Expert observers Holstein, Fallows, and Baker express their dismay. By Eamonn Fingleton

Wednesday, October 20, 2010

I am not alone in challenging the New York Times’s recent account of an absurdly dysfunctional Japan.

William J. Holstein, former president of the Overseas Press Club of America and a professional Japan watcher since the 1970s, has written a commentary whose headline says it all: “Japan Watch: The New York Times Goes Bananas Again.” He comments:  “Overall, Japan is a very successful society, one that acknowledges that its population SHOULD decline and that sky-high prices SHOULD decline. Western economists and commentators argue that these are signs of crisis, but the Japanese don't see it that way.” (See

http://williamjholstein.com/blog/index.php/blog/archive/japan_watch_the_new_york_times_goes_bananas_again/)

Similarly in his widely followed blog, James Fallows, the Atlantic’s national correspondent and the author of ground-breaking books on East Asia, has picked up my commentary of October 18 and pointed out that with a per-capita income 10 times that of China, Japan remains what it has been since the 1980s – a global economic powerhouse. (See http://www.theatlantic.com/international/archive/2010/10/poor-little-rich-japan/64722/)

Meanwhile Dean Baker, the brilliant Washington-based economic analyst who was among the first and most vociferous commentators to expose the policy errors that have led to America’s housing market catastrophe, has pointed out that the Times greatly exaggerates the negative implications of Japan’s deflation “problem.” (See http://www.cepr.net/index.php/blogs/beat-the-press/deflating-the-japanese-horror-story)

I endorse Baker’s comments, of course, and would add that, a bit like cholesterol, deflation comes in two varieties – good and bad. The bad is widely remembered from America’s Great Depression of the 1930s and it is this which the Times wrongly imagines it sees in Japan today. In reality Japanese deflation is good deflation similar to the now forgotten deflation in the United States in the 1880s and 1890s.  Thanks to soaring productivity, the price of American steel fell by 90 percent in the late nineteenth century and this drove widespread price reductions across the industrial waterfront. Similarly in Japan in the last two decades soaring productivity in electronics has driven remarkable price reductions that have greatly improved Japanese consumer’s lot.

For my riposte to the Times, see http://www.unsustainable.org/index.asp?type=article&contentID=62