Economist debunks Japan’s “stagnant” economy

Economist debunks Japan’s “stagnant” economy

Why should you be bullish on Japan? Economic freedom, stability, equity, opportunity. It was the bubble economy. Now Japan is running out of labor. Scarcity is the mother of invention. You’ve got this labor market mobility. It is the people who are in control. This break in the structure is going to force a lot of changes. Hey there, and thank you for tuning in. We’re excited to bring you another great conversation today. If you like the show and want to support us, please hit the subscribe button so we can keep bringing you great content week after week. And if you’re feeling extra generous, give this video a like and share your thoughts and comments down below. Thank you so much. And now, let’s get into it. [Music] Welcome to Unpacking Japan. I’m Toby and today we welcome Yesper Cole. Thank you so much for coming. Thank you for having me. You’re an economist who is known for his positive views on the economy in Japan. You’ve been here since 1986, I believe. So, you’ve got quite a track record and uh I’m sure many interesting perspectives on the situations and how the economy in Japan is growing and more. So, thank you for making time to sit down with us. And like all our guests, I want to first know a little bit what brought you to Japan back in 1986. Oh, what brought me to Japan? Um, it was a bit of an accident. Uh I’m from Germany originally was educated uh internationally mainly in the United States and uh you know was uh in a PhD program at Johns Hopkins University and one day somebody walks into the office and says hey we’ve got these uh fellowships 3 months uh all paid uh in Tokyo. And I said where is Tokyo? And uh the guy said uh 9,000 mi away. And I thought, “Oh, well, this is good fun.” Um and so I came um you know for 3 months at Mitsui Busan, one of the big trading houses and uh you know was 24 at the time. And the people at Mitsui were very Akarooi. They were very lively, very lots of fun. And I thought, “Wow, um you know, this is very good. Uh maybe I can incorporate Japan into my PhD. The PhD was um comparing uh Japan comparing American uh central bank policy and uh German central bank policy and uh you may recall in 1984 actually Japan and America agreed on something that’s called the Endolinkai uh the yen dollar accord. This is before the Plaza Accord. But Japan agreed on a course of market deregulation. Uh many people don’t know this. Uh until 1985, uh Japan did not have a government bond market. You know, uh finance was very regulated. Um you know, very closed, very little uh international capital flows. And so um you know after this accord in 1984 um deregulation liberalization of financial markets started to happen. And so it was interesting because you know sort of as a hybrid you know sort of Germany no deregulation America lots of deregulation and sort of Japan opened up in the mid 1980s as a very interesting case study and my professor was a very wise man. He gave me very sound advice. He said, “Well, if you’re crazy enough to become a Japan guy for the first year, get the hell out of Tokyo because you will spend the rest of your life in Tokyo, which was very good advice.” And so they connected me to Kyoto University and I was very lucky. I spent the first year um you know in Kyoto uh which at the time there was no tourism. The only tourism was uh you know chuga kuryoko Japanese high school and middle school students coming there. No international students. So it was a fantastic time. Quite the difference with now where you barely can walk around the tourist. But and even the temples were free you know. So so I would take my little kanji book and go up to uh the stone garden and sit there and um you know pretend to study Japanese. So it was uh it was good fun. So that was uh late 80s and this was kind of still the peak of the Japan economy. So it’s very interesting because you know it was the mid80s right? Um and uh you know you remember the plaza accord uh when the United States forced the devaluation of the dollar a massive appreciation of the yen. um you know the yen uh within a couple of months went from 260 to 120 um you know so that you know was was obviously a big event uh which ultimately you know was the spark of the asset bubble economy um you know but at the time I can tell you you know nobody knew this this was just normal in fact everybody when I was at Mitsui Busousan the trading company in the summer of 1986, everybody was talking about the new ice age. They were all worried that the massive appreciation of the yen would destroy Japan’s export business model, right? And uh you know, of course, in retrospect, what happened is that the appreciation of the yen coincided with massive deregulation of financial markets. And you know because of this deregulation of financial markets all of a sudden Japanese banks, Japanese credit companies um you know were flush with money and were super eager and keen to lend. And then you had a second force which is that the baby boom generation during the mid to late8s they really came you know to the four in terms of their purchasing power. They got the good jobs in the companies. They took out a mortgage to buy that home. They started families. And so you had massive demand, right, from the demographics from the baby boom generation generating this enormous tailwind. Um, and at the same time the banks because of financial deregulation being ready and aggressive to lend. Plus then of course with financial deregulation you also had this what’s called zitec financial engineering you know where with a little bit of collateral you know some unsuspecting investment banker would give you all sorts of derivative structures that allowed you to lever up even more. So it was the bubble economy but at the time it felt absolutely normal and you remember even in 1989 1990 which you know in retrospect turned out to be the peak of the bubble economy I mean anybody who tells you oh I predicted this is lying because I mean I can tell you I was I’ve been you know living and working in financial markets you know there were very very very few analysts or investors who actually predicted and traded correctly or invested correctly with the collapse of the bubble economy there. So you did your year at Cur University and you kind of witnessed this bubble grow and get bigger and then you started working in as an analyst and you started working in financial institutions when the bubble burst. So it was interesting because you know what happened to me is that uh after that year at Kyoto University uh I literally ran out of money and fortunately my professor at Kyoto University um you know um suggested that I should look for a job with the LDP, the Liberal Democratic Party. And uh you know in 1987 there were several of Japanese politicians looking for gaisho. So looking for you know international uh advisors or aids you know to their portfolio of all they really wanted you know was like some panda right who they could show uh show off and who could facilitate with their efforts to become a little bit more global. but particularly the faction around former prime minister Nakason. Uh they were very very key on that. And so I ended up getting a job with a uh LDP politician called Aryok from the Nakason group um you know around Watanabichio who ended up becoming finance minister as well as Koisumi the father who um you know also ended up becoming prime minister. And I I loved working, you know, uh for the LDP. I loved working um you know, for the politicians. Um and ended up doing that for almost 3 years. What was so interesting about it? What was interesting is that look um after about a year and a half of working for the politician, my PhD advisor called and sort of says, well, you know, you should come home and write the PhD. And so I was like a little bit, what am I going to do? And so I asked several people and they said, “Well, look, if you write a PhD thesis, maybe there’s going to be 80 people who will read this, right? If you’re lucky, maybe 800.” Um, how many non-Japanese are working for a Japanese politician? And the answer at the time was five. So it’s very clear, you know, that in terms of like, okay, where is my advantage? Um and then the second thing is like I loved you know working you know for the LDP. It was incredibly fascinating. people have a you know I mean you know have a many many different images of politicians but when you actually work on the ground you realize one thing which is that number one Japanese politicians are incredibly entrepreneurial because literally every two or three years whenever there’s an election you put your life on the line because there is a reasonable chance that you’re