THRIFT LESSONS FROM JAPAN´S CHERRY TREE / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( HIGHLY RECOMMENDED READING )

Thrift lessons from Japan’s cherry tree wars


By David Pilling


Published: April 20 2011 18:59


The cherry blossom wars are over. But the question of whether to spend or save in the greater interest of Japan’s long-term recovery is rather less fleeting than the delicate petals, now mostly scattered to the winds.


For those who missed the ideological skirmish over cherry-blossom viewing, the opening shot was fired by Shintaro Ishihara, the rambunctious 78-year-old governor of Tokyo elected this month to a fourth term as leader of the world’s biggest metropolis. The unfurling of tiny petals normally triggers a bout of boisterous parties beneath the capital’s cherry trees, but Mr Ishihara told Tokyoites it was wrong to be enjoying themselves so soon after the devastating earthquake. “Just because the cherry blossoms are blooming doesn’t mean we should be drinking and having a good time,” said the man who had earlier attributed the natural catastrophe to divine retribution for Japanese people’s greed.


Naoto Kan, prime minister, quickly countered Mr Ishihara’s message, saying it was time for the Japanese to start spending for the good of the economy. Kaoru Yosano, minister for economic and fiscal policy, said jishuku, the thrift and restraint the Japanese embraced after last month’s tragedy, was “like a movement to bring about a recession”.


Kosuke Kuji, a fifth-generation brewer of sake, Japanese rice wine, from tsunami-engulfed Iwate prefecture, said abstention was ruining his business. A YouTube video he uploaded urging people to get drunk beneath the cherry trees in the national interest was watched by nearly half a million people.


In the event, hanami cherry-viewing parties went ahead, albeit on a smaller scale than usual. But the question of jishuku versus spending-as-normal is still very much alive. The discussion plays out on two planes, one purely economic, the other almost philosophical.


To deal with the latter first, even in the excess of the 1980s bubble years, when some Japanese were sprinkling their food with gold leaf, society maintained a strong streak of sobriety. People continued to eat fish bones as snacks, to shun central heating in their homes, and to use plate-sized ironing boards without legs to save space in modest flats.


“We are taught as children that you should thank the farmer for every grain of rice,” says Akira Chiba, a civil servant. “It feels odd to be wasteful.” The impulse to be careful, to waste not, want not, has regained impetus since the earthquake. People lug their cases up non-moving escalators at stations and open their fridge doors sparingly in the name of saving electricity. Many shun lavish restaurants, because to eat in such places would be unseemly while other people are suffering in evacuation centres.


One suspects the impulse to live less extravagant lives will not quite vanish as the country recovers. The “slow-life” movement, already significant, is likely to be invigorated by people’s post-earthquake glimpse of a less extravagant lifestyle. The Japanese government, too, may pioneer different ways of measuring national output: does a baseball match played in the daytime really contribute less to gross domestic product than one played at night with the stadium’s lights ablaze?


But the restraint-versus-spending debate has a more immediate, straightforwardly economic dimension. Masaaki Kanno, chief economist at JPMorgan in Tokyo, estimates that the government will this year approve emergency supplementary spending of about Y14,000bn on top of the Y92,000bn of expenditure already budgeted.


No one questions that huge additional funds will be needed to rebuild infrastructure in the devastated north-east. The question is, how to pay for it? Japan’s finance ministry bureaucrats – who include plenty of hair-shirt adherents of jishuku – want to finance some from spending cuts elsewhere and from special reconstruction taxes. Paul Sheard, chief economist at Nomura, says that would be foolish. The country, he argues, has a “golden opportunity” to rid itself of deflation and refloat the economy if the Bank of Japan increases its already substantial purchases of government debt on the secondary market.


Mr Sheard notes that, contrary to common perception, Japan is not in debt. Quite the reverse, it is the world’s second-biggest creditor nation. Each year, with a current account surplus of about 3 per cent of GDP, it adds to its claims on foreign assets. Japan’s gross debt pile, famously pushing 200 per cent of GDP, is what the government owes to its own private sector. Unlike Greece, or the US, Japan’s debt problems are a family affair.


Japan’s economy could certainly do with a hand. April’s Tankan, a proxy of the BoJ’s business-sentiment study produced monthly by Reuters, registered the biggest plunge on record in April, falling 28 points to -13. Figures out this week showed consumer confidence collapsing. The consensus forecast for growth in fiscal year 2011 has crumpled from a pre-earthquake 1.6 per cent to 0.4 per cent.


Frederic Neumann, senior economist at HSBC, argues that people’s mood will be decisive. “It is not so much the destruction of physical infrastructure, but the scar recent events have had on the national psyche,” he says. Jishuku is part-scar, part-idealism. Few would dispute the admirable sentiments that are motivating this self-restraint. It is another case of: “Make me virtuous. But not yet.”
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Copyright The Financial Times Limited 2011