don’t remember this in the slightest.”
“Perhaps there really is a God after all.”

We headed back to Bill’s own Iida satellite village, Toyo’oka (population 6,797), whose much-mocked (by me) motto is “early to bed, early to rise, breakfast”. Perhaps it sounds better in Japanese: hayane, hayaoki, asagohan. Ah, no. There are few distractions to ruffle the determinedly diurnal lifestyle to which the motto exhorts the populace: a beer or two and banter to warm up the evening at a snakku bar, some late-night slapstick on TV, or perhaps a midnight loiter on the aluminum bench by the ashtray at one of the two 24/7 convenience stores.

I delved into the statistics of disruption: there were 16 traffic accidents reported in Toyo’oka in 2009, one roughly every three weeks, most of which will have been no more than fender-benders. There were 23 crimes reported in Toyo’oka in 2009, some of which at least will have been of the order of radishes pilfered from a field, 33.73 incidents per 10,000 people, ranking the village 1,534th out of 1,749 municipalities (lower is safer) in a fierce contest for uncriminality in which several municipalities went entirely crime-free.

Nevertheless, Toyo’oka has a permanently staffed police substation (豊丘村警察官駐在所), to which I believe three constables are assigned, giving each one roughly one crime every six weeks to investigate. The average annual pay of a Japanese police officer was Y7.7mn (almost exactly US$100,000 at the current rate) in 2007, so with overheads it is fair to assume that it costs very roughly $500,000 a year to investigate the two crimes a month that plague Toyo’oka.

There are a quarter of a million stalwart women and (mostly) men in the thin blue line keeping us from anarchy across the nation, one for every 500 people, so the vipers’ nest of vice and sin that is Iida (population 104,668) has perhaps 200 officers (and an annual wage bill of around US$20mn). As far as I can tell, ten crimes were logged in the Iida police blotter in November this year: five thefts of bags, purses, or cash from cars, two burglaries in which cash was stolen, a theft of a moped, a theft of a pair of gloves from an office, and a theft of a grating from a “facility”. Small wonder, then, that out in the provinces more than 10 hopefuls vie for every police officer post.

The terrible tranquility engendered by the lust for order makes the Ina valley a wonderfully untroubling and untroubled place to raise The Mikan Sisters.  

But as with everything, there is a quid pro quo. A wag once described the then faded-to-scruffy English seaside resort of Brighton as a place that “always looks as if it is about to help police with their enquiries”. Well, behind the privet hedge, Iida is the hand twitching the net curtains at the window with the neighborhood watch sticker, ready to turn in the hoodlum likes of Brighton to the authorities at the first hint of trouble.

Bill does his best to puncture the boredom of smugness with tacks of wit. He took a dubious phrase from a previous post of mine, “chapatsu slappers” (women of easy virtue with dyed brown hair), shortened and Japanesed it to “chappa surappa”, and taught it to his daughters, who now with glee will point to some hapless stiletto-heeled, bustiered, and chestnut-locked lass and shout in unison in their perfectly modulated Japanese, “Are wa chappa surappa?” Is that a tart? No one understands, though, and the tranquility seeps back to stifle once more.

You know what the fellow said—in Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace—and what did that produce? The cuckoo clock.

With its mizuhiki cord craftwork and its puppet festival, Iida is not short of cuckoo clocks of its own. While the relationship between crime (presence or absence thereof) and culture (presence or absence thereof) is no doubt not as easily mappable as the words Orson Welles put into the mouth of Harry Lime in The Third Man imply, it’s fair to say that the cafés of Iida do not hum to the sound of aspiring scriptwriters crafting screenplays on their laptops, that the bars of Iida do not throng with bien-pensant wannabes deep in debate over polymorphous perversity (“No, no! Gender is a performative construct!”), the role of crocodiles in the Mesozoic ecosystem, or the proof of the Poincaré conjecture, fair to say that the air of Iida is not febrile with intellectual ferment.

We girded ourselves with barrel-bottom sake for “a brief nocturnal sample of the delights of Iida’s nearly extinct nightlife.” I was keen to renew my acquaintance with Cock,

a subterranean izakaya pub offering “multinational home cooking”, whose matchbox I treasure, much frequented by the in-crowd long ago, but we found its space had been usurped in 2006 by a hip-hop emporium, Club Rulez, so there was to be no Cock for us in Iida that night.

We dined on butter and batter with an old mutual friend in an almost chic restaurant whose other patrons, without exception, were Japanese men with Filipina consorts. The talk was of shrinking pay packets and shrinking enrolments, old bangers bought on the never-never, and diminished expectations—harsher winds blowing in the heartland.
(to be continued)