not going to be reelected right the second thing is within Japanese society it’s very tatari Right? So, it’s very very vertical, right? There’s these lots of silos in Japanese society. And what you realize is that the smart politicians, they’re actually sort of on top of all the silos, right? So, in business terms, for example, you know, the Mitsubishi group would not really talk to the Sumitomo group, right? They’re in their different little verticals. But if you’re a smart politician, what you do is you organize these benokai, these little study groups, and you invite people from Mitsubishi and from Sumitomo and from Mitsuoi and from small and medium-sized companies, etc. So, the politician as a catalyst to break through the um vertical structures, the vertical silos that we have in Japan society, that to me was absolutely fascinating. right to actually see that that um you know politicians if they’re smart right actually become the organizers and become the ones who are actually um you know sort of building multistakeholder support you know for their activity very very interesting I love that I can imagine very exciting times but then also came the bubble burst well it was hilarious because of course you know so in my personal journey you know what I did in the last year of working for the LDP is I said like okay if these guys organize these benokai these study groups for Japanese businesses why don’t I organize a bankai a study group for international businesses and so at the time there was a lot of financial deregulation and so I said fine why don’t we get the American investment banks the British insurance companies you know um together for these uh study groups and you know the politicians said that’s okay and so you know we got uh senior bureaucrat from the ministry of finance or from the bank of Japan to give a little lecture uh about a given topic or some potential law change that was coming down the pike and we invited um the the heads of you know Goldman Sachs, Morgan Stanley, JP Morgan, SG Warbergs, BZW AIG the international firm firms and they would pay I think at the time it was 50,000 yen per right um and everybody would listen to the to the speaker the politician would sort of show himself off as a great policy expert everybody would exchange name cards and you know it was great and of course you know six or seven months later one of these companies offered me a job uh and that’s how I ended up working in finance uh and I was lucky because it was of course you Now, in retrospect, the peak of the bubble economy, I mean, anybody who spoke Japanese, uh, anybody who had a little bit of network within the bureaucracy or the central bank or the politicians, uh, you know, it was it was it was very easy, you know, uh, uh, to get that job. uh but I ended up working uh you know as the chief economist for SG Warbergs which at the time was one of the prominent uh you know British uh merchant banks, investment banks um and since then have basically always been uh working in finance. How was the atmosphere like when it all kind of changed when the when the predictions were all wrong? No, but look, it t it t took a long time, right? Um you know the predictions I mean um you know in terms of the actual reckoning that something fundamentally is broken, right? Um you know for the consensus really only started to happen in 1995. So it took like nearly five years kind of I mean I I remember and I’m as guilty as the next guy um in 1993 um you know when the Bank of Japan began cutting interest rates and uh the Ministry of Finance started to add fiscal stimulus um you know I remember writing very bullish reports um you know on Japan uh you know thinking that okay um you know there was an adjustment um but you know the overall competitiveness of Japan plan remains very much intact. And of course it turned out to be way too early. There was a cyclical upswing. But uh the real reckoning came in 1995. 1995 was uh you remember uh in January there was the Coobe earthquake. And remember at the time Coobe was the third largest container port in the world. So this is this is I mean this was a huge disruption of supply chains, right? Um then in March 1995 we had the Om Shindiku remember the cult doing a terrorist uh attack um you know on the Tokyo subway which killed you know many people and this for Japan was a shock because this was um people forget Omshiku was actually the first uh you know uh Japanese um you know computer company right it was the first now we would say tech company. Uh that was their business, right? I mean they obviously had this religious cult but they also were very aggressive you know it and tech uh you know people but they attacked you know Kasumi was the station and uh you know Kasameki and uh you know that as you know is where the elite bureaucrats um go through. So the attack by the by the Om Shindiko in March 1995 following the earthquake in January 1995 and then of course in June 1995 we had the Juen we had the credit cooperatives actually going bankrupt. You had run on banks uh in Japan and that’s when it became very clear that uh something fundamentally is broken. the post-war model of uh Japanese success uh you know fundamentally needs to be rewired needs to change and actually what happened is the prime minister at the time Hashimoto uh took some very dramatic action and it’s very interesting to me because you know people always say oh the Japanese it takes them so long to do anything you know unless they’re forced to exactly never waste a good crisis is and I think that the Japanese certainly over the 40 years that I’ve been here whenever there’s a real crisis they act very fast and very decisively. So in response to the 1995 crisis um what they did is they did three very very big deregulations right the first deregulation uh was actually for the government right Kaaku right was started and you know between 1995 and the year 2000 Japan actually streamlined its government they went from 23 major bureaucracies to 13 major bureaucracies. That’s nearly cut in half. It’s fantastic. It is f. It’s not what America has been doing over the last couple of months is like, “Oh, dodge. I have a chainsaw. I’m going to cut.” It’s like, you’re not changing anything fundamentally. You’re just taking money away. That’s not being constructive. And Japan after the 1995 crisis with Jose Kai Kaku um you know very proactively actually streamlined you know the Japanese government. A concrete example just to be very specific is the financial regulation was uh fragmented you know where the ministry of finance was in charge of securities where uh the um uh meti uh miti at the time you know the ministry of the economy was in charge of commodities the bank of Japan was in charge of another set of regulations and they said let’s create a unified financial regulator and they created the FSA. Right now, it took a while, but Japan is now one of the very, very few advanced economies where we actually have a unified financial regulator. And so, you know, when I was at JP Morgan later on, uh, with the CEO Jamie Diamond, you know, we always had to laugh is that yes, Japan has the best regulator in the world. And the reason is not that they’re particularly smart or anything like that. it is that from an administrative and institutional perspective, it is the one country where everything is unified. For example, in the United States, this doesn’t happen. In the United States, there’s more than 100 different regula regulatory agencies, right, that uh you know deal with JP Morgan or other investment banks. Europe after its Euro crisis, no change whatsoever in financial architecture and financial regul regulation. So, Japan did that. Why did Japan make such a change when other countries haven’t? Because like again I think that the greatest thing if you if you say give me a 15 second soundbite on why Japan is great. The answer is they are unbelievably pragmatic. You know when there is a problem you deal with it not on an ideological basis you deal with it on a rational and pragmatic basis. And you know in response to the 95 crisis you know streamlining the Japanese government in general and the financial regulatory framework in particular this was one of the top priorities. Now the second thing um that they did was labor market reform right because obviously you know with the emergence of China which by 1995 was also very very visible um it became very clear that Japanese industry is no longer competitive and so what did they do with labor market reform which you know was uh passed in parliament in 1995 started in 1996 is they allowed uh non full-time employees, right? So, arabito contract work um you know non-permanent employees um in all industries before 1996 you know it was