Thursday, August 2, 2012

Old against young in Japan

If you read about a country with economic problems where "already indecisive leaders [are] loath to upset retirees from the baby boom who make up more than a quarter of the population and tend to vote in high numbers," you might guess that the article was about the U.S. and Medicare. It's not.

It's about Japan and the value of the yen.

In 2007 the Japanese yen was trading at 123 to the dollar. In the post-2008 economic crisis the yen was seen as a safe haven currency. Its value went up. It now trades for about 78 to the dollar.

So what does the exchange value of the yen have to do with intergenerational conflict? An article in today's New York Times explains why the old and the young are fighting about currency.

The strong yen makes imports cheaper. Cheaper imports drive down domestic prices as well. Older people on fixed incomes can buy more. What cost them 123 yen in 2007 costs them only 78 yen now. But a strong yen makes exports more expensive, and Japanese industry - very export dependent - is suffering. This hurts the young.

Japanese political scientists say the government has tolerated the strong yen out of fear of the elderly. Shigeru Ono, a 62 year old retired oil company manager who lives on a monthly pension of 130,000 yen (approximtely $1,660), understands the intergenerational conflict:
The strong yen and deflation have been a boon for us baby boomers. But I also know that they cannot be good for my son’s generation.
The U.S. is struggling to contain the cost of Medicare. Japan is struggling with the impact of a strong yen. In families, grandparents cherish children and grandchildren. But in wider society the relationship between generations is playing out differently.

The future well being of both countries depends in large measure on the balance of competition and cooperation between old and young.

5 comments:

Nathan Houck said...

The gap in interests between younger and older generations seems to be apparent. Additionally, members of older generations tending to vote in high numbers also seems to be apparent. This means that the interests of younger generations are going to be swept aside for the most part, assuming that both groups vote in a self-concerned manner. By self-concerned manner, I mean that they are voting in a way that supports their personal interests.

This leads to an interesting normative question. Should the older generations's will be prominent when it comes to national decisions? If the answer is yes, then there is nothing to worry about. If the answer is no, however, then younger generations need to become more active and get to the voting booths. The obvious follow-up question would then be "why?" Why should older generations make the decisions? Why should younger generations make the decisions? Why should both contribute to the decision making process? This inquiry would require a LOT of work.

A question relating to the economics of this situation: Will the suffering export industry, which Japan is dependent on, eventually make the yen weaker if all other factors remain constant?

Jim Sabin said...

Hello Nathan -

Thanks for raising these important issues. And - good luck with your new blog!

From the perspective of democratic process, if the old vote more regularly than the young, their perspectives will be more fully represented in national and local policies. But as you point out, unless we believe that popular vote determines what is ethically right, voting patterns don't answer moral questions.

Clearly, to have a robust democracy, we need the young to become thoughtfully engaged with politics and voting. But as a member of the older generation, I'm concerned that our self-interested views have been given strong voice, but the less self-centered values held by my generation have been much less vigorously expressed.

From an evolutionary perspective, the long term health of a society depends on the developmental trajectory of the young. In my view, we underinvest in the "social capital" that determines our society's future.

Best

Jim

Anthony said...

Interesting blog post.

Cerna Health Care said...

Nice work to share the information. I do agree with you. old vote more regularly than young. the gap in interests between younger and older generations seems to be apparent.
A question relating to the economics of this situation: Will the suffering export industry, which Japan is dependent on, eventually make the yen weaker if all other factors remain constant?

In Home Care Santa Monica CA

Jim Sabin said...

Dear Anthony & Cerna -

I'm glad you found the post interesting.

I'm not an expert on currency fluctuation, but in answer to Cerna's question - if the Japanese economy weakens substantially the yen should eventually become a less desirable currency, and its value would float up.

Intergenerational conflict will be a pervasive global issue as the world's human population ages!

Best

Jim