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Sushi Robots Show Way to Surprise Japanese Recovery · Trumponomics

• 0:00
  Speaker 1: Japan's economy gets a bad rap, and for most of
• 0:03
  Speaker 1: the past twenty seven years, the so called lost decades,
• 0:06
  Speaker 1: that's largely been deserved. But don't let the past blind
• 0:10
  Speaker 1: you to what's going on in Japan right now. It's
• 0:13
  Speaker 1: still the world's third largest economy. And in case it
• 0:17
  Speaker 1: escaped you, the stock market is a stone's throat from
• 0:21
  Speaker 1: its highest level since the nineties. Japan's jobless rate is
• 0:25
  Speaker 1: about half that of the United States, and corporate profits
• 0:28
  Speaker 1: have never been better. And look at bank lending, it's
• 0:31
  Speaker 1: growing the most since again the nine nineties. Look, I know,
• 0:36
  Speaker 1: I know, we've had false dawns before I even believed
• 0:39
  Speaker 1: in one myself in nine during the two years I
• 0:43
  Speaker 1: spent editing economics for Bloomberg in Tokyo. So if things
• 0:48
  Speaker 1: are looking up, why isn't Japan getting credit? Why does
• 0:51
  Speaker 1: everything always have to be about China. Welcome to Benchmark,
• 1:05
  Speaker 1: a show about the global economy. I'm Daniel Moss, executive
• 1:08
  Speaker 1: editor for Economics in New York. My guest co host
• 1:11
  Speaker 1: this week is Chris Anstey, a managing editor for Bloomberg
• 1:15
  Speaker 1: in Tokyo and resident of that city for seven years. Chris,
• 1:19
  Speaker 1: it's great to have you on the show. Great to
• 1:22
  Speaker 1: be here, Dan, And your experience with Japan pre dates
• 1:26
  Speaker 1: you'll move there seven years ago. Well, that's right. I
• 1:29
  Speaker 1: was here as a teenager in the late nineteen eighties.
• 1:34
  Speaker 1: My dad was working here, UH, and I went to
• 1:36
  Speaker 1: an international school. I also came back after college and
• 1:41
  Speaker 1: taught English for a year before I went back to
• 1:45
  Speaker 1: the United States and spent the bulk of my year
• 1:48
  Speaker 1: in the US and UK. UH. And it's it's been
• 1:51
  Speaker 1: fascinating to see Japan uh, you know, the past seven
• 1:55
  Speaker 1: years compared with uh the eighties. It does feel, though,
• 2:01
  Speaker 1: doesn't it Like China just sucks all the oxygen out
• 2:04
  Speaker 1: of the room when you have a conversation about Asian economics.
• 2:08
  Speaker 1: And if Japan is discussed today, it's in the context
• 2:12
  Speaker 1: of a long struggle with deflation and a shrinking population.
• 2:16
  Speaker 1: And as we'll learn, that obscures what's been happening lately.
• 2:21
  Speaker 1: But don't just take our word for it. Peter Tasker
• 2:24
  Speaker 1: has been in and around Japan since the nineteen seventies.
• 2:28
  Speaker 1: He's a founding partner of Arcus Investments Limited, established in
• 2:33
  Speaker 1: He also dabbles in Japanese detective fiction. Peter, Great to
• 2:39
  Speaker 1: have you, Good to be here. What's different this time?
• 2:43
  Speaker 1: What is the popular narrative missing? Most of the indicators
• 2:48
  Speaker 1: that I look at are showing levels that we haven't
• 2:53
  Speaker 1: seen since the mid nineties or even before. And if
• 3:01
  Speaker 1: we look at, for example, the Japanese labor market, which
• 3:04
  Speaker 1: you've touched on the job offer to applicants ratio has
• 3:09
  Speaker 1: not been this high since the early nineties seventies. So
• 3:16
  Speaker 1: even even though the the rate of growth, the natural
• 3:20
  Speaker 1: rate of growth has declined due to the the population issue,
• 3:29
  Speaker 1: we have a kind of high pressure economy developing here.