very very restrictive right where you could hire seasonal or temporary workers and you had a lifetime career at the same company. This was so 199 this labor market reform that Hashimoto did um you know actually was the end of lifetime employment and as we know the number of part-time employees right in terms of the total went from around 18% in uh 1995 all the way up to 40% you know a couple of years ago and effectively you know the males or the weakness of domestic demand a lot of it can be traced back um you know to the changes in labor market reform which however did have the positive result of allowing corporate Japan to actually stay internationally competitive and as you know they kept on until recently they kept on running you know trade trade surpluses and certainly current account surpluses right after this crisis in 1995 if we look at many graphs I think in western media they keep talking about Japan having stagnated the wages haven’t changed much It’s not as competitive as it used to be. But that’s not your view. You have a very look I mean obviously empirically if you look at GDP you know the reality is that since 1994 until 2014 nominal GDP was flat. It was 500 trillion yen and it didn’t move. So it’s it’s completely correct that Japan you know did stagnate right from a GDP perspective. Now if you look at GDP per capita, if you look at real GDP, if you look at productivity growth, if you look at corporate profits, you know, Japan has done very very well compared to the rest of the world, you know. So, you know, the question is, you know, was this a necessary stagnation? um you know was it a stagnation or was it actually a steady state during which corporate Japan restructured very aggressively? Let me let me jump jump jump a little bit on that. Right. Um was this nine years ago or something like that, right? Warren Buffett uh came to Japan and uh you know we had a wonderful discussion and I had this this this data for listed companies. Yeah. And you know for listed companies you see that over the last 30 years sales revenue so topline growth was basically flat had stagnated but profits had gone up 11 times. In America sales over the last 30 years had gone up by about uh uh 3% right no not 3% sorry three times and profits went up six times. Right. But anybody who’s ever run a business, right, if your topline, if your revenues are flat, to get profits to grow, right, you can do that for a couple of quarters by cutting costs, right? But to do that for 30 years while your revenues are flat, your profits go up by 11 times, Japanese CEOs deserve the Nobel Prize for applied economics. So, how did they manage to make this happen? Well, by restructuring you know the break even points so the points you know how much revenue do I need before I make profits right Japan used to require nominal GDP growth or sales growth of around 2 and a.5% for profits to actually grow right now Japan needs 0.1% so basically nothing right of revenue growths for corporate earnings to grow by 10%. So the break even points, the cost restructuring, the operational efficiency of corporate Japan, you know, certainly of the listed companies, right, is unbelievably strong. So you know, so so you say, well, why why didn’t this reflect why wasn’t this reflected in the stock market? Well, as you know, the stock market is the combination of earnings, right? So your profitability plus the multiple right that investors are prepared to attach to this. Now when the restructuring when the great stagnation started out right the price earnings multiple was around 45 times right oh wow now it’s 14 times typically in the United States before the recent uh you know couple of years on average it’s about 15 16 times right so Japan was a bubble was overvalued in the regards of investors you know and what has happened over the 30 years is that the valuations came down and at the same time operational managers the CEOs of corporate Japan did restructure their companies very very successfully so that they are now actually hyper competitive which is very important you mentioned that uh up until a few years ago the number of part-time workers went to like close to 40% but this was an opportunity for the corporate Japan to strengthen itself can you explain a little bit more what you you always have it’s a a little bit simplistic, but you always have, you know, so what what’s what’s good for workers, right, is bad for profits, right? Or is bad for capitalists. And what’s good for capitalists is bad for workers. You always have it’s it’s it’s way too simplistic to put it that way, you know, but the reality of uh since 1996, companies being able to hire uh contract workers and part-time workers rather than full-time workers. um you know the cost difference is around 30%. On average, right? So if I can save 30% of costs, right? That’s great. But of course it means that you’ve got a generation of Japanese, uh anybody who got hired effectively, you know, since the mid 1990s, um you know, the bulk of the people never had a full-time job. And as you know that means number one you’ve got 30% less purchasing power because your income is lower. Um and by the way the reason the income is lower is predominantly because of the corporate bonus right that as a part-time or contract as a non shine as a non full-time employee um you know you don’t get access to the corporate bonus. The other thing that happened is that of course Japanese banks are very nasty, right? That if you don’t have a full-time job, right, you can’t get a loan. You cannot get a loan. It’s very difficult to even get a credit card, right? So, as a result of that, you saw leverage completely collapse. So, I’ve got this generation of Japanese, you know, the children of the baby boom generation effectively have not had full-time jobs, have not had access to leverage. And yes, as a result of that, nominal GDP, nominal national income um stagnated while corporate profits as I mentioned, you know, were able to grow 11 times, right? The economy is a combination of the whole. If the companies are doing good, but the people are not doing good, how uh is it looking for the future? So, what is interesting is like, you know, the the the the people did do well and now I’m going to be an economist, right? um which is that of course consumer prices declined right there never were any price increases in many many many cases right whether it’s the textile industry whether it’s even the restaurant businesses you know companies were passing on some of the increases in profitability via lower prices right so you did have this deflationary prosperity which didn’t feel good because you know like you know very well when your manager comes at the end of the year and says hey you know you are going to get a 5% pay increase that feels great while if your manager comes and says hey you know next year you still have a job but no pay increase but prices are falling by 5%. Right? You don’t feel good but from an economist perspective it’s like no no you’re good purchasing power is going up you know by the same cases. So what is interesting is the key point and this is where we get to the here and now right you’ve had 30 years of yes you know stagnation in nominal GDP during that period however the Japanese labor market the Japanese corporate market you know did actually reform and restructure and now over the last two or three years we’re actually at a point where the benefits from this restructuring is actually coming through and it’s coming through compounded by the most important development of Japan which is what uh that’s a very good question. The most important development of Japan the most important development in Japan is very simple is demographics. You know, the reality that Japan is running out of labor Yeah. is the single biggest catalyst for change. Because it doesn’t matter whether you’re Toyota or whether you run a yoga studio, it doesn’t matter what business you’re in, right? The moment you have to fight to retain your people, the moment you have to fight to attract people to join your venture, the moment that the head of Mitsubishi Corporation has to be out there on Bizreach begging for the young students to join Mitsubishi Corporation. That’s where it gets exciting because all economic activity, all social activity, everything starts with the people. It’s human capital that matters. And scarcity is the mother of invention. Remember, Japanese companies were unbelievably proud, right? When I showed up here in 1986, right, until basically 1994, 1995, 1996, Japan’s model of capitalism, Japan’s model of multistakeholder capitalism, Japan’s model of dealing with human capital was the model taught in all the major business schools around the world. Right. Mhm. And