■The path America has followed
This is how history repeats itself.
One of the trends of today can be seen in America venturing to create crisis conditions – notwithstanding the problem on the Korean Peninsula. Every ten years America’s economy has to consume an enormous amount of military stock, or else it will overflow. If that happens, Lockheed Martin and other large military supply enterprises will head into trouble, upsetting the foundation of American industry. For Panmunjom also, a wall that won’t come down like the Berlin wall, eventually it will probably be demolished, however it has long been at the mercy of America’s geopolitical strategy. Even if both nations even wanted it demolished, it hasn’t been possible.
Since the Korean War, America’s farsighted and deeply-laid geopolitical plan has been most certainly at work. The withdrawal of the American military from the Peninsula will not be easy. Even if South Korea wanted it, America will need to settle the battle for supremacy with China.
Of crucial importance in America’s Asia strategy is in how it will secure political and diplomatic honor and profit with the next super power, China (which also encapsulates the people of Greater China).
Let’s look at the beginning of the 21st Century. Around a hundred years ago the internationalization of the dollar ($) began in the 1920s. However, today America’s withdrawal from superpower status has been prominently sighted, and the beginning of a change in the fabric of history is being suggested. In other words, America is repeating the road that was once trodden down by Britain’s pound (£). Britain, in the middle of the 19th Century, had a close-to 40% monopoly on the world’s manufacturing industries. That dropped to 18% by the end of that century. Britain, having had its manufacturing dominance collapse, turned their national interests to financial supremacy and by the end of the century the pound currency occupied around 60% of the world’s trade, and close to 40% of foreign currency reserve. It was unquestionably the world’s predominant international currency. Thus, Britain’s road from manufacturing power to financial power is mainly being similarly run through America’s national policy.
■Through America’s three war economies
The “customer” has singularly become America
Well, how about Japan? From shortly after being defeated in the war up until the beginning of the Korean War, the fundamentals of national security between America and Japan were reviewed. The world moved towards the Cold War system, and the American-Soviet conflict brought about military bases across the Japanese Islands, from the North to Okinawa in the South. In this war, Japan carried the role of the “backing division”, and has supplied steel, foodstuffs, and other materials.
These war “special procurements” created profits unforeseen by Japan’s economy, stirring up strong economic activity post-war. With this opportunity, a variety of production factories that had been closed were reopened, and the sun shined on heavy industries such as steel and shipbuilding.
The opportunity to rise from the defeat of war and propel Japan’s economy unquestionably came from the post-war economy. Japan’s revival began from here, and it became the cornerstone for creating the high growth towards the 1960s. The economic activity called war, as is suggested in calling it “special procurements”, has a different environment and conditions from that which establishes an economy, and is an activity only for one-way supply. This is nothing to do with the supply and demand relationship under competition. Consequently, the economic activity called special procurements gave a strong impact whilst creating the foundations of the economy.
In the 40 years between 1950 and 1991, Japan has seen three war economies. The first was in the Korean War, the second the Vietnam war, and the third was in the Cold War. Having been through these war economies, the true cause of the financial strain that occurred at the end of the century is thought to be the misshapen management system “corporate governance” that was brought about by the special procurements cultivated over many years by these foreign economic activities. While concealed in the foundations of the large companies of today, the biggest weakness of Japanese management can be seen in this ‘convoying’
■Japan’s current state of having to be “a second-rate country”
It’s a staggering reality. Japan’s growth in 2018 was the very lowest within the OECD. The cause is seen completely in the non-activity towards the country’s financial crisis. The audacity to let the proportion of GDP raise up to 230% is unheard-of.
From here on, when will we be able to escape from financial deficit? The primary balance and consumption tax will be postponed and the revision of social security costs will also end up untouched. By leaving it without being able to see the future, uncertainty rises even more. The debate as to whether this is permissible needs more spotlight on the national stage.
Of course some of the responsibility lies with us citizens who voted for the Liberal Democratic Party, however no one wishes for an uncertain world. The root lies in the bureaucracy of each ministry that turns the gears of the government and compiles the budget. We can’t afford to allow neglect by the administrators and politicians of this country.
By issuing deficit-covering national bonds, the government over several years has continued to allow financial deficits, and as a result this has produced depletion of savings to buy national bonds. At the time the economic collapse was also predicted, and through the purpose of overcoming the financial crisis they insisted on a 2% inflation rate, and expanded the Bank of Japan’s balance sheet to 497 trillion yen (as of June 22nd 2017) to continue to buy national bonds.
However, in accordance with economic theory this was a mistake. Even now the inflation target of 2% hasn’t been achieved within two years. In addition, if the Bank of Japan’s purchasing was suspended in several years’ time, the price of national bonds would drop, and sudden rises in interest rates would no doubt lead to a financial crisis. The Bank of Japan, without showing prospect of an exit strategy, continues to purchase national bonds at length while enforcing up until minus interest rates.
The policy of minus interest rates is basically something that negates capitalism. Furthermore, the negative effect it gives to the economy is unlimitedly huge. The balance sheets of currency circulation match the GDP, so this is continuing without being pointed out as abnormal, but the government is not providing an answer to the people’s worries as to what will happen in the near future. The truth is, they are unable to provide that answer.
The debate as to why inflation is necessary is currently not being debated enough. The pretext of “overcoming deflation” is placed right in front, there are the circumstances of the FRB previously aiming for 2% in America, and just like that a number is being assigned.
The fact is, the government, in collaboration with the Bank of Japan, has a strategy of incinerating financial debt under the name of “inflation target”. For quantitative and qualitative monetary easing, the goal is to impose inflation tax and prevent financial bankruptcy. If it comes to inflation, both the people’s deposit value and the government’s debt value will be reduced. If commodity value rises, purchasing power will reduce. The essence of inflation is in the dropping of monetary value, and the fact that the government’s purpose is to increase inflation tax will bring about an unspeakable pain. Even if the increasing of quantitative and qualitative easing forces a drop of the yen and raises stock prices, it will have absolutely no effect in raising the productivity of industry.
Thus, even after around 30 years from the end of the century the period of slow growth continues, but it can be surmised that the basic tone of the world economy for this century will be set by deflation. The cause of zero growth in Japan is being blamed on the phenomenon of economic deflation, however I believe this is a mistake. The true cause is how the rise of productivity shown by growth potential has become sluggish at below 0 to 1%. If one looks at the real conditions of large corporations in these last ten years there are increases in sales written in the press, but the fact is that these are profits born from the accounts of profit totals through overseas businesses, such as benefits from the American tax system. They are not profits earned in the Japanese market.
Short-term business through globalization took away long-term visions from companies – visions that don’t neglect R&D. Now they are once again being recovered, and there’s a need to penetrate deeply into the essence of the problem to figure out how companies ought to continue.