Jul

17

Re: Immigration

If Abenomics is a Japanese response to a fear of Chinese domination, I agree they could best address those fears by offering stable rule of law and entrepreneurial opportunities to skilled Chinese/Korean immigrants rather than by debasing their currency. The non-linear multiplier effect of importing top talent from China would be nearly equivalent to the outsized positive effects of the Jewish diaspora in the US.

Indeed two of the 33 Japanese billionaires are "Zainichi" Korean-Japanese. Could new blood itself inject dynamism? Perhaps. But the biggest problem with unskilled immigration in a welfare state is the importation of labor with insufficient human capital to generate taxable productivity to cover future entitlement liabilities.

Westerners propose immigration as a panacea solution to Japan's demographic "problem," but ignore the root cause: the government's pay-as-you-go transfers to the elderly. The fertility rates of East Asians are as follows:

Asian-Americans 1.7

Japan 1.4
Korea 1.2

Hong Kong 1.2

Singapore 1.2

Taiwan 0.9

This implies that without reform of the welfare system, immigration will simply delay the problem as unskilled immigrants will likely require outsized old age benefits without producing the necessary number of children to pay for them. Immigration works best in a system like Singapore's and 19th/early 20th century US's in which there's a match funded welfare system or little welfare at all.

So the real cause of Japan's troubles really does not stem from demographics, but from the burdensome Ponzi scheme social security system. As any consumer or commuter in Tokyo can tell you, the problem isn't a lack of inflation or lack of people. A Japan with half as many people would improve the quality of life tremendously provided a deregulated economy could maintain productivity growth.

Deregulation and reforms (as you alluded to) need to focus on the labor laws, which make firings impossible, the various cartels, and the misallocation of human talent towards bureaucracy. On the last point, it seems a terrible waste to take the most talented elite of a generation and stick them in unproductive government jobs so that they can reap the reward of a sinecure upon retirement at the firms they previously regulated (amakudari).


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