the generation of managers was of course very proud of this corporate legacy. Right. This was broken number one by the labor law changes in 1996. But now the pendulum is swimming exactly the other way around. Now it’s not the capitalists, excuse me. Now it’s not the capitalists. It’s not the corporations who are in control. Now it is the people who are in control. I I I give you a concrete anecdote. You know, if you look at my favorite chart that I use at the moment, right, when I get asked is, “Oh, yes, but you’re always bullish, right? You’re always bullish on Japan.” But what what actually has changed? And the chart I show is the young men and women who join the elite. the young men and women who join the Ministry of Finance, who joined the Ministry of the Economy, right? How many of them after they join the elite ministry in their early 20s, how many of them quit while they’re in their 20s or 30s? And that chart is a flat line. Nobody quit. But over the last six, seven years, this has shot up quite dramatically. And what that shows you is that the elite is on the move. And you know what’s cool? When I go to the Ministry of Finance and say, “Hey, so where do these young men and women go? Do they go to Mitsubishi Corporation? Do they go to JP Morgan?” They said, “No, threearters of them go to startups.” Interesting. And that that tells you your image of Japan as this boring sorry as this boring salary man who just follows orders from whatever the the head of the company says right is wrong. You know that you’ve got this labor market mobility and that’s again comes back to why should you be bullish on Japan. The reason is that yes corporations have very much restructured. They are very globally competitive right but now the internal processes the laziness of dealing with human capital right now is being forced to change not because of AI not because of technology but because of the scarcity of people that’s what makes it very very exciting I mean it is interesting when just turning on Japanese TV we see these ads for recruiting companies all over the place and they are fighting for talent Um, but is this sustainable too? Of course. But it’s look look look is this it’s a pain in the neck for all the managers. My buddy who is the head of HR at Mitsubishi, you know, every time he goes to Ko University or Kyoto University or Osaka University and does a recruiting pitch, he calls me and says, “Let’s go out drinking because he’s depressed.” He said, “Like I used to have the best job in the world.” Because until four or five years ago, the young graduates were begging for me to hire them. Now they look me in the eye and say, “Hey, what’s Mitsubishi Corporation going to do for me?” Now that’s where it gets exciting. Yes, it’s Mendocite for the old generation because yeah, the old way of doing business, right? Uh is not going to work. I want a real career track. I don’t want seniority based pay. And this break in the structure, you know, is going to force a lot of changes in Japanese society. The gap between winners and losers, companies who act faster on this, who what is the English word? Empower, you know, their workers, who offer genuine career tracks rather than just lifetime employment where you stand on the escalator and move up. You know, that’s the metabolism of corporate Japan. So they will need another restructuration to kind of remain competitive to adapt to this younger market. No, thank you. And this is the key point. This is the key point. I was so excited last year was the first year ever that the Kanden companies, so the big the Fortune 500 companies of Japan hired more people midcareer than they hired at the graduate intake. And that’s a huge change. I’m so excited. NT Corporation, which is a dinosaur, right? The telecommunications China is one of the most unionized companies in Japan. NT last year announced that they will break and do away with seniority based assessment, seniority based promotion. They are now introducing a meritocracy. This is where it gets cool, right? How is this going to affect this balance between the the older managers that are used in these older ways of doing and now this younger workforce that is like, “No, I’m doing a good job. I want to be rewarded for this. But the older ones are like I’ve been here for 30 years and but thank you. And it’s Sonara Showa like I’m Sayonara myself, right? Um it’s very interesting. You know, you’re right. You know, Japan has always been very nice. You know, you don’t get fired. You know, the system carries you through um you know, until retirement. And now and as you know this year 2025 is actually a big year because it’s the year when all the baby boom generation is turning 70. So basically you know their their exit not just from the company right but their exit you know from a life where your employment income is your main part of income you know that has happened now. So the companies through attrition are actually now ready and you’re running out of labor. And so what do you see? You see now that we’re in the third year of historic record M&A activity. Why are companies merging? All of a sudden they’re merging because yes, you’re running out of people. If you’re a bus company in rural Japan, right? And you’ve competed your entire life against your buddy Watanabasan who also has a bus company. And this was healthy competition at the regional level. Now both of them has to merge right the same taxi companies I mean the whole you know the whole industrial structure of Japan is going to be streamlined and you know you’re going to start to see the emergence of national champions right well one of the big discussions of mergers was Honda and Nissan I think which kind of fell through and shortly after Nissan reported what was it5 billion US of losses it’s wonderful I mean you Look, I mean the reaction, I mean, look, I work in finance and, you know, we’re obviously cynical people. Um, you know, when that merger was floated or the the idea of the merger was floated, we all said, well, 18 years too late, you know, because 18 years ago, you could have created a global champion. right now for all intents and purposes you know the uh arrival of the people’s republic of China as a perfectly competitive you know car maker um you know Japan you know with its seven car companies I mean wow what’s your niche I mean you better become Lotus or Austin Martin um you know if you want to survive because on the high volume business right um you know the race is going to get tighter and tighter and tighter You described the biggest change affecting Japan right now is the the decreasing population. Um that also affects another big part of Japan, the the rent uh the retirement system, right? With the number of people paying into Nankin uh getting lower and lower and the number of people needing it growing year after year. Is this going to shape an imbalance in the system? Well, but look, I mean, it’s it’s wonderful in the sense of that, you know, I mean, you know, the big quip, what’s the difference between Japan and China? Japan got rich before it got old. I mean, this is the bu the wealthiest baby boom generation on earth. And yes, let me be very clear. I mean, there’s obviously an underclass. There’s obviously people, you know, but if you look at this proportionally relative to what’s going on in France, what’s going on in Germany, what’s going on certainly in the United States, even in the People’s Republic of China. I mean, I’m sorry to say, you know, Japan is unbelievably rich, right? the current retirees, you know, it’s the richest baby boom generation on earth. And, you know, for all intents and purposes, you know, I think that this constant crying, you know, over, oh my god, my entitlements are being uh uh cut back. Oh my god, my out-of- pocket expense for healthcare is being cut off. It’s like, my god, yes, it’s more expensive than what was promised to you. um you know but for all intents and purposes in terms of the aggregate right um you know I do not you know see any problems and by the way I beg you and dare you to look at u you know Japan’s underclass um you know relative to you know underclasses that you have uh elsewhere in the world I mean this is an extremely rich um you know and wellto-do society and very importantly the ethos of providing minimum standards of service, minimum standards of public service that are extremely high. Like for example, in California alone, every year there’s 300,000 people who declare bankruptcy because bank have to 300,000 people who have to declare bankruptcy because of medical expense that they can’t afford. Here in Japan, nobody declares bankruptcy about medical expense because yes, it’s a socialized medical system. The same is with schooling, right? I