• 3:34
  Speaker 1: And as a result, we're seeing a virtuous circle develop
• 3:40
  Speaker 1: in which you've got more consumption and I think we
• 3:45
  Speaker 1: will see more corporate investment and better improvement in the
• 3:51
  Speaker 1: in the economy as a whole. Just the standard metrics
• 3:56
  Speaker 1: that we look at are far better than anything we've seen.
• 4:00
  Speaker 1: And this goes to, you know, even some of the
• 4:02
  Speaker 1: sort of social mood that we we look at in
• 4:06
  Speaker 1: as you As you said, the two Lost decades were
• 4:08
  Speaker 1: really dismal period for Japan, and one of the things
• 4:13
  Speaker 1: very sad indicator of that was the very large rise
• 4:16
  Speaker 1: in the suicide rate, particularly after the first banking crisis
• 4:24
  Speaker 1: in we saw a significant rise almost in the suicide
• 4:31
  Speaker 1: rate over the next five or six years, ah, and
• 4:35
  Speaker 1: it was concentrated on the sort of middle aged male population,
• 4:40
  Speaker 1: for many of whom found themselves out of work or
• 4:44
  Speaker 1: under employed. Well over the past ten years that has
• 4:49
  Speaker 1: gone right back down again. There's been a huge decline
• 4:53
  Speaker 1: in the in the suicide rate. It's gone right back
• 4:57
  Speaker 1: down to where it was before that bank crisis. So
• 5:02
  Speaker 1: this seems to be a sort of happier vibe socially.
• 5:06
  Speaker 1: And that's no surprise when you see that there's a
• 5:09
  Speaker 1: very high proportion of the population which is now employed.
• 5:16
  Speaker 1: And I think that's an absolutely key metric, is that
• 5:18
  Speaker 1: everybody who wants to work is working, you know, Peter,
• 5:23
  Speaker 1: like you, I really enjoy looking at the historical trend
• 5:30
  Speaker 1: of of indicators, and one great thing about the Bloomberg
• 5:35
  Speaker 1: is you can track some of these way back to
• 5:39
  Speaker 1: the seventies or eighties, or in some cases even before.
• 5:43
  Speaker 1: And what really kind of caught me onto something changing
• 5:47
  Speaker 1: in Japan was when I looked at indicators like nominal GDP,
• 5:51
  Speaker 1: which of course is uh, you know, unadjusted for for
• 5:55
  Speaker 1: price changes. That's the actual yen that's produced in the
• 6:00
  Speaker 1: economy every year. Nominal GDP at a record. Again, you
• 6:04
  Speaker 1: look at again UH employment, You look at UH income
• 6:10
  Speaker 1: across the economy UH, and UH is pretty striking. The
• 6:14
  Speaker 1: past few years. The trajectory has been much better than
• 6:17
  Speaker 1: it was. You know, a phrase we like to use
• 6:19
  Speaker 1: a Bloomberg is size and scope. The size and scope
• 6:23
  Speaker 1: is the highest in decades. But why, Peter, do you
• 6:28
  Speaker 1: think that you know these headlines? You're obviously aware of this. Um.
• 6:32
  Speaker 1: You know, some folks who followed Japan closely are aware
• 6:36
  Speaker 1: of this, But the world seems to have largely forgotten
• 6:40
  Speaker 1: about Japan. What do you think, um is the reason
• 6:44
  Speaker 1: that people don't really recognize this story more widely. Well,
• 6:48
  Speaker 1: I think there are a couple of reasons. One is
• 6:50
  Speaker 1: sort of long history of the relations and the image
• 6:54
  Speaker 1: of Japan globally, going back to the war, and then
• 6:58
  Speaker 1: in the ninet eighties when it appeared that Japan was
• 7:01
  Speaker 1: going to be of the economic superpower of the twenty
• 7:05
  Speaker 1: one century, and many very very smart people brought into
• 7:10
  Speaker 1: that and there was a huge flood of books about that,
• 7:13
  Speaker 1: and Michael Crichson's film um Um what was it called? Again?
