Global Lessons of Japan 1013 - Columbiaenergypolicy.columbia.edu/sites/default/files/Stephen...
Transcript of Global Lessons of Japan 1013 - Columbiaenergypolicy.columbia.edu/sites/default/files/Stephen...
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Global Challenges: The Lessons of Japan
Stephen S. Roach Senior Fellow Yale Jackson Institute for Global Affairs
October 2013
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Conceptual Framework: Forensic Macro
§ Japan as the Template
§ Policy Blunders or Structural Malaise?
§ Bubbles, Imbalances, and “Zombies”
§ The Hangover: Debt, Deflation and Lost Decades
§ Exit Strategies: A Way Out?
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Japan United States Europe China Model Developmental state Invisible hand State-directed Market-based
Capitalism Socialism Mandate Lifetime employment Full employment Union of peace and Growth vs stability
prosperity Policy blunder Yen suppression and Condone bubbles Flawed currency union Anti-consumer
the Plaza Accord Clean not lean Regulatory blunder Evergreen bank Mortgage abuses No banking union State-directed bank
lending (MITI) Lax bank oversight No fiscal union lending (NDRC) No political union
False prosperity Equity and Property Property and Credit Convergence Export bubble
bubbles bubbles bubble Economic distortion Zombie corporates Zombie consumers Zombie PIIGS Zombie SOEs?
Zombie LGFVs?
Made in Japan?
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Japanese Real GDP Growth (Averages over designated intervals)
Source: T. Ito and International Monetary Fund WEO database
0
1
2
3
4
5
6
7
8
1946-‐90 1991-‐2013
7.25%
1.0%
The Rise and Fall of Modern Japan
Abenomics: Japan’s Phoenix? Three Arrows § Monetary: QE on steroids § Fiscal: Public works § Structural reforms
Three Foils § QE traction and deflation § Fiscal quagmire § Yen, equities, and complacency
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1974-79 1980-85 1986-90 1991-95 1996-00 2001-05 GDP Growth 3.9 4.2 5.2 1.6 1.2 1.3 Labor 0.9 0.9 0.7 -0.1 -0.1 -0.1 Capital 1.7 2.0 2.5 1.9 1.3 0.9 TFP 1.3 1.2 1.9 -0.2 0.0 0.4
(Average annual % changes over designated 5 year intervals)
1974 to 1990 TFP average: 1.5%
1991 to 2005 TFP average: 0.01%
Source: KLEMS database
Decomposition of Japanese Economic Growth
Pre-Bubble Post-Bubble
Japan’s Structural Imperative
Abe’s “Third Arrow” Agenda Agriculture Education Medical Care Tax System Energy Gov. Reform Employment Electoral System Immigration
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US Consumption Binge… …Was Not Supported by Income Effects
But Driven by Wealth and Credit Bubbles
100
110
120
130
140
0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100
months after trough
Average of Past 4 CyclesCurrent Cycle
Index=100 at Business Cycle Troughs
103-month shortfall:$1626.3 billion or 15.9% of real disposable personal
income
Real Private Compensation
-9
-6
-3
0
3
6
9
12
15
18
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10-4
-2
0
2
4
6
8
10House Price Index (left)
Net equity extraction as a % disposable income (right)
% YoY 4Q MA
Growth American Style
54
56
58
60
62
64
66
68
70
1970 1975 1980 1985 1990 1995 2000 2005 2010
Personal Consumption As a share of GDP
1970-99 average: 64.6%
Last plotting: 2013-Q2: 68.7%
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Deleveraging
Rebuilding Saving
Source: Federal Reserve flow-of-funds and U.S. Department of Commerce, BEA
Household Sector Debt Outstanding (% of Disposable Personal Income)
Personal Saving Rate (% of Disposable Personal Income)
Lingering Headwinds of U.S. Balance Sheet Repair
America’s Zombie Consumers (US real consumption: Average annualized growth) § The Balance Sheet Recession 2008-I to 2009-II: -1.8%
§ Anemic Recovery 2009-III to 2013:2 +2.2%
§ 22-Quarter Average 2008-I to 2013-II: +1.1% ****************************************** § Pre-crisis trend 1996 to 2007: +3.6%
0
2
4
6
8
10
12
14
16
18
1970-99 average: 9.3%
1970 1975 1980 1985 1990 1995 2000 2005 2010
0
20
40
60
80
100
120
140
1970-99 average: 40.3%
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Growth European Style
Sources: European Central Bank and International Monetary Fund
0
5
10
15
20
25
30
35
Germany Greece Ireland France Italy Spain
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
European Long-term Interest Rates (Yields on 10-year notes) %
90
100
110
120
130
140
150
160
90
100
110
120
130
140
150
160
France Germany
Real GDP in Local Currencies (Index:1999=100)
Ireland Greece Spain
Portugal Italy
High Flying PIIGS Sluggish Core
1999 00 01 02 03 04 05 06 07 08 1999 00 01 02 03 04 05 06 07 08
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Developing Asia’s Growth Bonanza
Source: IMF World Economic Outlook data base (April 2013)
-6
-4
-2
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
World Advanced economies Developing Asia
Real GDP Growth Disparities %
2000-13 Average DA Gap Developing Asia 8.2% --- Adv. Economies 1.8% 6.4 pts World 3.7% 4.5 pts
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Global Rebalancing Imperatives
Source: IMF World Economic Outlook database (April 2013)
Investment Shares of GDP
10
15
20
25
30
35
40
45
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Major advanced G7 Developing Asia
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Export-Led Developing Asia
15
25
35
45
55
65
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
ExportsConsumption
as % of GDP
Source: IMF, national data sources
GDP Shares: Developing Asia
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0
100
200
300
400
500
600
700
800
900
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48
Japan NIEsASEAN-4 ChinaIndia
Index, period 0=100
Years after growth takeoff
Shares of World Trade Indexed at “Takeoff”
Source: International Monetary Fund
The Asian Trade Model
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Source: IMF World Economic Outlook (April 2013 WEO database)
Global Contrasts China Stands Alone
0
10
20
30
40
50
60
0
10
20
30
40
50
60
China
Developing Asia Emerging Market and Developing Economies
Advanced Economies
United States
% %
Gross Saving Rates (Share of GDP)
Gross Saving Rates (Share of GDP)
Global Saving Disparities
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China’s Growth Leaders China’s Growth Laggard
Source: National Bureau of Statistics of China
“Unstable, unbalanced, uncoordinated, and unsustainable.” — Premier Wen Jiabao, March 16, 2007
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25
30
35
40
45
50
55
Personal Consumption Share of GDP
Export Share of GDP
Fixed Investment Share of GDP
0
5
10
15
20
25
30
35
40
45
50 % %
China’s Unbalanced Growth Model
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Source: Eswar Prasad, “Rebalancing Growth in Asia,” Finance and Development, December 2009: IMF, WBMS, BP, CRU, Morgan Stanley Research.
