Halfway Around The World, Brexit Hits Japan's Already Soft Economy | KERA News

Halfway Around The World, Brexit Hits Japan's Already Soft Economy

Jun 28, 2016
Originally published on June 28, 2016 11:19 am

In Japan, the world's third largest economy, the Brexit means more bad news for a country already struggling with its finances.

Following the British vote to leave the European Union, the Japanese stock market on Friday saw the largest single day drop since the year 2000 (though it did rebound a bit on Monday).

Japan's exports instantly became pricier — and less competitive — as the value of the Japanese yen soared. Japanese households, meanwhile, are still cautious about spending money needed that could help energize the economy.

"We need to take all possible measures to prevent this [Brexit] from affecting the Japanese economy," Prime Minister Shinzo Abe said at a news conference Monday. He didn't signal which measures Japan would take.

It's dismal timing for Abe, who was elected in 2012 on an eponymous plan and promise — "Abenomics" — to revive the Japanese economy after years of stagnation. But the country faces stubborn headwinds: an aging and shrinking population, and climbing public debt.

"Three and half years on, the metrics are pretty dismal at this point, for Abenomics," said William Pesek, executive editor of Barron's Asia and the author of Japanization: What The World Can Learn From Japan's Lost Decades. "The metrics initially were measured by the stock markets rising, by exports increasing and the hopes that companies would be increasing wages. We haven't seen that part of it, and it's kind of the problem."

Feeling the pinch more than most are part-time workers, who don't get the guarantees of wages and benefits that full-time jobs offer.

Limited Safety Net

One Thursday a month, dozens of working-class Japanese line up under a train overpass to pick up a free basket of food.

"Seaweed, tea, sauce, biscuits in a can, emergency-type food," Michiko Sato shows us, as she digs through her basket. "And dry curry."

It's made possible by the Second Harvest, a non-profit national food bank. The government here doesn't provide much in the way of help for the working poor, since companies have traditionally employed people for life. Since that's changing, the stress of a bad economy has hit non-corporate employees like Sato especially hard.

"I feel like that's one of the biggest problems.There's only temporary jobs available to people like me," Sato says.

She's working two of them — one as a cashier, and the other checking people into a gym. But it's not enough to feed her teenage son, and there are few places to turn for help.

"There's not a safety net here for people in need," says Charles McJilton, the founder and head of Second Harvest. "And the non-profit sector here is still very, very small. I would easily say it's less developed than the Philippines, less developed than India."

This leaves a whole segment of the Japanese population struggling to make ends meet. Many of them are single moms and children. Government statistics show 55 percent of single-parent households — most headed by women — live in poverty, defined in Japan as those with no more than about $9,900 in disposable income a year. That's one of the highest such rates in the developed world.

"Over time, it's become very difficult with this government to keep up with this problem and this trend," Pesek says.

The mothers at the food bank pickup say they don't have time to consider the geopolitics involved. They just want to reliably feed their families.

Tomomi, a 34-year-old mother who didn't want to share her full name because of the shame attached to poverty here, takes the subway from an hour outside Tokyo, with her 2-year-old strapped to her hip and dragging a suitcase to hold the food.

"The fact that we can come here and get good food, for free, at least once a month makes a huge difference in our ability to just get by as a family," Tomomi says.

Facing Big Debts

To help families get by, Japan did recently delay a planned increase in sales taxes, which would have hit the working poor harder than others.

"But they can't do that forever, because ultimately, Japan has a very large debt," said U.S. Treasury Secretary Jacob Lew, when asked about the state of Abenomics last month. "They can defer bringing those taxes into place, but they need to use the space they create to put structural reforms into place at the same time."

Structural reform includes ideas like encouraging entrepreneurship, loosening immigration restrictions and getting more women in the workforce. But doing those things to alter the structural makeup of Japan's economy is an arrow that hasn't quite flown.

"I would give it maybe a kind D minus, frankly," says Pesek.

