Japan’s New Economic Structure

The news that this post is built around is somewhat stale, I meant to get to it yesterday but bear with me because I think there are some subtle issues worth thinking about.

First, Japan announced that it was paying foreign workers to go home. Really, I didn’t know that there were many workers in Japan outside of expatriates. It turns out that they have an estimated 366,000. An even bigger surprise is that most are from South America and are actually descendants of Japanese who emigrated there decades ago. They started bringing them in in 1990 to do work that native Japanese shunned. That work is called the three-K jobs (kitsui, kitanai, kiken — or hard, dirty and dangerous).

Now with unemployment a growing problem Japan is paying these workers to go home. The catch is that they will not be allowed to return — ever. The plan has caused a lot of consternation among the immigrant workers and only a modest stir in the general population. Despite one of the oldest work forces in the industrialized world, the prevailing attitude is that Japan should not be home to foreign workers. Diversity, in other words, is not a goal of Japanese society.

The other piece of news was that Japanese exports fell 45.6% in March following a 49.3% decline in February. The export dominated economy is so weak that in March Japan logged a 726.3 billion yen trade deficit. The first deficit since 1980.

This is where things get kind of interesting. Japan is starting to consider that things might not ever return to whatever normal was before the crisis and companies are beginning to make moves to adjust.

Nissan, Panasonic and Sharp have all said they would shift more production out of Japan. There is more talk of consolidation among industry competitors and other companies are shifting workers towards services and away from manufacturing.

Government officials and economists are beginning to question the competitive position of Japanese manufactured products as well as the basic industrial structure of the country. They seem to be adjusting to some new order though I sure don’t know what it might be.

What I see is a country that rather combat a declining work force has decided to restructure to accommodate that reality. Moving a small number of immigrants out of the country is a small matter from a demographic standpoint but maybe bigger from a psychological one. Shifting significant production overseas and redirecting your domestic labor force towards more value added occupations is not a minor move. 

Now a lot of their actions might well be driven by internal demographics but it’s also possible that they’re trying to build in some flexibility to deal with whatever arises from the ashes of this fire. Spreading production to low wage countries opens up new albeit small markets in addition to production costs. It also gives them leeway to respond quickly to changing economic circumstances. It’s a lot easier to close down a plant in Hanoi than it is in Osaka.

Is there a lesson in all of this for us? I think there might be. Hopefully, some larger minds in commerce and government are thinking about the future and how this country might need to adjust as well. Right now the response seems to be get back to where we were and then figure things out. I’m not sure that’s not more hope than plan.

The Japanese have been fought this battle before. They might have learned a few things that we can profit from, so keeping an eye on their policies might not be the worst thing.

more: here and here 

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