mean, it’s like you can and moan and complain about the quality of schools this that or the other. The reality is that, you know, Japan’s public schooling system is arguably the best in the world. Certainly when you look at you know what economists call intergenerational earnings elicity and what that tries to measure is that you know to be economically successful do you have to come from rich parents and Japan scores you know the highest u you know in index in other words it is a very very uh you know e equal opportunity uh uh society so it’s it’s interesting that you make that point you know because I always I always point out it’s like you know in in my presentation I have this one slide. Is it is it good to be old? Right. Um yeah. And uh you know I mean basically the people over 70 now or pretty soon one in three is going to be over the age of 70, right? Yeah. Um but when you look at the people who vote, you basically have over uh over 65% of all the voters, right, are over 70. The young people don’t vote. Mhm. And so of course you know there is this focus if I’m a politician and I want to get reelected right I do need to take care right and I do need to be uh uh uh you know concerned about the older generation but in macroeconomic terms from an objective perspective right I’m sorry Japan has a problem of riches not a problem of of uh uh of poorness you said sonara earlier and so all this older generation that is arguably one of the richest baby boohon generation in in the world. What’s going to happen with all that wealth uh if they don’t have children and if it’s Oh, thank you. So, so again, this is why I’m so bullish, right? Because I’m bullish like we talked before, companies now have to fight for their labor, which means that labor is going to become more productive, right? The second thing is that you’ve got and you can show the data over the next 10 years the equivalent of 1.3 times GDP will be unfrozen from the mattress money will be unfrozen because of death right and I’m sorry to be so blunt you know but the baby boom generation is going to start to die as a result of that you’ve got this wealth transfer right it’s about 700 750 trillion ion yen, right? That is going to flow. And thank you, the Ministry of Finance, the tax authority will want their share of it, but that’s still a substantial part of money that actually flows into the next generation. You know what the problem is? No. So it’s funny because you know about 10 years ago in one of these government advisory councils you know I made this point about you know sort of wouldn’t wouldn’t it be good to sort of have tax incentives uh you know so that you can transfer you can speed up you don’t have to wait to death you know before you transfer the assets right and uh the guy from the ministry of finance right uh runs out of the room and comes back a couple of minutes later and and he says, “Oh, Hzan, average age of people receiving inheritance is 62.” In other words, you know, you would you you know, you would because people die so late, right? Um you actually to get an economic impact, right? you would almost do have to skip not one generation but two generations because people need the money in their 30s when they want to establish themselves, have a family, buy a home and so on. Exactly. You know, so there are rigidities and this by the way in in in in my opinion and and we’ve been writing about this and and lobbying for this. The single biggest change that Japan needs to do in my opinion uh is exactly a change in inheritance and gift taxation. Uh you may recall that um the Japanese inheritance and gift tax system uh was set up by General MacArthur. Mhm. Uh it was set up uh specifically to reduce all family wells um you know over three generations. And so General MacArthur at you know at the time you remember in the 1930s and 40s there were basically eight families who controlled around 80% all the wealth and all the economy the big the big zyata families right and uh when the Americans took over during the occupation one of their goals was to make this sort of uh conglomeration of capital and power this sort of oligopoly oligarchy, right? Make that impossible. And so MacArthur asked uh I think it was Professor Shupe from Chicago University, designed me a tax system that destroys all family wells over three generations, right? And they did. And so as a result of that, you’ve got an inheritance tax system which is very draconian. um you know you’ve got uh gift taxation system that is very draconian and so you know that was wonderful and perfect to actually start the democratization of the Japanese economy right you had land reform you had this new taxation system and as a result of that you know the the the big families this sort of oligopoly or plut I mean Japan is not a putoaucracy you know by any means right so Now that you’re three generations later and there is all this mattress money, there is all this stock of financial wealths that the household sector has accumulated, right? How can we use this wealth, right, to actually flow back into the economy? Now, the moth just says, “Oh, we’re going to tax, we’re going to use that wells to pay down the national debt,” which is fine, but that makes the accountants happy. That doesn’t do anything for you and me. That doesn’t do anything for the economy. So, should there not be gift taxation or inheritance taxation reform that actually incentivizes the older generation, right? To give back to the younger generation, to give back to the rural community, to actually build, you know, a new old folks home, to build a new library, to build whatever it is that that that you want to be building. So that’s sort of something that uh you know I think uh certainly I feel very strongly about that uh you know what’s what’s the one piece of advice you would give to the prime minister is actually look at your gift and inheritance taxation and reform it so that the wealths accumulated uh you know creates new wealths rather than just pay down debt. You brought up the national debt which I believe is the highest in the world over 300 something%. How do we understand this number if someone is not too familiar with economics? Well, it’s it’s it’s very interesting and as a German I need to be very careful because of course you know Germans are supposed to be super fiscal hawks right um wherever it comes to but look um you know the the debt is enormous uh 2.6 six times GDP which you have not seen in economic history outside of periods of world wars right um you know but at the same time uh of course the mirror image of the debt is the enormous savings pool by the private sector in fact you can show that um you know both private companies and private citiz citizens of Japan for every one yen of debt of public debt they have saved 2.6 yen over the last 30 years. So you’ve got an enormous surplus of savings right that Japan actually has. So again, I need to be careful as an economist because you know there are obviously potential implications um you know for um interest rates. But the reality is that despite Japan having the highest level of debt outstanding, Japan has the lowest interest rates in the world. Interest rates which I believe were close to zero. and the bank of Japan recently increased a tiny bit a few months ago. Uh what does it signify Marcus? How does this affect anything? So it’s very interesting that you know um the whole focus in my opinion the whole focus of the bank of Japan is to normalize um the interest rate and financial markets. There was an enormous amount of intervention by these central authorities, the Bank of Japan in particular in financial markets. We all know that 60% of the government debt is owned by the Bank of Japan. Mhm. Um at one point the Bank of Japan owned as much as 10% of the Japanese stock market. The Bank of Japan owns about onethird of all the REITs, the real estate investment trusts. And the Bank of Japan controls about 10% 12% of all corporate loans lending to zombie companies. Right? So over the last 20 years, there was an enormous amount of government intervention to keep the cost of capital to keep the cost of debt abnormally low, right? Or lower than it would otherwise be. And so again, it’s the government acting as a buyer of last resort. And they’ve done that for not just a couple of years during a crisis, but they’ve done that consistently for the last 20, 25 years, you know, now that things are normalizing, right? That you do have a little bit of inflation back in the system. Now the central bank is actually privatizing as it were, getting out of the way, no longer buying Japanese equities. uh last December like you pointed out they did increase interest rates from uh a quarter of a percent to half a percent