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Japan & the “Crab Mentality”

Ashish Advani (July 23, 2009)

Thursday, July 23, 2009

My Take on the “Sushi Green Shoots” Story

By Ashish Advani Japan…What can you say about them?

The Japanese have squandered the great lead they had on the world back in the late 1980′s, and they’ve been wandering along aimlessly ever since.

In fact, they have spent nearly a decade and a half in deflation / stagflation and many milder forms of “…flation” in between. And they are still struggling to find any meaningful direction. Japan’s problems are deep rooted and won’t be easy to solve in the years ahead.

An Aging Population & Stubborn Government

The age demographic is always a big challenge for Japan. The population there is aging rapidly so the demographics alone present a huge problem. The only two ways to overcome that is procreation and immigration.

But unfortunately, the aging population makes procreation a problem in itself. Japan has a rigid immigration process. Until they reform immigration and relax their rigid cultural nuances a bit, this challenge will be a big hindrance to real growth.

Next, the Japanese reluctance to address the NPL (Non Performing Loans) on their bank’s balance sheet is killing real reform. In fact, this albatross is hanging on Japanese banks and weighing them down.

The lack of political stability will also continue to dog this issue. If Japan needs to re-assert their authority on the world (besides cars and electronics – which by the way they are losing to Korea big time now) they will have to make a fresh start by dissolving many of their zombie banks and embracing new and modern ways of banking.

Crab Mentality Continues to Drag Japan Down

Finally, they need to resolve their differences in the region before they can move forward. Their old animosity with China and Korea is deep rooted and is mired in mistrust. Till they all learn to live as one happy family again, the seeds of suspicion will always keep their thinking in “Crab” mentality.

Do you know what a “Crab” mentality is? If you ever visit a fresh seafood market with fishes in a tank etc, you will see that the basket which contains crabs never has a lid on it.

The reason for that is crabs will try to climb out of the basket and escape, but the other crabs will always pull the back. Eventually no crab ever escapes the basket. Hence no lid required.

But here is where my views for their future changes a little bit.

There is a chance that Japan could ride China’s coattails and re-invent itself. I do see some hopes of this happening. The China Japan relationship has thawed a little compared to two decades ago. Most of the large Japanese electronics manufacturers have moved their bases to China back during the 2001-2003 slowdown.

But that’s all in the future. At present, I am not a big fan of the Sushi Green Shoots story. If I had excessive capital and maxed out my allocations world-wide then I may look for selected opportunities in Japan.

Tomorrow I will be back to talk about the Ex-Japan Asian green shoots story.

Till then! Yours in FX Profits,
Ashish Advani

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