Jake Adelstein and Mari Yamamoto contributed to this story. For a behind-the-scenes look at reporting from Tokyo, check out our East Asia blog, Elise Goes East.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

LINDA WERTHEIMER, HOST:

Markets around the globe are trying to cope with the British decision to leave the European Union. In the world's third-largest economy, Japan, Brexit means nothing good. NPR's Elise Hu reports from Tokyo.

ELISE HU, BYLINE: One Thursday a month, Michiko Sato lines up under a train overpass to pick up and pack up a free basket of food.

MICHIKO SATO: (Through interpreter) Seaweed, tea and sauce and biscuits in a can.

HU: It's made possible by Second Harvest, a nonprofit national food bank. Because Japanese companies have traditionally employed people for life, the government here doesn't provide much help for those who bounce from job to job. And lately, there are more and more non-corporate employees like Sato.

SATO: (Through interpreter) I feel like that's one of the biggest problems. There's only temporary jobs - jobs available to people like me. So...

HU: She's working two of them - one as a cashier, the other checking people into a gym. It's not enough to feed her teenage son.

CHARLES MCJILTON: There's not a safety net here for people in need.

HU: Charles McJilton is the founder of Second Harvest.

MCJILTON: And the nonprofit sector here is still very, very small. I would easily say it's less developed than the Philippines, less developed than India.

HU: Leaving a whole segment of the Japanese population - mostly part-time workers, single moms and children - struggling. William Pesek is executive editor of Barron's Asia and the author of the book "Japanization."

WILLIAM PESEK: Over time, it's become very difficult for the government to keep up with this problem and this trend.

HU: In 2012, voters elected the party of Japanese Prime Minister Shinzo Abe on a promise to return Japan to growth with his eponymous plan, Abenomics. By now, Pesek says, the economy was supposed to be faring better than this.

PESEK: And three and a half years on, the metrics are pretty dismal at this point for Abenomics. And the metrics, initially, were measured by the stock market rising, by exports increasing and the hopes that companies would be increasing wages.

HU: The idea was that would help lift up the Japanese at all levels with better jobs and better pay.

PESEK: We haven't seen that part of it. And that's kind of the problem.

HU: The problem has only gotten trickier in recent days. After the Brexit vote, the Japanese stock market saw its largest single-day drop since the year 2000. The country's exports became far pricier and less competitive as the value of the Japanese yen soared. All the while, households aren't spending money, meaning they're failing to fuel the economy.

HU: (Speaking Japanese).

HU: "We need to take all possible measures to prevent the Brexit from affecting the Japanese economy," Prime Minister Abe said Monday morning. He didn't signal which measures Japan would take.

HU: Moms at the food bank pick-up say they don't have time to consider the geopolitics involved. They just want to feed their families without such a struggle. Thirty-four-year-old mom Tomomi, who didn't want to share her full name because of the shame attached to poverty, came from an hour outside Tokyo, wearing her 2-year-old and dragging a suitcase to hold the food.

TOMOMI: (Through interpreter) The fact that we can come here and get good food for free at least once a month makes a huge difference in our ability to just get by as a family.

HU: To help families get by, Japan did delay a planned increase in sales taxes, which would have hit the working poor harder than others.

JACOB LEW: But they can't do that forever because, ultimately, Japan also has a very large debt.

HU: That's U.S. Treasury Secretary Jacob Lew when asked about the state of Abenomics last month.

LEW: They can defer bringing those taxes into place. But they need to use the space they create to put structural reforms in place at the same time.

HU: He's talking about reforms like loosening immigration restrictions, getting more women to work and making it easier to start new companies. But changing the structural makeup of Japan's economy is an arrow that hasn't quite flown. William Pesek.

PESEK: And I would give it, maybe, a kind D-minus, frankly.

HU: The situation's gotten more dire. But the clock for Prime Minister Abe hasn't run out. He's expected to stay in power after parliamentary elections next month. Elise Hu, NPR News, Tokyo. Transcript provided by NPR, Copyright NPR.