Japanese economic problem (was: Y2K)

Wei Dai (weidai@eskimo.com)
Thu, 18 Feb 1999 17:52:57 -0800

On Fri, Feb 19, 1999 at 12:09:22PM +1100, Tim Bates wrote:
> It is interesting thing to think about this in the Japanese situation.
> Their government cannot convince them to spend their savings for love nor
> money. It is currently earning less than .25% (yes, less than one quater
> of a percent), and that just makes them want to save harder! Why? Becuase
> they are saving for their old age.
> But upon what will they spend this money when they are old? The reason
> they need to save is that there are no young people to do the work. In
> the, mostly retired, future, there will be few goods to buy nor services
> to purchase.
> The saved money will then suffer tremendous inflation (more money than
> goods = higher prices for goods). No use trying to buy American or
> Australian goods (2 countries for whom the age bulge will hit around 15
> years later than in Japan), as no one will want to swap dollars for those
> Yen when there is nothing in Japan to purchase.
> Tough times ahead for Japan, I think.

I'm not sure this is the right forum to discuss this issue, but since you brought it up...

I do not understand why Japanese savers do not invest more of their money outside of Japan (in the US or Europe for example). First of all it would earn a lot more interest. It would help the countries they invest in. It would also stimulate demand for Japanese exports, thus helping their own economy. And finally it would solve the problem of their savings not being worth anything when they retire.

It just seems like a win-win solution, yet it is not adopted nor even promoted. Why?