Japan: The ultimate in "karaoke politics"
Kevin Rafferty wrote a trenchant piece in this Saturday's South China Morning Post, "Can the DPJ really sing a new tune?". I have taken various ideas of his and woven them into my own thoughts.
I am writing this piece because on 18th August, Japan's campaigns for parliamentary elections begin. The rulers, the Liberal Democratic Party (LDP), very well could be usurped by the Democratic Party of Japan (DPJ). Normally, such "house cleaning" would suggest that "change is in the air". Not so in Japan, however.
The bottom line is simple: Japan keeps sticking her head in the sand and thus not adapting. She is up against a country that time and again has reinvented herself, America,and two formidable economies whose "mandate from heaven" is to create jobs: China and India. Japan will continue going nowhere in a hurry, rendering her stock market a waste of time for any globally-focused investor.
Indeed, the only thing that the place has going for it is her ever-stronger currency: on a trend basis, you now pay about one quarter the amount of yen per dollar that you had to pay when rates floated freely in 1973. But other than that, there is just no reason to get excited about the macro-profits prospects of Japan, fascinating a culture as she has.
Here are at least four reasons for an investor to be skeptical of any "change is in the air" whiff:
- Karaoke politics. Mr. Rafferty dubbed this salient term. Japan's politics are run by a machine. "It (the phony election) will be the ultimate in karaoke politics - the orchestral backing comes from a machine and now a new unknown with no experience of power will step into the spotlight and pretend that he is the star." That "unknown" is the leader of each party, as we discuss next.
- Deer staring into the headlights. Regardless of who wins the parliamentary elections - the LDP and thus Mr. Aso or the DPJ and thus Mr. Hatoyama: nobody has a clue as to what they are doing, or indeed leading. "The Asahi Shimbun said this week that Mr Aso proved himself 'pathetically unfocused and incapable of convincing the public of his of shaky policies.' " Meanwhile, the DPJ is refusing to tell the public what it would do, should its party win the elections. Indeed, have you ever read of what Mr. Hatoyama intends to do, should he assume the reins of power?
- Chicken with its head in the sand. Mr. Rafferty goes on to write that the "real" issues - some of the ones that I mentioned above, are not being debated. Other issues listed by Mr. Rafferty are: "... - that the government is heavily in debt, the economy is stuck somewhere between negative and abysmal growth, unemployment is rising, the old ways of lifetime employment are disappearing, and the expensive costs of an aging and declining population are beginning to bite in inexorably rising health and welfare expenditures." One reason for non-debate is that "...strict campaign rules ...help generate noise and heat but not much enlightenment." Another reason is this Japanese penchant for telling the world that "it takes time", something maddening that your author has run into time and time again. Of all of the places in the Far East that I think that I may know a little about, none tops Japan when it comes to the "form over substance" school. It looks like the current Prime Minister, and the next one, might not get that hoped-for "kick in the Aso", and
- Tug of war. We are left with one final, weight issue that won't be resolved in this culture so obsessed with placing form over substance: "...it is an open question how the bureaucracy will react to a government determined to end its special privileges or how a government would react to a recalcitrant bureaucracy, surely not by smashing the karaoke backing machine."Those "special privileges" of the bureaucracy include the "amakudari" (translated as "descended from heaven") whereby retired bureaucrats get juicy jobs in the private sector. The DPJ has said that it wishes to end this system - but I cannot believe this. It is endemic to any bureaucracy anywhere in the world, Hong Kong, America and Europe included!