Labor-Saving Resource-Intensive
Average GDP and Employment Growth: 2000-2008
0
3
6
9
12
China India Indonesia Korea Thailand
% Change
GDP Growth Employment Growth
0
10
20
30
40
50
60
As % of World GDP
Crude Oil Aluminum Steel Products
Iron Ore Coal Cement
Percent
China's Share of World Total: 2008
China’s Internal Imbalances
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MECHANISM GOAL
JOBS BLUEPRINT FOR LARGE-‐SCALE
SERVICES INDUSTRIES
WAGES SUPPORT TO RURAL
HOUSEHOLD INCOMES
LABOR ABSORPTION
HARMONIOUS SOCIETY
REDUCE PRECAUTIONARY SAVING
FINANCIAL SECURITY SAFETY NET IMPERATIVES
China’s Pro-Consumption Rebalancing
The 12th FIVE-YEAR PLAN
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A Lagging Chinese Services Sector Labor Intensity: Jobs per RMB Million GDP
0%
20%
40%
60%
80%
100%
China Korea India Taiwan Japan USTargeted in
Targeted in the 12th Five-Year PlanManufacturing and Construction (Secondary) Services (Tertiary)
The Potential in Chinese Services
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Ratio of Urban to Rural Income
Urban Share of Chinese Population
Source: UN, OECD
%
Projected urban population growth: 2030: 316 million (OECD)
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
3.1
3.3
3.5
1980 1985 1990 1995 2000 2005 2010 0
10
20
30
40
50
60
1950 1960 1970 1980 1990 2000 2010
2012: 52.6%
2015 UN Projection
Income Leverage of Urbanization
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0
2
4
6
8
10
12
14
1990
2000
2010Relative to US
Relative to J apan
China: Capital Stock per capita, relative to US and JapanIn percent
Source: Penn World Tables and International Monetary Fund
0
50000
100000
150000
200000
250000
300000
350000
Japan
Australia
Germ
any
United States 225000
France
Singapore
United Kingdo
m
Korea
Mexico
Malaysia
Brazil
South Africa
Russia
China
Indo
nesia
Ph
ilipp
ines
Vietnam
India
Capital Stock per Worker $USD
Chinese Capital Stock Per Capita Relative to the U.S. and Japan
1990 2000 2010
%
Urbanization Drives Investment
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5
10
15
20
25
30
35
40
1978 1983 1988 1993 1998 2003 2008
%
Source: International Monetary Fund, National Bureau of Statistics (China), National Social Security Fund (China), Xinhua News Service, BBVA Research
Chinese Household Saving Rates Retirement Assets 2010-11: RMB 2669 Bil
Rural Urban 300
1500 869
National Social Security Fund (2011) Local Govt Social Security Funds (2010) Private Pensions (2010)
(USD $435 Bil or $569 per worker)
China’s Safety Net Conundrum
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First 1953-57 Stalinist Central Plan Second 1958-62 Great Leap Forward Third 1966-70 Agricultural Push Fourth 1971-75 Cultural Revolution Fifth 1976-80 Post-Mao (Reforms and Opening Up) Sixth 1981-85 Readjustment and Recovery Seventh 1986-90 Socialism with Chinese Characteristics Eighth 1991-95 Technical development Ninth 1996-00 SOE Reforms Tenth 2001-05 Strategic Restructuring Eleventh 2006-10 Rebalancing Alert Twelfth 2011-15 Pro-Consumption
5-year Plan Dates Key Feature
China’s Strategic Advantage
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%
Codependency and Rebalancing Imperatives
Personal Consumption Share of GDP
Source: U.S. Department of Commerce and National Bureau of Statistics (China)
20
30
40
50
60
70
80
1978
19
79
1980
19
81
1982
19
83
1984
19
85
1986
19
87
1988
19
89
1990
19
91
1992
19
93
1994
19
95
1996
19
97
1998
19
99
2000
20
01
2002
20
03
2004
20
05
2006
20
07
2008
20
09
2010
20
11
2012
United States
China
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Current Account Disparities (as % of World GDP)
Source: International Monetary Fund (October 2012 WEO database)
Forecast
Total Imbalances 1.2% 2.0% 3.2% 3.2% 3.8% 5.6% 5.1% 3.8% 3.4% 3.0% 2.8% (as % of World GDP)
%
Surpluses
Deficits
Global Imbalances and the Lessons of Japan
-3
-2
-1
0
1
2
3
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
ROW
CHN+EMA
OCADC
DEU+JPN
OIL
United States
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New Book
Yale University Press January 2014