To The Editor

Back to Contents of Issue: October 2002

by our readers

I AM A SUBSCRIBER to and fan of your magazine, but I believe you have gone down the wrong track in your article on Japanese government debt (Economic Bondage, August 2002). Your subtitles and catchy graphics allege that the Japanese economy is being 'strangled' by government debt, but your article fails to demonstrate any such thing. Normally, such strangulation would result from 'crowding out' or a sharp rise in borrowing costs, but neither of these have in fact happened. Japan has the lowest interest rates in the world by quite some margin. Nor is there any evidence that Japanese savers are heading for the exits.
The only evidence you come up with is the loss of bank deposits by small banks. However, this is a direct result of the government's policy of ending full deposit insurance on bank deposits, and has little to do with the rise of government debt per se. Are you suggesting that people shouldn't have the right to buy a safe asset? Although some individual banks are losing deposits, the banking sector as a whole is awash in cash. Banks in aggregate are far larger buyers of JGBs than are individuals, precisely because their deposits are rising while loans are falling as companies try to pay back excessive debt levels built up during the Bubble period. It is this corporate debt deflation process which is the main source of deflation in the economy. If the government issued less debt, deflation would be even worse.
The Finance Ministry's homely example of the family balance sheet is fundamentally misleading, because it ignores the difference between internal and external debt. If the 'family' owes the debt to someone else, it's obviously a big problem. However, in this case the 'family' actually owes the debt to itself, since, as you note, it is 95 percent Japanese owned. In that case, the standard macroeconomic answer is that the debt does not impose a net burden on the economy. As long as Japan maintains a high rate of savings and a current account surplus, this situation of the debt being internal will continue, and the prophets of doom will continue to be frustrated.

Peter Morgan
Chief Economist, HSBC Securities (Limited) Japan

I ENJOYED YOUR ARTICLE by Justin Hall on trying to get online in Tohoku (Internet Withdrawal in Akita, June 2002). Actually, I've sat in the very spot of your Morioka mister Donut picture many times, Toshiba Dynabook open, wishing I had a wireless card -- I was a long term resident of Morioka, now based in Tokyo.
I assume the electronics shop you were referring to is Denkodo, just a block down and around the corner. Thanks again for the article -- a good read.
J. Sean Bennett

REFERRING TO AI, NOVEMBER 2001, nice article and very appropriate question ("how would you define artificial intelligence?")! I noticed you received varying answers, not surprising though, we are still trying to understand it. But I would like to be bold enough to answer it. It is like baking a cake, you need ingredients and some process. Well when it comes to intelligence, the ingredients are our physiology and neurology and our emotional and physical traits. The process is cognition and the result is intelligence.
Like making the cake, not one ingredient is responsible for the result. Without the batter, baking powder and a little heat, there would be no cake to eat.
Mike Feldhake
President & CEO
Ccore Innovations, Inc.

SORRY IF THIS IS old news, but your J@pan Inc Newsletter #173 included some highlights of the Gregory Clark interview from the May issue of J@pan Inc (Running on Empty), including the following: "...and where to find land in Japan that is cheaper than land in Australia..." I read the interview in the May issue, but didn't notice anything along those lines. Did I miss something, or was this info edited out of the final interview that was printed?
Thanks, and keep up the good work!
Adam Kozyniak

Good catch on your part. The information was edited out of the final version. What Professor Clark said was that much of the land on the Boso Peninsula in Chiba, especially away from the popular beach resort areas like Kujukuri, is cheaper than land in Australia -- the editors

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