• 7:19
  Speaker 1: The Rising Sun was what was marked a sort of
• 7:24
  Speaker 1: peak of that, and then after the bubble burst it
• 7:29
  Speaker 1: turned out to be a bubble economy and the foundations
• 7:33
  Speaker 1: were built on sand. There was a sort of audible
• 7:37
  Speaker 1: sigh high of relief and a bit of chardon freuder
• 7:42
  Speaker 1: if you like. That. Japan was actually doing pretty badly,
• 7:47
  Speaker 1: and so the worst could say, well, look at this,
• 7:49
  Speaker 1: they're not doing it the way they should do they
• 7:52
  Speaker 1: and they're doing it their own way, and it's all
• 7:54
  Speaker 1: going wrong. See I told you so. I think you're
• 7:57
  Speaker 1: just being diplomatic, Peter. Triumphalism is the term that comes
• 8:00
  Speaker 1: to mind, triumphalism. Yes, indeed, So what what happened after
• 8:05
  Speaker 1: that is that Japan has recovered, I believe, but it's
• 8:10
  Speaker 1: recovered in a sort of stealth fashion, and it's now
• 8:15
  Speaker 1: neither a challenger nor a disaster. It is what it is.
• 8:22
  Speaker 1: Even so I think that it's it's it's something that
• 8:26
  Speaker 1: the rest of the world should pay a lot more
• 8:27
  Speaker 1: attention to because many of the issues they're dealing with,
• 8:31
  Speaker 1: particularly the aging economy, the need to bring more people
• 8:37
  Speaker 1: into the labor force. As we know, the labor participation
• 8:41
  Speaker 1: rate in the US is dismally low, whereas Japan has
• 8:46
  Speaker 1: been very successful not just in bringing the the the
• 8:50
  Speaker 1: the the actual sort of technical working population which is
• 8:54
  Speaker 1: fifteen to sixty five, but also bringing many seniors into
• 8:58
  Speaker 1: the labor force as well, so we have over of
• 9:03
  Speaker 1: the over sixty in the labor force. Um. So there
• 9:08
  Speaker 1: are many things that Japan is doing which we could
• 9:11
  Speaker 1: all learn from and probably will need to go there
• 9:16
  Speaker 1: before too long, because aging, though we we present it
• 9:20
  Speaker 1: as a as some kind of disastrous democraphic situation, is
• 9:26
  Speaker 1: in reality a kind of triumph because it means that
• 9:29
  Speaker 1: we've extended people's lifespans. And Japan has the second largest
• 9:35
  Speaker 1: second longest lifespan for males and females or second or third.
• 9:40
  Speaker 1: It's all it's always been there or there about. So um.
• 9:45
  Speaker 1: What we what we need to do in in most
• 9:48
  Speaker 1: of the developed countries is to recognize that people live longer,
• 9:52
  Speaker 1: they should be economically active longer, and they should work longer. Uh.
• 9:57
  Speaker 1: And Japan is is moved, I think quite in quite
• 10:01
  Speaker 1: a constructive way in this direction. Europe hasn't moved that
• 10:06
  Speaker 1: way at all. I think America's is sort of in
• 10:09
  Speaker 1: the middle, but Japan is is way ahead. It's interesting
• 10:13
  Speaker 1: you mentioned Rising Sun. Both the book and the movie,
• 10:16
  Speaker 1: they did seem to capture the zeitgeist of the moment,
• 10:20
  Speaker 1: the sort of Japan as Number one industrial complex. I wonder, though,
• 10:26
  Speaker 1: you make me think, are we making the same mistake
• 10:30
  Speaker 1: in the way the West views China now that it's
• 10:34
  Speaker 1: destined to be on top, it's destined to be the
• 10:37
  Speaker 1: economic superpower of the twenty one century, and some of
• 10:41
  Speaker 1: the potential for problems such as demographics, you know, they're
• 10:46
  Speaker 1: just being swept under the carpet at the moment because
• 10:48
  Speaker 1: it's the current mania. Well, that's a good question, don
• 10:52
  Speaker 1: And obviously my experience in Japan is that never make predictions,
• 10:58
  Speaker 1: especially about the future. And all those smart people who
• 11:03
  Speaker 1: who who wrote that century was going to be Japanese
• 11:08
  Speaker 1: supremacy again got egg on their face very very quickly.
