Did you know that last night the Japanese turned over their government? For 54 years one party has ruled Japan – a very pro-business, conservative party. Then last night the voters threw out the old guys and in a landslide replaced 3/4 of their elected government officials. The new politicians are considerably left of center by U.S. standards, a dramatic shift. "Calls for Fast Action after Historic Vote" is the Yahoo! News headline.
You may be so tired of American politics that your interest in a Japanese election may be – let's say muted? But this is really a very big deal. Japan is the second largest global economy. A change from the conservative, pro-business leadership to a more free-spending and liberal government is sure to have an impact on businesses everywhere – including the USA. Remember we are Japan's #1 trading partner, they buy (and hold) a substantial portion of U.S. Treasury securities, and Japanese industrialists are often credited with having killed the U.S. steel and auto industries. This is a market shift well worth paying attention to.
Ever since the great Japanese stock market melt-down in the early 1990s the U.S. has been pushing Japan to reflate the economy. But the conservative government was opposed. Thus, deflation kept Japanese from buying many goods. But it now appears that several new stimulus programs will begin in Japan, which would raise the prices of Japanese imports (look out U.S. consumers) while increasing demand for offshore goods.
Historically Japan bought loved U.S. goods, but shunned products from China, Taiwan and Korea – a leftover from their significant invasions and horrible treatment of people in those countries in the early 1900s until the end of WWII (Japanese Emporer Hirohito was about as popular in those countries as Hitler is in the USA.) But new liberalism is likely to lead to more apologies from Japan, and a thawing of relations. Which could lead to more trade with China and Korea – which would only exacerbate the U.S. economic problems. We could see prices go up on imports, but no significant increase in exports!
Think we have a growth problem? Since peaking earlier in this century at 126M people, the Japanese population has actually been shrinking. Most demographic experts believe the population will fall to below 100M by mid-century (that's just 40 years folks!) Activities to stimulate the economy, creating more domestic demand and more domestic production could pull money away from buying U.S. Treasury bonds to fund domestic programs, making the interest rates on Treasuries go up, further dampening the U.S. economy due to debt costs (we running a bit of a deficit – in case you missed the news lately.) Higher Treasury cost means higher corporate debt cost means harder to raise money – and dampers profits. Meanwhile, inflation gets worse as we struggle to refund our debt load.
Japan has no domestic petroleum. If you think our energy supply/demand is out of balance you ain't seen nothin' till you look at Japan. They have to buy almost all their energy. Reflate the economy, increase domestic demand for housing and cars (including dropping all road tolls – which can be $60 or $100 on a Japanese roadway) and you get increased energy demand, driving up prices, and putting more dampening on the U.S. economy as we pay more for oil, gas and electricity imports.
If you don't sell in Japan today, why not? The new government promises to reduce the power of heavy handed bureaucrats (like at MITI) who have blocked expansion for decades. For the first time in our lifetimes, we can anticipate a Japanese economy that will accept significantly more imports. Stimulus money, strong currency and pent-up demand all indicate a much more desirable place to make and sell things than, say, America?
Market shifts happen at lots of levels. And when they happen at the level of an economy, (read more about this in Create Marketplace Disruption) everything higher – like industries, companies, functional resources and work teams – have to shift with it. If you don't, you become like the manufacturers being wiped out by today's global industrial shift. The Japanese economy is on the precipice of a really big shift. Intentionally. If you don't prepare, you could see really bad things happen to your business. On the other hand, if you watch closely, learn from the shift, and take action this just might be one of the biggest opportunities ever to grow your business. So you'd better update your scenarios about the future, rethink Asian competition, Disrupt your patterns to consider new ideas and open some White Space to deal with this. Because it could make a huge difference in just a year or two.