but more importantly they announced the end of the lending program by the bank of Japan to zombie companies as I call them right um so it’s very very interesting that for us in the private sector what is happening is yes interest rates are going up but much more importantly opportunities to profit from that new liquidity because the Bank of Japan is no longer the big player is no longer crowding out Japan’s financial markets and you can see that reflected in the reality that Japanese banks uh are having record profits because finally it’s them who are benefiting from the increase in interest rates rather than uh the bank of the Bank of Japan taxing them by not allowing interest rates to rise. Another big change that is happening at the moment, I think, is a new relationship with the government of the United States. Tar tariffs are being implemented or not and changed. How is this affecting Japan’s economy, especially since it’s kind of heavily relying on export to the United States? Look, it’s it’s it’s interesting that the um you know, next year in 2026, we will have the 75th anniversary of the US Japan relationship, right? Um and it’s very clear that the American administration that the American president, you know, is changing the global game and you know, the immediate impact is tariffs. Um because the American government uh thinks that let’s collect monies from the rest of the world via tariffs to pay for tax cuts for the American people and it’s a separate discussion but you know whatever that’s the priority that they want to set for Japan this is potentially hugely dangerous um because about 18% of profits for Japanese companies come from dealing selling to the Americans and you know if you did have a 10% tariff right uh across the board that alone would reduce corporate profits you know by as much as 20%. That’s a lot. So it’s a potential huge um you know negative shock right which of course comes at a time when the major exporter which is cars and car parts is under enormous pressure because of the rise of China right in that area. So it’s sort of like a double whammy that is starting to come through. Now personally I’m very hopeful that um the uh US Japan relationship even under Trump is strong enough to actually find a compromised solution and uh we shall see. Um, I doubt that all of the tariffs are going to go away, but I think if Japan ends up with a uniform tariff of between 5 and 10 percentage points, that’s something that’s going to cause a dent, but it’s going to cause a cyclical or temporary dent rather than structural damage. And I’m hopeful that um at the same time uh a new investment strategy where Japanese capital, Japanese analog technology um actually uh helps to uh helps for America to achieve its goal of um you know building a new industrial base in America. I mean to be very specific for example you know there there’s wonderful areas when you look at the details um for example shipping I mean Trump is obsessed with the idea that the uh ice caps are melting and that as a result of that the sea routes are going to change fundamentally the polar routes are hence is uh interesting Greenland so so interesting Greenland but at the end of the day you still need the ships to be able to plow through you the uh thinner and thinner ice. America has no ice breakers. Japan builds the best ice breakers in the world. Oh, interesting. So, here you’ve got a solution where, for example, Japan commits jointly with America to build ice breakers for America. Um, you know, which is a for-profit business, right? Um, so you know there’s there’s there’s room outside of agriculture, outside of you know uh oil and gas imports from America. Uh there’s plenty of opportunities for the two countries uh to actually make 1 + 1 uh equal three because as we all know in the analog world of you know precision engineering, precision machinery um you know as well as for example ship building or steel you know you do see you know that the room for compromise is there and it’s very important that just a couple of days ago uh President Trump basically gave the green light for the Nippon steel US steel merger or it’s actually a takeover right which was halted a while back it was I mean these are look unfortunately we live in a world where um you know American politics is our primary source of entertainment right and treat it as entertainment if you start to treat the policies proposed by Trump as real policies right? Then we’ll have a global depression, you know, like 150 164% whatever it is tariffs on the People’s Republic of China. I mean, if you want to kill the global economy, this is the way to do it. And it’s very dangerous. I completely agree with that assessment, you know, but again, if you look at the reality, if you look at the track record, you actually find that it’s more kabuki than actual reality. like we’ve seen in the Nippon Steel case. I hope that that’s going to become a good example because I’m against it because I need to be elected and I need the union vote and now you come well actually it makes perfect sense. Thank you Nippon for investing what is it $17 billion uh into the United States of America because quite frankly America doesn’t have a steel industry anymore. Nippon Steel is the best steel company in the universe in terms of the engineering ability. So obviously if you want to reindustrialize America, you can’t do that without steel and nip on Steel gives you the technology as well as the management knowhow on how to actually get this done. As a person living in Japan, when we read all of these news, uh regardless of which newspaper we take it from about politics and this discussions on economy and tariffs and trade and so on, it’s very hard to understand. It’s a very complex system. How do we kind of navigate this as a person just living here and trying to understand how this will affect us? So it’s very interesting. I think that um you know and this is not a glip remark you know I think that follow what the Japanese are you know are saying and doing rather than what the Americans are putting out there. Um, this is obviously not true for some of the inter inner America policies, right? I mean, obviously Harvard University is being hit extremely hard, you know, by what’s going on there. Obviously, some of the social policies that Trump and his team are re-engineering in America will have enormous impact, you know, on the society in the United States of America. But as far as the global interaction is concerned, I think that focusing on the Japanese press and on the particularly the commentary that you get from the Japanese bureaucracy, right, I think gives you a much truer north, a much truer guidance as to what’s going on. And specifically I think that uh at the end of the day I think that the uh focus on pragmatism right um the focus on actually making 1 plus 1 equal two and for us living and working here in Japan right much more important is the reality of what these Trump policies are doing which is that they are focusing the mind of Japanese politicians of Japanese bureaucrats that Japan needs to build greater domestic strengths because I’m optimistic on US Japan relations. But it’s perfectly fine if you’re pessimistic. I mean, it’s we we just don’t know. It’ll take you another four or five years before we actually know what will happen. But for us living and working here in Japan and making this country our home, right, the reality is that America having become less trustworthy, right? And of course the People’s Republic of China, right, also not particularly trustworthy, right? that the two big partners for Japan cannot be relied upon and therefore Japanese policy makers, Japanese business makers becoming much more pragmatic, much more decisive in wanting to rebuild in wanting to strengthen their domestic economies. And you’re seeing that and this is where you know particularly for non-Japanese um you know for the next generation um you know of global citizens who want to build a career who want to build a family um I think Japan is unbelievably attractive because the domestic human capital the domestic labor cohort is going down. Right. Japanese companies are opening up. There is empirically you can show every day over the last 18 months there is 1,100 non-Japanese who receive a work permit. Right? Do you know this? Every 18 months, over the last 18 months, every day 2,200 people, the population declines, but every day 1,200 get a work permit. So, it’s very interesting. When I showed up in Japan in 1986, there were approximately 500,000 non-Japanese living and working here. Today, it’s 3.5 million. And that chart looks like this. So, the point being, the world is an uncertain place. the relationship with the United States, the