[ccebook.cn]The World in 2010

Asia
Bring on the new generation
Nov 13th 2009
It will take more than a new government to get Japan out of its fiscal black hole
Let’s not have another lost decade
Japan is a top-down society. As in books, where the characters flow from top to bottom, so life is run
vertically, with seniority often synonymous with age. In politics, age is no disqualification for high office: the
new cabinet is, on average, over 60. In business, the seniority system is entrenched. Even in the home,
hierarchy starts young: there is an honorific for little brothers to address their bossy big sisters.
How galling then, for those down the pecking order, that the numbers of people at the top are rising so fast.
In 2010, there will be as many middle-aged people of 45 and over in Japan as there will be people under 45.
That not only means more people to bow to. It means more layers to fight through before promotion, and
more pensioners to support (by 2010 4m baby-boomers will have retired since 2007—roughly the number of
inhabitants of Yokohama, Japan’s second-largest city).
This retiring bebi bumu generation has reasons to feel proud of its achievements. Over its lifetime,
industrialisation has transformed Japan and the elderly have accumulated savings that many can live off
comfortably. But do they merit all the deference they receive? In 2010 there will be several alarming statistics
that suggest not.
For one, the economy, the world’s second-largest since the 1960s, has lurched so treacherously that it will fall
behind China’s in size in 2010 (see article). That will make it even more difficult to persuade the world that
Japan matters.
The legacy of not one but two lost decades has saddled Japan’s future generations
with a debt whose relative size is unprecedented in the OECD. That organisation
reckons gross borrowings will exceed 200% of GDP in 2010. The borrowing may be
underpinned by high savings, but it has not brought security for Japan’s growing
number of jobless and poor people. After a collapse in the economy in 2009, the
The seniority
system is
entrenched
fiscal deficit is expected by the OECD to rise to nearly 10% in 2010. Yet social spending remains low and, the
more people age, the more it is likely to increase. Sooner or later the Japanese will realise that a country
growing old so rapidly cannot live so absurdly beyond its means.
That is why the government of Yukio Hatoyama, which swept to power in 2009, ending more than half a
century of almost unbroken rule by the Liberal Democratic Party (LDP), has a devilishly hard task in its first
year in office. It was elected because the Japanese were sick of the LDP’s crony capitalism, in which
government, bureaucrats and favoured industries carved up the spoils of the budget. But as it seeks to
rebalance the economy, by redirecting privileges away from the export and construction industries towards
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