My heart is heavy over the destruction and loss of life in Japan following the earthquake; Japan is one of my favorite places on earth.
However, there might be a (small) silver lining in the face of such bad news. The massive capital expenditures required to re-build the country may help Japan reinvigorate economic growth in the face of many years of financial stasis.
I’m no expert, but it seems that Japan has been in an economic logjam for a while. First, you have a personal savings rate that is very high relative to other G20 countries. And that rate hasn’t fluctuated much despite the recessionary periods of the last 20 years. Second, you have a very healthy population whose life expectancy is high and getting higher. Third, you have a low birth rate. Last, you have a country with an isolationist immigration policy. The end result: Japan’s growth has stalled as a result of expensive labor and a shrinking workforce. It can’t afford its lifestyle of circa 1985 that followed a long period of economic expansion.
The system is hamstrung in terms finding new incentives and sources of investment capital . Many of the constraints in the system are self-imposed by the populace as consumers and voters.
Which is where the silver lining could come in.
The massive spending required to re-build infrastructure will be government-led. And that government is going to quickly find that a blue-collar workforce in Japan is in scarce supply and/or very highly paid. Which it cannot afford.
Thus, the situation may necessitate the need to import workers from other countries. Unlike during periods of stasis where cultural norms have prevailed, this relaxation of immigration policy could be face-saving in the name of “rebuilding”.
Why would this be good? If you examine any other G20 country, you will observe fewer structural barriers to bi-lateral trade and immigration. In other words, inexpensive labor can flow into a country when the conditions warrant it such as high capital investment. And Japan needs this labor to afford the bill that the catastrophe has levied.
One could argue it’s not a very efficient use of capital to pay for infrastructure that was already paid for and is in fine working condition. But Japan needs a reason to break the stasis and constraints of the last 20 years. It changed so rapidly in the 40 years since World War 2, and prospered mightily. Another wave of change would help Japan re-calibrate in a world has changed a lot in the last 20 years and is more interdependent than ever.
Physically, an island. Metaphorically, perhaps not for long. Which could be good.