relationship with the People’s Republic of China, all of these things, you know, need to develop and are evolving in ways where history is not necessarily a very good guide. But at the same time here in Japan also, society’s metabolism is increasing. society’s wish and desire to actually build greater strengths here in Japan together with non-Japanese that is not going to go away no matter what happens to Mr. Trump or Mr. Mr. what’s his name? Ishiba. You said you are an economist and therefore you’re cynical, but you’re also quite a positive person and very bullish on the markets and kind of looking ahead at the bright future. Where do you get all this positivity from? But look the reason is very simple is that you know the attention to detail, the amount of uh you know honesty, the amount of uh sincerity and uh wanting to do the right thing and wanting to do the best thing. This whole shun bonka that Japan brings, you know, this this craftsmanship, right, that Japan brings to the table makes you incredibly bullish. I mean, how can you not be, you know, uh, bullish on Japan? Now, in terms of investment, I mean, of course, there’s ups and downs. There’s cycles that go on. Um, so, you know, you need to be able to pick your spot on the individual investment strategy, but the fundamental strengths, I mean, let me give you one example. Yeah. I mean, you know that, you know, people talk about, oh my god, you know, how savvy is the workforce, etc., etc., right? It’s like, I’m sorry. The OECD does this survey every 5 years uh looking at the uh ability of middle and high school students on mathematics and on science. Japan is always number one or number two. I mean, so how and and you know that if Japan slips from number one to number two, they declare a national crisis. Now, I’m sorry, I’m a mathematician myself, but the reality is like if you are going to be taxy, if you are going to be able to survive, right, in terms of, you know, your national skill set, right, the foundations in Japan are second to none. Absolutely second to none. The second thing is like look at infrastructure, you know, I mean it was so hilarious during the lost decade, right? Or the lost generation. Yeah. In Tokyo, Tokyo already had the best subway system in the world in 1990. During the lost generation, during the last 30 years, they built three new subway lines. They continue to invest in public infrastructure both at the hardware and at the software level. Fantastic. My home country Germany is a disaster. Yeah, the trains are not the same. No, the trains I mean are they even trains? Sometimes. You brought up the topic of personal investments and I think one of the big moves that Japan is doing for this has been Nissa in the last uh couple of years. It’s something that is being advertised a lot. What’s your take? Can you explain how it works and and kind of No, but look, I mean, it’s it’s it’s it’s very straightforward. um is that you know the NISSA accounts give anybody who is a resident or tax resident of Japan uh an opportunity to invest um you know tax-free and uh you can invest u basically up to 19 million yen um you know in the stock market or in bond markets or in you know in financial products in these in these accounts and with the new Nissan the shinisa. Um you know even you know your capital gains if you if you sell one and buy another fund or sell one stock and buy another stock um you know is uh uh capital gains taxfree. I mean to put this in perspective right the average savings of the average Japanese right um you know is about 20 million yen. So, 19 million yen of tax-free investment. Wow. I mean, this is a huge incentive, you know, that you actually have. And, you know, I think that whether you’re a non-Japanese or whether you’re a Japanese, I mean, just from an accounting from a from a tax optimization, you you you’d be a fool not to participate in that. And the interesting thing is of course that you know people are actually doing this you know so it does have the uh uh you know the the the result now 80% 75 80% of the monies are invested internationally um rather than here in Japan and that’s always I mean you know every six seven weeks I do this caravan you know with the manx group we go around you know Osaka, Fukuoka, Nagagoya different cities and we do these investor seminars and it’s it’s it’s very interesting because you know why don’t Japanese buy their own market why yeah it’s it’s it’s you know if you if you have an answer to this especially you mentioned the banks have had their record profits and thank you and this is I mean I’ve been doing this for 10 years you know said like look you can put your money that you don’t need right your cash reserve you can put it on deposit at one of the banks and earn exactly zero, right? Or you can buy the equity and earn 4.5% of dividend. Now the risk is that the bank goes bankrupt. Now we’ve done that in the 1990s. So the banks are extremely well capitalized etc. But it’s interesting that Japanese, you know, for all intents and purposes, particularly the older generation is very very risk adverse, right? Um, and it’s interesting that the next generation, the younger generation, um, is actually much more prepared to take risk. And by the way, you’re seeing this. It’s interesting. The the Japanese don’t buy um don’t buy their own stock, right? They don’t buy equities, but they do buy real estate, which is interesting because the value of real estate in Japan seems to kind of be the opposite of how it’s being used in in France, Germany, or the United States, right? The property of no value. Uh it’s just a land that holds a little bit. But no, it’s so cool. I mean you look at this it’s like the uh you know in in in Japan you have um you know still it’s even after the recent appreciation over the last two or three years it’s still the only country that god forbid if you work at a Starbucks right with the average salary you can afford to buy an apartment within a 1-hour commute which is impossible in Paris or Shanghai or Chicago or anywhere right so it’s quite interesting you know that if you actually of course the absolute price has gone up, right? But actually starting level salaries, right, have gone up faster than the average apartment price. So affordability for the new next generation of Japan is still very high. And of course for non-Japanese who decide to come and work here in Japan, um it’s not easy to get a mortgage, right? Um but you know, the affordability is still very very high. not just because of the exchange rate you know rather than look compare it to the salary or the income that you actually have in particular look at disposable income because you know for example if you go to the United States you know you’re spending almost you know 25 30% of your money on commuting on just transporting is hugely expensive in the United States right while here as you know public transport I mean it’s not free But public transport is certainly extremely reasonable and most employees will cover it for you as well. But voila, voila. You know, so the real purchasing power that you get uh working here in absolute terms because of the yen’s depreciation of course doesn’t compare uh very well to Europe or to the United States, but uh in terms of the relative to your income purchasing power that you get um I think is a very very attractive proposition. And if you from a finance from an advice perspective, you know, if you whatever it is that you are saving, if you invested in uh Japanese equities, you know, in some broad index fund, um you know, I think that your probability, nothing is certain in finance, but your probability of coming out on top, uh I think is is is really quite high. We talked about a lot of topics today. If people are interested in kind of learning more about these and researching getting a better understanding of the economy in Japan, what would you recommend as like sources of information where to what to read, what to study, what to Look, I think that um you know there are um you know obviously you know the the the English version I assume you’re asking about non-Japanese language sources, right? Um, you know, I think that, you know, for all intents and purposes, the the English version of the nikay, right, if you’re interested in business as well as in some of the macro priorities, um, you know, is uh is definitely a must readad. Um, I think that there are also um, you know, some uh very interesting um, you know, sort of private uh, commentaries that are now available. I don’t know whether people are familiar with Substack right um you know I mean it’s obviously the Japan optimist myself but you know there is uh you know other uh areas on on other blogs on Japan that are that are very very good and then last