Open Thread and a Few Observations on Japan

I am putting this post up to give commenters who would like to carry on conversations related to previous posts a place to comment, since comments on my last post have been cut off.

Also, my family and I recently returned from a two-week vacation to Japan. The combination of the time away and jet lag has given me less time to research and write a full article. Here are a few observations, based on my recent trip to Japan:

General

The scenery is beautiful, but it is clear that the Japanese people and agriculture are squeezed into the small amount of land that is not mountainous and forested.

The amount of land being used for agriculture has been steadily falling. Our tour guide remarked that if an older person wanted to leave agriculture, getting solar panels installed is an alternate way of obtaining income. We did see quite a few solar panels. But does this approach make sense, when the amount of land farmed is relatively small and falling year-by-year? The USDA says, “Based on total calories consumed, Japan imports about 60 percent of its food each year.”

Tokyo-Edo Museum Visit

When we first arrived in Tokyo, before our bus tour began, we visited the Tokyo-Edo museum. This is a photo of one of the exhibits from the museum.

In previous posts, I have talked about economies being dissipative structures–growing for a fairly long period, before collapsing or obtaining an infusion of cheap energy. I thought that it was interesting that the Edo Period lasted 265 years (1603 – 1868). This is about as long as a person might expect an economy to last in its role as a dissipative structure. In the latter part of the Edo Period, there seemed to be increasing wealth disparity and problems with the government collecting enough taxes. These are things that we would expect to happen, as resources per capita start to fall and complexity starts to increase.

Free English Language Guided Tour of Museum

The three of us (my husband, son, and I) received a free three-hour English language guided tour from a volunteer guide at the Tokyo-Edo Museum. The guide told us that he is a 75-year old retired business man. There was no charge for his services; we were also told not to tip people in Japan.

My impression is that the no-tipping policy is a holdover from the gift economy approach that much of the world used before our current capitalist approach took over. Under the gift economy approach, people are expected to offer their services for nothing, with the expectation that others will reciprocate. This system has pluses and minuses. If pensions of some elderly people are inadequate, it makes it harder for them to provide personal services for wages, since others (with more adequate pensions) will do the same thing for free, as unpaid volunteers.

Traveling School Children

Everywhere we traveled, we encountered a large number of school children traveling on school trips. They often stayed at the same hotels as we did and visited the same sites as we did. In fact, in several places they seemed to be the majority of hotel guests.

The group of children shown above had prepared some type of recitation and response to be offered in the Hiroshima Peace Park. The group is lined up for their presentation, even though there was no real audience for their performance, other than a few of us from our tour bus who happened to be walking by. I can’t imagine US children doing this.

Our tour leader told us that only children whose parents can afford to pay for these class trips are allowed to go. As a result, there is a great deal of pressure on parents to save up money for these trips.

Roads in Japan

The roads in Japan impressed me as being incredibly expensive to build and maintain. Everywhere, we saw walls built along the side of the road, presumably to prevent falling rock. In the US, we just put up signs, “Beware of Falling [really fallen] Rock.” Of course, we have more space, so we don’t build our roads quite so close to the road cuts.

The white line near the side of the road is to mark off what I would call a “sidewalk substitute.” It is a low-cost way of giving pedestrians a little space to walk.

We saw other features that make roads expensive. Our tour bus drove through countless tunnels. We also drove on many sections where the road was elevated, so that more roads could be squeezed into less area.

Nearly everywhere, soundproofing panels have been added because roads are so close to buildings. Roads are being made in an earthquake-proof manner, which also adds to costs.

Our bus frequently drove through toll stations. Wikipedia indicates that most expressways were originally financed by debt, and the tolls are being collected to pay off this debt. The Japan Guide indicates to drive the length of Japan, toll payments of 39,000 yen ($349) are required for a private passenger automobile. This is expensive compared to tolls elsewhere.

Man Made Rocks

Something else I noticed in Japan that I hadn’t seen elsewhere was the use of man-made rocks. Here, they are being used to keep the sea from causing erosion under a major road that is very close to the edge of the sea. We saw other shapes of rocks being used for other purposes elsewhere.

Government Pensions in Japan

The National Pension program in Japan (somewhat equivalent to our Social Security) is based on the assumption that all participants in the program will make equal contributions to the program, regardless of income. In 2017, these contributions amount to 16,490 yen (or $147) per month. To get the maximum pension amount, a person has to contribute at the full level (whatever it is declared to be, each year) for 40 years.

Our bus tour guide told us that because of changing employers and resulting low income, he has been unable to make contributions in recent years. When he retires, he expects that his pension payments will be very low because of this. He seemed to be well educated and hardworking. If he is having pension problems, I expect that many others are also having pension problems. In fact, some may be having pension problems today. We saw quite a few older people working.

Bullet Trains in Japan

One thing we discovered is that Japan’s bullet trains are for people, not luggage. The racks over people’s heads hold a backpack or brief case, but not much more. If people have luggage, they generally send it a day or two ahead of time via a luggage transfer service. There is also no internet service available on these bullet trains.

We chose to take an airplane from Osaka to Tokyo. Airplanes will transfer both people and luggage.

Photo in Kotohira, Japan 

This is a photo of my husband, son, and me, after we had climbed 865 steps to a shrine in Kotohira, Japan. We had a good but tiring trip.

 

 

 

 

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
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2,378 Responses to Open Thread and a Few Observations on Japan

  1. Harry Gibbs says:

    In Jan 2015 Gail Tverberg anticipated: “Disruptions in oil exporting countries, such as Venezuela, Russia, and Nigeria,” and “continued low oil prices.”

    Here we are 2.5 years later:

    “In any discussion of the oil market it is all too easy to ignore the real world consequences of the price fall that has occurred over the last three years… That is short-sighted because the structural shift that has taken place is profoundly destabilising and potentially very dangerous.

