Entrenched political interests bode long-term malaise for Japan: Investor Jim Rogers

TOKYO - When Japan rose from the ashes of war to host the Olympics in 1964, it wowed the world with urban infrastructure and cutting-edge technology like the bullet train and marked its emergence on the world stage as a global superpower.

But Japan today is very different, said veteran Singapore-based investor Jim Rogers.

While he predicted that next year's Games will bring a short-term boost, he said it would portend a longer-term slump given that there is no solution in sight to a slew of socioeconomic issues like a shrinking and fast-ageing population, the lack of gender equality, the reluctance to embrace immigration, low productivity, and a low appetite for disruption.

"Japan's national debt is going to swell due to the Olympics, and this can only lead to a bad outcome for ordinary citizens," he said in a new book, Warning To Japan.

The book, which is published in Japanese, comprises interviews with Oxford-educated entrepreneur Hakuei Kosato. It has cracked bestsellers' lists and was reprinted six times within one month of its release in July.

Japan's crushing debt load now stands at 240 per cent of its gross domestic product, and attempts to bring the nation back to fiscal health have stalled. A target of fiscal 2020 was pushed back to 2025, and yet even the most optimistic forecasts now suggest this is unlikely.

"There was such a long period of astonishing prosperity, when everything worked," Mr Rogers told The Straits Times in an interview. "But Japan got so rich, so successful, that... it resulted in huge protectionism."

Prime Minister Shinzo Abe has tried to change things, but Mr Rogers said many policy measures serve only to kick the can down the road, rather than go far enough to yield results.

"If there was somebody in Japan who will say, we got to bear this pain, we have to sort this out. And if we don't, the 10-year-olds in Japan today will have no future," he said.

"But the problem is that the politicians in power today don't want to do that. They know if they cause the pain, it is not going to be good for them."

Japan, pressured by global headwinds, downgraded its economic outlook to "worsening" this month. Among other things, it is facing sluggish exports in part due to a trade war between the United States and China, and an ongoing boycott of Japanese goods in South Korea.

And while Mr Rogers acknowledges Japan has opened up to foreigners under a new "specified skills" visa scheme for blue-collar workers launched in April, he said the influx needs to be more drastic to make an impact.

Japan is already facing a glut of jobs. The unemployment rate was 2.2 per cent last month, when there were 159 job openings for every 100 job hunters.

But the visa scheme, under which up to 345,150 foreigners are to be welcomed by March 2024, has been off to a tepid start. This has raised questions about whether they want to work in Japan, and whether the locals are welcoming enough to these foreign workers.

Only about 600 people, mostly from South-east Asia, have been granted the visa, although the government wants to woo 47,550 foreigners in the scheme's first year.

"They're opening up a little bit, but not nearly enough," he said. "It's simple arithmetic. The population is going down and they're not having babies. It is straightforward, but overwhelming and frightening for their future."

Fewer than 900,000 Japanese babies are expected to be born this year, marking a new low. The population, now at 126.4 million, is expected to fall to 88 million in 45 years.

A forecast by the Japan Centre for Economic Research showed that Japan will lose its status as the world's third-largest economy by 2060, overtaken by India and Germany.

Mr Rogers said this could be why people have been so reluctant to have children, even if the government drafts policy measures to spur the fertility rate.

"Few people have any confidence; they know, consciously or subconsciously, that there is something wrong," he said. "Maybe somebody will change things, but I'm afraid I don't see that happening right now. There are too many entrenched interests."