Newsweek Japan – April 2010
I am a digital cat. I was designed in Mumbai and manufactured in Shenzhen. Where I live digital cats outnumber children. That’s because they are much cheaper. If you cannot afford the latest version, you can buy a second hand product at a shop called CATOFF.
I take care of my master and keep his tiny apartment clean. While he eats breakfast, I explain the morning news. Today’s news has upset him more than usual.
“What is this GMF?” he frowns. “ Why are they coming to Japan?”
“It’s short for the Global Monetary Fund. The G30 set it up after the old IMF collapsed in the big crisis of 2016. If countries cannot manage their own economic affairs, the GMF steps in and imposes new policies.”
My master looks angry. “Imposes? That sounds like the American occupation!”
“The G30 gave the GMF powers of compulsion. Independence is fine in theory, but allowing troubled countries to carry on with bad policies is too risky for the world economy.”
“So what’s going to happen? Are my wages going to be cut again?”
My master studied hard to get into a good university and then became a salaryman, fiercely loyal to his company. That company no longer exists, and he lost his savings in the financial crisis of 2014. He is eighty three years old, but needs to work to pay for food, rent, and medicines.
Sometimes he talks about the government’s “Happy End” euthanasia program. Volunteers are pampered with trips to hot springs and top-grade kaiseki dinners in their last few weeks. Alright for him, but what will happen to me? I am a 2G digital cat, and now everyone is buying 4G. I may be broken up for parts!
“Probably not. Your wages might even rise.”
My master struggles to digest the idea. “Rise? How is that possible?”
“The GMF are planning to scrap the old yen and create a new yen with a fixed rate against the Chinese yuan . Effectively it will be a huge depreciation. Many more Chinese tourists will come to Japan, so you can expect much bigger tips.”
My master is registered with an employment agency. For the several years he has been working as a cleaner at the big casino on the Tokyo waterfront. Most of the customers are wealthy Chinese.
“How did Japan ever get into this mess? At one time we thought we would be the economic superpower of the twenty first century. That’s a bad joke now. Our government debt is 340% of GDP.”
“370% actually. Your numbers are two years out of date. Getting back to your question, the basic problem in Japan is people like you, master.”
“Me! What do you mean, you impudent creature!”
“Please listen. Most countries with big financial problems have consumed more than they produce. But Japan is different – thanks to thrifty people like you it produced more than it consumes. That is highly deflationary. And deflation is the major cause of the debt problem.”
“I’m not sure I understand”
“Look at the financial flows.. Japan households and companies saved much more money than they spent. After the small crisis of 2008 and 2009, Japan’s private sector excess saving was more than 10% of GDP.”
“But isn’t thriftiness a virtue?”
I twitch my whiskers. “Money doesn’t just evaporate. Money saved by one person has to be spent by someone else . Who spends the excess savings of the private sector? The only possibility is the government or foreigners. In other words, master, it was your thriftiness created the government deficit. And it also created the current account surplus, which pushed the yen higher and made deflation worse.”
My master frowns.
“Our government tried many times to improve public finances, but failed..”
“Yes. Tax hikes triggered the recessions of 2012, 2015 and 2018. In every recession tax revenues collapsed and the deficit grew bigger. The GMF thinks Japan’s fiscal problems can only be solved by a long spell of nominal growth. That’s why they plan to redenominate the yen, take over the Bank of Japan, and set a 5% inflation target. They claim this will cause asset prices to rise and get money moving in the economy”
“What a strange idea! Could it work?”
My software runs the simulation in a nano-second.“The probability of success is over 70%. If we could take a time machine to – for example – 2010 and try it then, Japan would be totally different place today.”
I nuzzle my master’s leg to comfort him. There are tears in his eyes. I don’t know whether he is happy or sad.
Peter Tasker (with apologies to Natsume Soseki, author of “I Am A Cat”)