Three Reasons Japan’s Economic Pain Is Getting Worse – By Jared Diamond

Japan’s economic problems are serious and getting worse. Foremost among them is the crushing burden of government debt.

Japan’s ratio of government debt to gross domestic product, currently about 2.28, is by far the highest in the industrial world, almost double that of even Greece and Italy, and steadily growing. Already, the combined costs of interest on that debt and social security are approximately equal to total government tax revenue.

Japan’s trade balance is about to go negative for the first time since 1980. Land values and Nikkei stock values have fallen to about 30 percent of 1989 levels. Now, educated young Japanese women are emigrating, Japanese companies are shifting production overseas (even to the U.S.), national politics are in gridlock (six prime ministers in the past five years), and last year Japan experienced its first mass street protests in decades.

The economic troubles are symptoms of at least three sets of deeper social problems. Regardless of what policies Japan now adopts, its troubles can only increase unless those social problems are solved. While all three of these also beset other industrial societies, certain local attitudes make them more severe in Japan.

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To an outside admirer of Japan like me, its opposition to sustainable resource use seems sad and self-destructive. Unrealistic quests for resources drove the country to self- destructive behavior once before, when it made war simultaneously on China, the U.S., the U.K., Australia, New Zealand and the Netherlands. Defeat today is as inevitable as it was then -- this time, not by military conquest, but by exhaustion of both renewable and nonrenewable natural resources. If I were the evil dictator of another country who hated Japan and wanted to ruin it without resort to war, I would do exactly what Japan is now doing to itself: destroy the overseas resource bases on which it depends.