Emerging Labor Protectionism In Japan

In 1850 Frederic Bastiat wrote in his prologue the magnificent must read essay, That Which is Seen, and That Which is Not Seen

``In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause - it is seen. The others unfold in succession - they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference - the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, - at the risk of a small present evil."

In other words, laws always constitute an economic trade off between the present and the future. Policymakers are usually predisposed to respond to short term visible effects arising from crops of present concerns but ignoring the larger costs from unforeseen consequences.

We have a very good example of this phenomenon unfolding in today's crisis laden environment.

In Japan, the current deep recession has compelled policymakers to repatriate its migrant workers as reaction to widening unemployment.

According to the New York Times, ``But the nation’s manufacturing sector has slumped as demand for Japanese goods evaporates worldwide, prompting job cuts and pushing the jobless rate to a three-year high of 4.4 percent. Japan’s exports plunged 46 percent in March from a year earlier, and industrial production is at its lowest level in 25 years.

``So Japan has been keen to help foreign workers go home, thus easing pressure on domestic labor markets and getting thousands off unemployment rolls.

“Japan’s economy has hit a rainstorm. There won’t be good employment opportunities for a while, so that’s why we’re suggesting that the Nikkei Brazilians go home,” said Jiro Kawasaki, a former health minister and senior lawmaker of the ruling Liberal Democratic Party.

``“Naturally, we don’t want those same people back in Japan after a couple of months,” Mr. Kawasaki said, who led the ruling party task force that devised the repatriation plan, part of a wider emergency strategy to combat rising unemployment in Japan. “Then Japanese taxpayers would ask, ‘What kind of ridiculous policy is this?’ ”

``Under the emergency program, introduced this month, the country’s Brazilian and other Latin American guest workers are offered $3,000 toward air fare, plus $2,000 for each dependent — attractive lump sums for many immigrants here. Workers who leave have been told they can pocket any change.

The idea is, in order to ease statistical unemployment, Japan's policymakers simply decided to send the laborers away! Reduced workers equals low unemployment rates-what genius!

Next, such reactionary program possibly unmasks of Japan policymakers' narrowmindedness and antagonism to global cultural integration.

More from the New York Times, ``But Mr. Kawasaki, the former health minister, said the economic slump was a good opportunity to overhaul Japan’s immigration policy as a whole.

``“We should stop letting unskilled laborers into Japan. We should make sure that even the three-K jobs are paid well, and that they are filled by Japanese,” he said.

``“I do not think that Japan should ever become a multi-ethnic society” like the United States, which “has been a failure on the immigration front,” Mr. Kawasaki added. That failure, he said, was demonstrated by extreme income inequalities between rich Americans and poor immigrants.

Another, Japan's recent actions reflects discrimination and protectionism...

Again from the New York Times, ``Japan’s repatriation offer is limited to the country’s Latin American guest workers, whose Japanese parents and grandparents emigrated to Brazil and neighboring countries a century ago to work on coffee plantations...

``The plan to fly immigrants out of Japan has come as a shock to many here, especially after the Japanese government introduced a number of measures in recent months to help jobless foreigners, including free Japanese-language courses, vocational training and job counseling. Guest workers are eligible for limited cash unemployment benefits, provided they have paid monthly premiums.

``“It’s baffling,” said Angelo Ishi, an associate professor in sociology at Musashi University in Tokyo. “The Japanese government has previously made it clear that they welcome Japanese-Brazilians, but this is an insult to the community.”

Lastly the article showcases Japan's structural long term problems...

``The program comes despite warnings that the aging country needs all the foreign workers it can attract to stave off a impending labor shortage.

``Japan’s population has been falling since 2005, and its working-age population could fall by a third by 2050. Though manufacturers have been laying off workers, sectors like farming and elderly care still face shortages...

``Critics denounce the program as short-sighted and inhumane, and a threat to what little progress Japan has made in opening its economy to foreign workers.

``“It’s a disgrace. It’s cold-hearted,” said Hidenori Sakanaka, director of the Japan Immigration Policy Institute. “And Japan is kicking itself in the foot... we might be in a recession now, but it’s clear it doesn’t have a future without workers from overseas.”

The present recession will not last forever. And as its economy recovers, Japan's dwindling population (see the above chart from japanfocus.org) will endure strains from labor shortages.

While Japan can easily absorb more foreign workers when it is deemed as politically convenient, it would bear additional costs from the "learning curve" to integrate foreign workers to its society.

Moreover, Japan's selective application of repatriation policy will likely incur a political backlash with affected Latin American countries which may lead to policy retaliation and even more protectionism.

Finally, Mr. Kawasaki's bigoted anti "multi-ethnic" society remarks will be faced with harsh reality. The persistence of a dwinding population will lead to societal extinction and economic regression.

Hence without raising its fertility rate, in order for Japan to maintain its status quo "society" means to adopt a culture of multi-ethnicity. (Unless cloning or other artificial scientific means of adding people comes into the script)

This noteworthy remark from Kyohei Morita chief economist at Barclays Capital in an interview with Finance Asia,

``But in Japan, the opposite is happening. Japan’s population has been shrinking since 2006, which will continue to put downward pressure on GDP. In 300 years, at the current rate of decrease, Japan’s population will be extinct." (emphasis mine)

After over a hundred years, Bastiat's message is more than relevant as it is universal.