18. Japan Korea Taiwan

Excerpt from BBC 1 TV Panorama Monday 15th April 2103 Reporter John Sweeney Doctor says, “They would kill me.”

To watch Panorama click this link

Japan is an important major economy, third on the world stage by GDP.

Its history includes the period of aggressive territorial expansion that coincided with the that of German in the Second World War which we al hope will not be repeated.

After wartime defeat its economy remained on a war footing in that industiry was organised for maximum productivity and growth. Shareholders refrained from withdrawing earnings from the major companies and companies cross financed each other and Japanese people saved a great deal.

Professor Richard Wernerof Southampton University worked in finance in Japan in the 1990s and writes helpfully in his books Princes of the Yen and In search of a new paradigm for macros economics 

Window Guidance.  As I understand it he says that Central banking is a tool by which a government can shape its economy. In the years before the 1993 slump in Japan the commercial banks had to send a man along to a window at the central bank, the Bank of Japan each month to be told how much new money they would be given and to whom they should lend it ; mostly to one of the big industrial companies. Later they had taken all the investment they could possibly use. They had all the machinery they needed and could use any more. At that point the BoJ still gave orders about where newly created moeny should be lend into the economy but increasingly it went (presumably under BoJ instruction) into real estate producing a huge bubble of house and office prices such that an area in Tokyo the size of the Imperial Garden sold for a price for which you could have bought to whole of the state of California. 

Then for some reason the money creation tap was turned off suddenly inside the BoJ and there was a crash. The price of property fell disastrously and lots of industrial companies went bust too.

They were creating money in the BoJ but putting it into the wrong things. The investment in industiral production went well at first. Even that could only take so much. When the torrent of new money went into housing it just created an unsustainable bubble.

The thing I get out of thisis that when a central bank creates money it can be allocated. (actually the BoJ didn’t give it to the government as would have been wiser since there would then have been some democratic control of events it seems to have cut the government out of the process and allocated it on its own whim).

Central Banking is a tool with which one can shape the economy of a country.

The message is that when public authority creates money and gives it to the national government, the government in turn can allocate it to the bits of the economy it wants to see grow. In our case in the UK we should do that but put it not into houses but into the factors that create a productive economy (infrastructure, higher education at universities and technical institutions and research and development and power generation).

Japan’s low interest rates at much less than 1% since about 1993 has fed a feast of borrowing at very low rates and thus stimulated the money market and massive cross border borrowing of mortgages. I don’t yet quiteunderstand how thishas affected usbut I think it fed a desire to do exciting an unwise things with out steady boring building societies since borrowing on the money markets became possible and others  were doing it.

So …. I don’t really know what we do with regard to Japan. Most of its life seems to be conducted with cleanliness and probity and great efficiency but this mysterious practice of the Bank of Japan has left many people baffled asthey are also baffled about why the long slump (1993-the present) occurred and what can be done about it. There are important lessons to be learned which can help us understand why we are all in such a mess!  So – like others- I am learning!

Taiwan is one of the East Asian Tiger economies with Korea, Hong Kong and Singapore that has thrived in recent years and despite a crash crash in 1997 from which they rallied.

Taiwan has to tailor its politics in order not to upset its mainland neighbour the People’s Republic of China that spent many years of my childhood shelling outlying Taiwanese islands which are just off the mainland coast Amoy and Quemoy. China should settle down to a more peaceful existence with its neighbour.

Korea is a thriving democracy which suffered at the hands of the Japanese during WWII and then had to endure the further tragedy of the Korean War  from 1950 to 53 in awful conditions and still suffers the pain of surviving as the prosperous part of a grievously divided nation.

North Korea or the Democratic People’s Republic of Korea DPRK  is a tragedy. Ruled by tyrants, isolated, and inflicting on religious people or dissidents of any sort the most horrible sufferings in prisons and labour. Security services shoottheir own citizens trying to escape across the Yalu River into the relative safety of China. But escapees face the further horror of beign captured by Chinese authorities and returned forcibly to N Korea where some are executed of their return.

The way only way that I can see DPRK changing is by China refraining from repatriating North Korean escapees. If word got around that escapees were no longer being returned more would come and that persuade the regime to change but the process would probably be violent. North South tension has been high recently with some northern attacks on the south and with news of a DPRK  nuclear weapon detonated in the north and of help they are giving to Iran to produce an Iranian nuclear weapon.

So this is something you can ask your high street stores that sell Chinese goods if they will take up with the Chinese Ambassador since his nation may have some leverage.

Here is an interesting site on North Korea – I don’t know them personally Liberty in North Korea