US will not become Japan
Illustration: Phil Couzens

Why the US will not become Japan

I drove over the Benicia Bridge today, passing over ships unloading Toyotas from Japan. The company’s entire product line was there, from Lexus to Prius to Corolla, baking in the sun, still wrapped in plastic, and unsold by the thousands, the victims of a 40 percent YOY sales drop.

So it was no surprise when the Bank of Japan informed us that wholesale prices in June fell a gob smacking 6.6 percent YOY, confirming the most dire forecasts that the country is still in the grips of a nearly 20 year economic ice age. This is why the US is not headed for the same big freeze, as many Cassandras are predicting.

Japan’s bail out of its banks was a slow motion affair stretched out over eight years. Treasury Secretary Hank Paulson pulled the trigger on a much bigger bazooka with the TARP, a month after Lehman went bust, and Secretary Tim Geithner and the Fed’s Ben Bernanke followed up with their 155 mm howitzer. Tokyo’s insiders made sure well connected “zombie” borrowers have stayed alive to this day. The truly great strength of the US is that creative destruction is a constant, unrelenting, and unstoppable force, enabling the economy to bury its mistakes quickly and move on to the next game. Look at GM.

Japan’s fiscal stimulus was an impotent, irregular drip of inadequate packages financing bridges to nowhere. Obama’s hurricane of a $2 trillion budget in his first month provided more stimulus than Japan did in ten years in GDP terms, and now there is the threat of a second package. The bottom line is that Japan never understood the true debacle they got into until it was too late to do anything about it. The US realized in September we were on the precipice of a Great Depression II, and have thrown in everything, including the kitchen sink, to stop it. The US recession may be long and brutal, and the recovery subpar, but we are definitely not looking at Japan’s two lost decades.


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Comments

I see similar rows of unsold new cars just outside Toyotas Australian headquarters while escorting Japanese visitors on day tours out of Melbourne,Australia.
Economic gloom and doom is indeed a worldwide phenomena even if Toyota is now the best selling car with an excellent reputation.
Point taken about US economy and President Obamas stimulus package and the fact that Japanese appear to be so resistant to taking drastic change when desired.As I am reading the news right now with the coming Japanese election and the manga crazy PM Aso`s continuing woes and gaffes Obama seems to be on the right track and enjoys great popularity as our own PM Kevin rudd.
But I would take issue with US car makers who appear to have wasted many years of paying execs massive bonuses(familiar story?)and not concentrating on research and development of more ecofriendly vehicles
culminating in the recent jet trip debacle to Washington which was widely reported here in Australia and apparently in Japan also.
As an eco tourism accredited fluent Japanese speaker I never forget attending a lecture by world renowned scientist Tim Flannery here in Melbourne where he castigated US automakers on this issue yet had a lot of encouraging words for their Japanese counterparts for taking the initiative long before and were now reaping the benefits of increased sales and consumer respectabilty.I spoke to him briefly after and he reiterated same comments but felt(as I do myself) that so much more could be done,even from the Japanese side.
With the efforts of Al Gore and others a lot more of us have waken up and indeed US car makers are looking to get electric cars out in the market soon but this should have happened a lot more sooner.
Hence willingness(or lack of ) to confront an issue,whether climate change or fiscal stimulus packages is just as much an issue in the US,Japan,
Australia or anywhere else

regards
John Milanese
Melbourne
Australia

PS author is welcome to reply or comment if he feels inclined to
I am not an economist by trade but anyway...yoka!yoka!

And let us hope that Japan does not become another US.

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