• 11:12
  Speaker 1: So we should we should always challenge the assumptions, and
• 11:16
  Speaker 1: we should always think of all the different scenarios that
• 11:19
  Speaker 1: are out there and realized that our ability to to
• 11:23
  Speaker 1: be certain about them is very limited. And I think
• 11:27
  Speaker 1: you're you're right that if if you're sitting in in Beijing,
• 11:32
  Speaker 1: in Xijing Ping's seats, you would see a whole world
• 11:36
  Speaker 1: of problems that you've got to face and not easy
• 11:41
  Speaker 1: to deal with. Having said that, of course, China has
• 11:43
  Speaker 1: made fun unbelievable progress in many areas, and particularly in
• 11:49
  Speaker 1: moving up the value added chain in technology, and so
• 11:54
  Speaker 1: as a result of that, country like Japan, has moved
• 11:58
  Speaker 1: out of any of the consumer brand icons but sell
• 12:05
  Speaker 1: directly to the consumer that they were famous for in
• 12:08
  Speaker 1: the seventies and eighties. Most of the Japanese high tech
• 12:13
  Speaker 1: we see these days, apart from in autos, is in
• 12:17
  Speaker 1: capital goods which go into somebody else's branded products. So
• 12:23
  Speaker 1: I think that's that's a change in the industrial structure,
• 12:26
  Speaker 1: which also means that Japan is less visible as as
• 12:29
  Speaker 1: a sort of brand owner than it was going back
• 12:33
  Speaker 1: thirty years ago. But in fact does it a huge
• 12:36
  Speaker 1: amount of trade with China, and a lot of intermediary
• 12:39
  Speaker 1: goods and capital goods and key components go into uh,
• 12:45
  Speaker 1: you know, your iPhone or many of the other key
• 12:49
  Speaker 1: products of today. So, Peter, if I like your your
• 12:54
  Speaker 1: term that Japan is neither a challenger nor a disaster.
• 12:59
  Speaker 1: So if that's the case, what sort of opportunities does
• 13:04
  Speaker 1: this new kind of stealth dynamism in Japan create for
• 13:10
  Speaker 1: investors and businesses outside Japan. Yeah, well, talking about financial investment, UM,
• 13:18
  Speaker 1: one of the things that people find very hard to
• 13:20
  Speaker 1: to to get their brains around is that the high
• 13:23
  Speaker 1: growth economy does not necessarily produce the best returns for investors.
• 13:31
  Speaker 1: There are a number of reasons for that, which I
• 13:33
  Speaker 1: won't go into, but there's long studies a hundred years
• 13:36
  Speaker 1: of stock market history have shown that if anything, the
• 13:40
  Speaker 1: the the the the correlation is the other is the
• 13:42
  Speaker 1: other way around a bit so, UM, we should we
• 13:46
  Speaker 1: don't need Japan to grow rapidly in order to be
• 13:50
  Speaker 1: an okay investment destination. What we do require is good
• 13:55
  Speaker 1: value of good values and good profitability from the companies,
• 13:58
  Speaker 1: and I believe that we do have both those elements
• 14:02
  Speaker 1: in place. Um. And just to give you an example,
• 14:07
  Speaker 1: the Topics Index, which is sort of the major index
• 14:11
  Speaker 1: of the of the stock market here equivalent to the
• 14:14
  Speaker 1: S and P. When it was peeking out right at
• 14:19
  Speaker 1: the start of this century with the I T bubble,
• 14:23
  Speaker 1: the EPs on Topics was about twenty five yen a share.
