40 Years of Finance in Japan

Events Features - January 8th, 2010

by Magellan Financial Planning

We at Magellan Financial Planning are delighted to be part of the Tokyo Weekender 40th anniversary issue, especially as it was founder Corky Alexander who encouraged us to advertise when we set up our company in 1995.

So what has happened in Japan over the last 40 years from a financial standpoint? For example, a three course lunch in 1970 was ¥1,250 and today it is only ¥1,000. In the US the same would have cost $3.40 and $9.40 respectively. The Japanese signed their own death warrant in 1971 when they agreed to strengthen the yen. In the early 70s the yen/dollar rate was ¥360, and today it is around ¥90. This made exports more expensive, and the weaker dollar made it possible for Japan to buy lots of US treasuries to feed the boom there. Maybe the Chinese won’t make the same mistake.

The Japanese obfuscatory brand of protectionism also helped ensure that the currency move didn’t benefit its own citizens, build domestic consumption or force competition in the process. Their money just went into the bank, the bank bought Japanese Government Bonds (JGBs), and the government concreted river beds to keep the construction industry cash rich enough to keep the political donations flowing.

Deflated by this news? During the bubble years at Roppongi crossing, men in suits held up three, four or five fingers to hail a taxi home. The significance? This was the multiplier of the meter charge that would be paid by the lucky winner of that elusive cab ride home.

So is Japan a basket case? Of course not. Forty percent of the world’s research and development expenditure happens here or in Japanese companies overseas. Automotive, manufacturing and electronics are still key growth areas, and the Japanese process of keizoku (continuous improvement) will ensure Japan maintains its place at the global economic table.