The Lesson Of Japan

Why can Japan have a strong currency, the lowest bond rates in the world, combined with 200% of GDP government borrowing?  The answer is the savings of ordinary Japanese people.

If governments are feckless and cannot be trusted, the behaviour pattern of people is entrenched and changes but rarely and slowly, and in Japan, the people save money, and they amass huge financial backing, not just the rich, but most Japanese people. 

British people spend their income.  They borrow, apart from sinking money into property, that is.  We have an unbalanced  private savings portfolio as a result.  While Japanese have become expert at trading markets individually, Britons hang back and only get involved in trading financial markets through the medium of advisers, fund managers and other financial ‘bonus-seeking’ operatives.  
The other problem is taxation.  Capital taxes in Britain are too high.  We have the highest inheritance tax in the world, which obliterates family wealth each time someone dies.  The problem is jealousy.  Because ordinary Britons loath to save, they hate the fact that some individuals do so successfully, and tend to vote for equality measures which remove the wealth saved by individuals, and hand it to the government.  This acts as a major disincentive to save.
With a world financial crisis in full swing, this situation places Britons in a perilous position.  The debts we carry are too large relative to our assets.  If Britons could change and adopt a saving habit beyond the house-buying level, we would all be in a stronger position.  Our government could be broke like the one in Japan, but we would still be bankable.
The lesson is that we should never trust governments, but we should trust ourselves.  Inheritance Tax should be halved to 20%, the world average, or less (Australia has zero and has a stronger private sector as a result) .

People should learn more about how international markets work, and save and invest their own money, not relying on so-called ‘professionals’ to do it, who invest in their own interests to a great extent.  The internet makes this possible for the first time, and trading platforms like Interactive Brokers are accessible to all, who have $100,000 to spare.  It’s not a lot.

The countries with strong private sectors will survive the financial crisis despite the folly of their governments.  Countries like Japan, like Australia.  Britain must start educating its citizens to save, get rid of capital taxes, and change into a wealthy society, with the greed of government suppressed.  Only that way will we have any future.
Japan’s problem is deflation and lack of growth, but it is still the wealthiest country in the world per capita at the individual level, and can survive economic shocks and difficulties with the surety of these reserves.  The whole world is suffering from unproductive over-sized government.  At least in Britain we now have a government that seems determined to start tackling that half of the problem, one of the first countries in the world to do so.

We also need to stop the Vince Cable equality agenda, and start persuading people to become wealthy in their own right, and not rely on the state.  Maybe that will come along in time.  Japan, on the other hand, seems unable to shift the burden of her over-sized state, and her progress is locked.   Japan and Britain can learn from each other.  The financial crisis will expose all these imbalances, and put pressure on us all to change.  Even Vince Cable might begin to understand that private wealth is a strength, not a weakness.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.
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