• 14:28
  Speaker 1: Right now it's a hundred and ten yen a share
• 14:31
  Speaker 1: and is expected to rise to about a hundred and
• 14:34
  Speaker 1: thirty year and over the next couple of years, so
• 14:36
  Speaker 1: in other words, there's been a huge improvement in profitability
• 14:41
  Speaker 1: over that time. Now the market itself is actually blow
• 14:44
  Speaker 1: where it was then, though the the EPs on the
• 14:48
  Speaker 1: market is four or five times higher, So obviously that's
• 14:52
  Speaker 1: a much better investment environment with in terms of evaluations
• 14:56
  Speaker 1: and company profits. I think you also need a more
• 14:59
  Speaker 1: stable macroeconomic environment. To some extent, the policy makers have
• 15:06
  Speaker 1: a role to play here, and being generally a more
• 15:10
  Speaker 1: accommodative and easier in in in in the macro policy
• 15:15
  Speaker 1: settings have led to more confidence for companies and actually
• 15:22
  Speaker 1: this sort of environment that we're seeing now, again we're
• 15:26
  Speaker 1: talking about small numbers here, but Japan has been growing
• 15:29
  Speaker 1: well ahead of its natural rate of growth, which is
• 15:33
  Speaker 1: simply productivity growth, because the working population is not rising
• 15:38
  Speaker 1: year after year. Therefore you are soaking up all the
• 15:42
  Speaker 1: used capacity, and we're starting to see some wage rises,
• 15:46
  Speaker 1: particularly in the part timer space. They're not huge, but
• 15:50
  Speaker 1: you're talking about two point five two point six pc
• 15:52
  Speaker 1: with a very lower inflation still, so a much a
• 15:56
  Speaker 1: much better environment and for investors, I think we've got
• 16:00
  Speaker 1: a more stable macro environment and we've got better profitability
• 16:03
  Speaker 1: and valuations than we've seen for I would say probably
• 16:08
  Speaker 1: since the sixties. You know, Peter, you mentioned the labor
• 16:12
  Speaker 1: force UH and running out of of spare capacity. There
• 16:18
  Speaker 1: one thing that I've started to think about is UH.
• 16:21
  Speaker 1: You know, if you look at the past couple of decades,
• 16:24
  Speaker 1: there were periodic UH episodes of a very a very
• 16:29
  Speaker 1: strong exchange rate in Japan, which really kind of shook
• 16:34
  Speaker 1: out the exporters. UH. It forced them to become more productive. UH.
• 16:39
  Speaker 1: It sent some of them out of business. UH, it
• 16:42
  Speaker 1: sent many of them UH pushing manufacturing and jobs overseas. UH.
• 16:48
  Speaker 1: And arguably it left those that survived the toyotas and
• 16:54
  Speaker 1: and others UH in in stronger shape. And I'm wondering
• 16:58
  Speaker 1: if their labor shortages and the emergence of of labor
• 17:04
  Speaker 1: cost pressures domestically will do the same thing for the
• 17:09
  Speaker 1: domestic economy that you will see a shakeout with some
• 17:14
  Speaker 1: not able to survive the increasing UH costs UH and
• 17:18
  Speaker 1: others left in stronger position with more productive workforces. Yeah,
• 17:25
  Speaker 1: I think you're right, because I think the you know
• 17:29
  Speaker 1: that this sort of tight labor market is driven by
• 17:32
  Speaker 1: two things. One is sort of decent economic performance. But
• 17:35
  Speaker 1: the other is the demographic uh limitations. So what I
• 17:41
  Speaker 1: think we'll see over the medium term is this really
• 17:44
  Speaker 1: forcing all kinds of shakeouts and consolidation of industries. So,
• 17:51
  Speaker 1: you know, many industries in Japan have got a huge
• 17:54
  Speaker 1: number of players in the industries, and you don't have
• 17:58
  Speaker 1: that situation many mature economies, you would have the top
• 18:04
  Speaker 1: four or five companies that have an overwhelming share of
• 18:08
  Speaker 1: that market. That's not really the case in Japan. You
• 18:11
  Speaker 1: often have hundreds and hundreds of companies. I think we're
• 18:15
  Speaker 1: going to see over the next decades, in fact, a
• 18:18
  Speaker 1: great deal of consolidation there and mergers, mergers and acquisitions
• 18:23
  Speaker 1: as well. We also see a great deal of automation
• 18:28
  Speaker 1: of activities that are done by people, and there's a
• 18:33
  Speaker 1: tremendous room for that, particularly in the service sector. I
• 18:37
  Speaker 1: would say, particularly in things like the banking sector. If
• 18:40
  Speaker 1: you go to a branch of a bank in Japan,
• 18:42
  Speaker 1: you'll see that they're still got a large number of
• 18:46
  Speaker 1: personnel in there despite all the you know, the potential
• 18:51
  Speaker 1: that we have these days for reducing that. So I
• 18:55
  Speaker 1: think what we're going to see is bigger companies emerge
• 19:00
  Speaker 1: in many of the service sectors, which so far have
• 19:04
  Speaker 1: been very overpopulated company wise, and we're going to see
• 19:09
  Speaker 1: more innovation in terms of personnel reducing technology sort of
• 19:16
  Speaker 1: robotization if you like. We've we've just looking at one
• 19:21
  Speaker 1: company which has got share in small scale sushy robots.
