Dr. Vernon Beck Discusses Japan's Economy

Vernon Beck, the former president of the Japan Society of Fairfield County, said Prime Minister Shinzo Abe’s stimulus program has boosted a stagnant economy but “structural reform” will be needed to ensure that the “Three Arrows” plan is successful.

The Ridgefield resident said since being established in 2013, the aggressive monetary policy and flexible fiscal policy, the first two arrows, have increased productivity and have begun to address the country’s chronic deflation, which is when consumers don’t use their considerable discretionary income.

Critics have said that the Japanese put too much emphasis on savings.

“The past 15 years of deflation have not only caused Japan’s economy to stagnate, but also—more fundamentally— have made people lose hope in the future,” according to a PowerPoint presentation that Dr. Beck provided during his Feb. 20, 2014 talk to a section of PS 104: World Governments, Economies and Cultures at Western Connecticut University in Danbury.

“People feel discouraged to invest, to take on new projects or to engage in new activities. In a vicious circle, this mood has worsened the recessionary trend and has deprived young people of opportunities,” the PowerPoint slide show reported.

Dr. Beck said that the Bank of Japan, which is similar to America’s Federal Reserve Board - hopes to reach a two percent inflation rate in the near future.

To accomplish that, he said the central bank began in 2013 to double the monetary base within two years and also is trying to double the average lifespan of long-term government bonds.

However, Dr. Beck said the country’s economy won’t be fully revitalized until there are structural reforms in which the private sector regularly stimulates private investment and human resources are better utilized.

He said one such valuable change would be an increase in the number of women in a work force that, according to the Denver Post, is running out of employees.

The newspaper reported Dec. 31, 2013 that, for example, there are very few women in executive posts.

Greg Boyko of Canton, the honorary counsel general to Japan from Connecticut, has said due to an aging population and restrictive immigration policies, it is projected that Japan’s population will decrease from 127.5 million to 100 million over the next 35 years.

Dr. Beck said the Abe Administration hopes to have the rate of women in the work force from ages 25 to 49 increase from 68 percent to 73 percent between 2012 and 2020.

He said, in part, the prime minister hopes to accomplish this by adding 400,000 seats in in child-care facilities by 2017, which should ease some burdens on working mothers.

Japan, which is now third in the world, behind the United States and China, in gross domestic product, owes part of its economic rise following World War II to the monetary support it received from the United States following the bombing of Hiroshima and Nagasaki in 1945 to end World War II.

“Sometimes Japan is referred to as the child of the United States,” Dr. Beck said. “The child is now a young professional and doing quite well.”

Even though it only has about the land size of California, over the second half of the 20th century Japan made the conversion from a military power to an economic giant.

Japan established a 99 percent literacy rate and saw the development of some state-of-the-art companies, such as Toyota, Canon, Nissan and Sony.

By the late 1980s, Japan had the second largest gross domestic product in the world and was considered an economic threat to the United States in much the way that China has been over the more recent years.

Former Commerce Secretary Barbara Franklin, a Bristol resident who served under former President George H.W, Bush, has said that by the late 1980s, Japan was dominating the United States in the semi-conductor market.

Author and former White House speech writer James Fallows praised Japan’s economic model in his 1995 book “Looking At The Sun.”

The Japanese are noted for their technology, ability to adhere to five-year business plans and emphasis on savings, although that eventually led to the deflation that has plagued its economy since the early 1990’s.

However, NewYorkTimes.com foreign affairs columnist Thomas Friedman has stated that the secret of Japan’s economy during its boon years was that a majority of its companies operated under a quasi-socialist model in which people were seldom fired and there was less competitive verve.

A real estate crisis that began to surface in the early 1990’s, poor infrastructure planning and a weak service economy has left Japan’s economy largely stagnant for more than 20 years, according to Mr. Boyko.

Tragedy struck in Mar. 2011 when a massive earthquake sent tremors under the ocean and generated huge waves that damaged some of the nuclear power reactors.

Dr. Beck said 20,000 people were killed and “there still are a fair number of people that are displaced.”

He said Japan has embarked on an ambitious infrastructure program over the last three years to address the disaster.

Lou Auletta Sr. of Bauer Aerospace in Bristol, the former honorary counsel general to Japan from Connecticut, has said the Japanese will rebound from the recent setbacks, noting that they are resilient and that over the recent centuries they have had a record of reinventing themselves.