but not least you know look the Japanese government the Japanese bureaucracies they publish every year white papers right and it takes a little bit of time lag for the English translation to come through. But um you know for insights and learning about Japan, right on your next longdistance flight, download the METI white paper on the economy, download the white paper, you know, from the Ministry of Health and Welfare. Um it’s very very interesting. um and they are unbelievably thorough in the subjects that you’re covering. You may get, you know, you you skip some of the chapters, be my guest, right? Um and then the other thing is I’m happy to provide you with the with the with the link. The Bank of Japan uh recently um published a comprehensive review of what happened over the last 30 years. And it’s full of charts. It’s not very verbal, right? uh and it is the best insight into the genesis of what uh has happened in Japan and what the starting point is for where we are uh in the here and now. We started our conversation uh talking about kind of the the tumultuous time that happened when you arrived with a crisis in 1995 and you said that back then you wrote a lot of reports that were uh kind of quite optimistic about things uh but you couldn’t foresee the future at the time. If you had to write a report today about what’s going to happen in the next 5 to 10 years, what would you put in there? Look, my my view on Japan is is is is very simple, you know, and uh I mean, I turned the Japan optimist uh when I was at uh JP Morgan in uh 2001 uh which was, you know, one of these times when Japan was sinking into the into the Pacific. Um and I basically thought I talked to my mentor, God bless him. Um and said like look, you know, somebody needs to speak up about uh you know, the fundamental strengths that Japan does have to offer. And uh you know, I think that the focus of, you know, markets, right? Is the stock market going up? Is it going down? Is the currency going up, going down? I mean that’s obviously sort of the day job of a strategist, right? But my fundamental thesis has always been that Japan is capitalism that works. So this is an economic system, an economic, financial, political, social system, right? Uh where yes, if you want to get rich, you can get rich. property rights, uh, you know, equality, um, the rule of law, you know, very capitalistic, um, you know, in nature, but at the same time, the government intervention that happens to smooth some of the excesses that uh, capitalism inherently brings that this is the model system. And I think a report on the future of Japan, you know, is that this fundamental strength of Japan being the one country, the one national economy that actually balances, you know, the multiple outcomes that you desire. You desire economic freedom, you desire stability, you desire equity, you desire opportunity, right? um these holistic u optimization of multiple outcomes, Japan is absolutely fantastic and I think that that will continue to be um and I think that the great thing on top of this is that from an investment perspective, right, Japan is cheap. It’s not your fault. It’s not my fault and I’m not a stock broker, right? But you look at whether it’s the whatever valuation criteria you apply like we talked about real estate and it’s not the absolute comparison to Hong Kong or uh Jakarta or uh New York. It’s the comparison relative to income of the young generation relative to the starting salary. Japan is still very very cheap. You look at stocks, you look at equities, right? Yes, I know I can buy Palunteer at 300 times earnings. Wow, that assumes, you know, something absolutely crazy in terms of the growth and maybe it will happen. I mean, I have no idea, right? But in terms of a Warren Buffett approach where you focus on what is the value that this company creates, what is the strengths that this company brings to the table in the sense of this is this technology or this service that they offer are they going to be around in five years time in 10 years time. I think that Japan is going to surprise very very much on the upside precisely because of the uncertainty that we have in the world right because America as the safe haven is gone. It’s very interesting in in my sort of weekly bi-weekly discussions with different CEOs of Japanese companies, right? I mean, one of the things that that you know, I mean, how do you advise a you know, a major corporation uh how do you advise them in this in this turmoil, right? And one of the fundamental things I believe is that the probability of America going back to sort of a free trade open economy type system right at any point over the next 10 years even after Trump I think that that probability unfortunately is very low. So for the Japan report, you know, the focus is really on the domestic strengths that Japan brings to the table and that strength is incredible public and social infrastructure that is not despite the big fiscal deficit, right? That will not be shortchanged, will not be cut back. Mhm. Number two, I think that the opportunities in the corporate world, right, because of the shortage of labor, right, as a result of that fundamental restructuring creating genuine opportunity for outsiders, whether that is women participation, whether that is non-Japanese participation, even in the executive and seuite branches of corporate Japan, that door is going to open and open and open and open further and then last but not least you know I think that we will see um the development uh of national champions so Japan’s today has seven major car companies right you don’t need seven major car companies and it’ll be painful you know but just as the banks when I showed up there were 21 money center banks 21 major banks today there is three plus resa plus the bank of the the the post bank that merging that creation of national champions is now going to happen in Japanese industry and I think for non-Japanese to be part of that is a very very exciting career opportunity thank you so much for coming and sharing your insights this was fascinating I’m sure we could go on for hours and have many more topics to dive into. I certainly have many more questions, but uh I appreciate the time you took to come to talk to us and uh share your explanations, your views on the Japanese economy. Thank you everyone for listening and watching. This was Unpacking Japan and we’ll be back again next week. Bye. [Music] Thank you so much for joining us today. I hope you enjoyed this episode as much as I did. Please hit the subscribe button so you don’t miss out on future conversations. And we’d love to hear from you. Share your thoughts in the comment section down below. And if you enjoyed this episode, here are a couple more that we think you’ll enjoy. Thanks again for your support and we’ll see you next time.

On today’s episode we talk with Jesper, A.K.A the Japanoptimist, an economist with a unique perspective on Japan’s current economy. Jesper is bullish on Japan’s economic future and the opportunities for change that seem to be approaching quickly. Today he’ll go over the reasons why he has a positive outlook despite the strong current wave of bearish perspectives that others seem to have.

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0:53 Meet Jesper
1:17 Coming to Japan in the 80s
4:38 Japan’s Bubble Economy
7:40 Starting financial career post bubble burst & working at the LDP
14:02 1995 – Japan’s Economic reckoning
19:46 Japan’s 3 responses to the economic crises that changed its financial structure forever
21:58 Rebutting the idea that Japan’s economy is stagnant
24:23 How Japan’s economy is actually beating Western countries
28:17 Workforce mobility is breaking old salaryman work life for bullish change
36:22 How will new and old generation workforces blend in the same environment
38:08 How corporations are trying to adapt to lack of labor
39:09 How will declining population & Baby boomer aging affect Japan’s economy & society
42:08 How aging population is on the brink of drastically changing Japan’s economy
44:14 The #1 change Japan needs to make – Inheritance & gift tax reform
48:56 The National Debt & the role of The Bank of Japan
53:25 Trump Tariffs & their effect on Japan
59:39 Understanding the complexity of the global economy & Japan’s future
1:04:25 Why have a positive outlook on Japan’s economy
1:07:02 Tax free personal investments in Japan
1:13:08 Resources to use to learn more about the economy in Japan
1:15:37 What will happen to Japan’s economy in the next 5 to 10 years

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Liked this episode? Check out our interview with Mira, a psychologist who practices hypnotism!

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