• 19:28
  Speaker 1: I mean that this is perhaps one of the way
• 19:30
  Speaker 1: things are going to go over over many years to come.
• 19:33
  Speaker 1: What does a sushi robot do, Peter, Well, it can't
• 19:37
  Speaker 1: actually put the fish in, but it can make a
• 19:39
  Speaker 1: nice sushi thing for you, and then you have to
• 19:43
  Speaker 1: put the fish in yourself. You need a bit of
• 19:45
  Speaker 1: human skill to do that. But yes, it rolls the
• 19:48
  Speaker 1: sushi for you. But again I would say that these
• 19:52
  Speaker 1: are all phenomenon which if you look at this overall
• 19:57
  Speaker 1: growth rate, it will be average. Nothing much will change,
• 20:00
  Speaker 1: but the quality of it will will be much improved. Peter.
• 20:04
  Speaker 1: Before we close, let's talk a little bit about your
• 20:07
  Speaker 1: other occupation, writing detective fiction. And I understand this is
• 20:12
  Speaker 1: based around an antihero called Maury. How has he navigated
• 20:18
  Speaker 1: Japan's economy in the past a couple of decades and
• 20:23
  Speaker 1: what does he make of this optimism right now? Is
• 20:25
  Speaker 1: he feeling it. He's been at the raw end of deflation. Actually,
• 20:32
  Speaker 1: like many people in service industries, he's found that the
• 20:37
  Speaker 1: kind of fees that are available for him for the
• 20:40
  Speaker 1: work he does have gone down and made it very
• 20:43
  Speaker 1: difficult to cover his costs. So though he's not really
• 20:47
  Speaker 1: an economic person in an economist, yes, he suffered from
• 20:54
  Speaker 1: the lost decades, and yeah, he The other thing about
• 21:00
  Speaker 1: Maria is, of course the way I constructed him that
• 21:04
  Speaker 1: he was basically a sort of nineteen sixties guy, our
• 21:07
  Speaker 1: early seventies guy. So he's getting on a bit now.
• 21:10
  Speaker 1: But of course in Japan, that is no barrier to
• 21:15
  Speaker 1: being cool and doing your stuff. So people carry on
• 21:20
  Speaker 1: doing all kinds of things, whether it's climbing, everest or
• 21:26
  Speaker 1: whatever else. It may be well into their seventies and eighties.
• 21:31
  Speaker 1: So I think that Marius can still keep going and
• 21:37
  Speaker 1: he can challenge the stereotypes of the problem of demographics
• 21:43
  Speaker 1: actually being instead an opportunity. What's your favorite detective novel ever?
• 21:49
  Speaker 1: Favorite one ever? Well, of course there are so many classics.
• 21:53
  Speaker 1: Chandler is really wrote the book, but I'm very fond
• 21:56
  Speaker 1: of Ed McBain. Actually, his is stuff is great. Do
• 22:02
  Speaker 1: you like Philip Kerr's character Bernie Gunter. Yes, yes, yes,
• 22:06
  Speaker 1: I do, I do, I do. I do like that
• 22:09
  Speaker 1: some a bit more modern stuff. Yes, thats good, Peter.
• 22:13
  Speaker 1: It's been an absolute treat to have you here on
• 22:16
  Speaker 1: this show and we hope you'll come back again. My
• 22:19
  Speaker 1: pleasure entirely well. Benchmark will be back next week and
• 22:22
  Speaker 1: until then, you can find us on the Bloomberg terminal,
• 22:25
  Speaker 1: Bloomberg dot Com, our Bloomberg app, as well as Apple Podcasts,
• 22:30
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• 22:34
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• 22:37
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• 22:39
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• 22:43
  Speaker 1: Echo and Chris you are at ampty Asia and and
• 22:47
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