Peak Japan

Japan’s rapid development following its humiliating defeat in the Pacific War has been well documented. During the boom years of the 1970s and 1980s the country’s infrastructure developed at an unprecedented rate and to a very full extent. Highways and bridges were built servicing areas with no need for them. Airports were constructed in remote, lightly-populated areas to fly vegetables to the cities. (Have you ever bought a radish that has its own Air Miles?) Unused concert halls and empty art galleries were built in the smallest of hamlets. Railways were expanded to every corner of the country and sprawling subways (underground railways) were built under most of the major urban centres. While current residents enjoy the fruits of this investment, they are increasingly having to shoulder the burden of maintaining it all.

On NHK news last night there was a story about the increasing cost of maintaining Japan’s now ageing public infrastructure such as roads, highways, bridges, and municipal public buildings. Maintenance costs for public infrastructure have been increasing year on year for the last half-century, and last year, for the first time, more money was spent maintaining current infrastructure than building new stuff. In the last couple of decades Japan has been stuck in a cycle of deflation, so these increases in costs are real, not inflationary.

This would all probably be OK if the economy was growing (it’s barely moving), the population was increasing (it’s declining), the number of taxpaying workers was going up (it’s not),  there was little public debt (it’s now at a whopping 220% of GDP), and there were no other budgetary surprises (it is now forecast that decommissioning and decontaminating Fukushima will take 40 years). Living in Japan in 2012 really feels like living in a post-developed economy that is just starting to go into gradual but terminal decline.

So what’s the solution? On the news story last night NHK looked at how the municipality of Hamamatsu was dealing with the problem. Their solution is a public fire sale. Assets that can be sold will be sold, and the small amount of money raised will be used to demolish assets that have no value. The national government is currently pursuing legislation to increase sales tax. Further tax increases along with cuts to social services and the national pension scheme are inevitable.

Unless some other radical step is taken (such as opening the country to mass immigration) I think that residents of Japan in 2030 will look back to 2012 as the end of a golden era for Japanese public services, taxes, and infrastructure.

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