    “A new note from the Energy Information Administration in the US published last month sets out the impact of the fall in prices in recent years. It is worth summarising the data, which are expressed in real 2016 dollars.

    “These are big numbers for all the countries involved. Very few have diverse economies that can adjust quickly to the fall in the price of a crucial export commodity. Most have large dependent populations, especially of children and young people. Nigeria, for instance, has some 115m people, amounting to 61 per cent of its population, under the age of 25; Angola 13m — 63 per cent of its population…

    The price fall has reduced the revenue of the Opec states by some $750m from the 2012 level — a fall of over 60 per cent. None have fully adapted to that loss of income. Most have assumed that the price change would be temporary and some have even borrowed to cover the shortfall of revenue against current spending — thereby storing up even more problems for the future.

    The real pain of enforced austerity is only just beginning and will deepen as governments realise that the price fall is more structural than cyclical. The latest attempt to manage the market by extending the production quota for another nine months has had no positive effect. Prices for Brent crude on Friday were down to about $48 per barrel.

    The pain will be profoundly destabilising. At least five Opec states are at risk of very serious political and economic destabilisation, including major economies such as Venezuela and Nigeria. Civil unrest is already evident in Libya and latent in Algeria. Across the whole of the cartel there is a substantial and growing group of restless, unemployed youths aged between 15 and 30. Many of Opec states, again including Nigeria and Venezuela, already have their own political or tribal conflicts. To all that can be added the simmering disputes between the strands of the Islamic religion, and most of the Opec member states are Islamic.

    …the structural fall in the oil price is the most destabilising economic event to have hit the world since the financial crash of 2008. In this case, the impact is being felt in slow motion but it is building and feeding on existing conflicts and tensions. And just as the collapse of the subprime housing market in the US shook the global economic system, so the problems of the cartel cannot be contained within the countries themselves. When problems are rapidly globalised through migration, terrorism and even health risks if key public services collapse, the deteriorating situation within Opec is all too likely to become our problem too.

    https://www.ft.com/content/48d0ac89-3acf-351c-88bc-d55ecf45ae6c

    • JT Roberts says:

      As has been demonstrated it takes time to work through the problem. The first reaction on the price drop is for everyone to increase production if possible. Buy some time and wait. None of the producers can believe that the price hasn’t started rising. It simply can’t everything is contracting. The shale drillers are a good example of the overall problem. They can’t stop because when they do they bring the whole industry down. And Wall Street with it.

      Oil is a bubble, stocks are a bubble, housing is a bubble, auto manufacturing is a bubble, shipping is a bubble, what could possibly go wrong?

  2. Fast Eddy says:

    At the end of February we first highlighted something extremely troubling for the global “recovery” narrative: according to UBS the global credit impulse – the second derivative of credit growth and arguably the biggest driver behind economic growth and world GDP – had abruptly stalled, as a result of a sudden and unexpected collapse in said impulse.

    As UBS’ analyst Arend Kapteyn wrote then, the “global credit impulse (covering 77% of global GDP) has suddenly collapsed” and added that “as the chart below shows the ‘global’ credit impulse over the last 18 months is essentially mainly China (the green shaded bit), which even now is still creating new credit at an annualized rate of around 30pp of (Chinese) GDP.

    But the credit impulse is the ‘change in the change’ in credit and even the Chinese banks could not sustain the recent extraordinary pace of credit acceleration. As a result: whereas back in Jan ’16 the global credit impulse was positive to the tune of 3.8% of global GDP (of which China comprised 3.5% of global GDP) it has now fallen back to -0.1% of global GDP (China’s contribution is -0.3% of global GDP).”

    As we concluded then, “absent a new, and even more gargantuan credit expansion by Beijing – which is not likely to happen at a time when every single day China warns about cutting back on shadow banking and loan growth – the so-called recovery is now assured of fading. It is just a matter of time.”

    Four months later, the so-called “global coordinated recovery” is on its last, shaky legs, because not only has soft data in the form of PMIs, ISMs and various other sentiment surveys peaked and is now declining, as has consumer confidence, but those all important CPI readings from around the world have posted several consecutive months of disappointing prints, and according to some are jeopardizing the Fed’s rate hike intentions (especially if Wednesday’s inflation print is a big dud). US GDP is likewise in “stall” territory.

    In short, February’s collapse in the credit impulse, duly noted here, top-ticked the recent peak of the world economy.

    So, fast forwarding just over three months later, where are we now? To answer that question, overnight UBS released its much anticipated update on the current state of the global credit impulse, and it’s nothing short of a disaster.

    As Kapteyn writes in what may have been the most eagerly awaited report in recent UBS history, “we have been inundated with questions about the chart below, first published in March. Yes, the global credit impulse is still falling. And yes, it matters because the correlation of this global credit impulse with global domestic demand is 0.61.”

    But it’s what follows next that should send shivers down the spine of anyone still clutching to the failed “recovery” narrative:

    From peak to trough the deceleration in global credit growth is now approaching that during the global financial crisis (-6% of global GDP), even if the dispersion of the decline is much narrower.

    Currently 55% of the countries in our sample have experienced a -0.3 standard deviation deterioration in their credit impulse (median over 12 months) compared to 77% of countries in Dec ’09 when the median decline was -1.4 stdev.”

    Here is what the stunning collapse in the credit impulse looks like as of today:

    As such, what “kickstarts” the next spike in the credit impulse is unclear. What is clear is that if the traditional 3-6 month lag between credit inflection points, i.e. impulse, and economic growth is maintained, the global economy is set for a dramatic collapse some time in the second half.

    More http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/02/08/credit%20impulse%20negative_0.jpg

    Ben… Ben…. BEN!!!

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