The Investor's Guide to China: Japanification (#24)
Oct 10, 2023
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The podcast discusses the economic challenges faced by China, drawing parallels with Japan's experiences. They explore topics such as deflation, monetary policy, and consumer mindset. They also touch on global success of Yakort, China's CPI, aging population, SOEs' adaptation, and Japan as a rewarding market for shareholders.
China can learn from Japan's economic journey and policy responses to similar challenges like deflation and an aging population.
Maintaining a modest pace of inflation through a combination of monetary and fiscal policies can help prevent economic problems similar to Japan's in China.
Deep dives
Lessons from Japan: Economic Challenges and Recovery
The podcast discusses the economic challenges that Japan has faced, including a lackluster economy, real estate bubble, price inflation, and an aging population. It emphasizes the idea of 'Japanification,' which refers to the similarities between Japan's challenges of the past and those currently faced by China. The podcast explores the lessons that China can learn from Japan's economic journey, particularly in terms of policy responses to similar economic pressures. It highlights the importance of avoiding deflation and the role of monetary and fiscal policies in stimulating the economy.
The Impact of Deflationary Pressures on Japan's Economy
The podcast delves into the impact of deflation on Japan's economy, describing it as a 'silent killer.' It explains how deflation initially may seem appealing to consumers due to lower prices, but it has a detrimental effect on the economy, making it difficult to reverse the downward spiral. The podcast also discusses the struggles Japan faced with deflation, including disinflationary pressures and the need for a combination of monetary and fiscal policy to combat the issue.
Japan's Response to Inflationary Pressures and the Role of Monetary Policy
The podcast explores Japan's response to inflationary pressures and the importance of maintaining a modest pace of inflation. It highlights the importance of a combination of monetary and fiscal policies, along with the willingness of the nation to accept higher prices. The podcast emphasizes that the implementation of such policies at an earlier stage can help prevent China from going through the same economic problems that Japan faced.
Implications of Demographic Challenges for Japan and China
The podcast discusses the demographic challenges faced by both Japan and China, including an aging population and a shrinking workforce. It examines how both countries are dealing with these challenges and the response from consumers and companies. It highlights the importance of policy responses to support the economy and encourages companies to adapt and stay competitive. Additionally, it mentions the role of automation in helping companies in both countries increase productivity and cope with the shrinking workforce.
When you look at some of the big economic issues China is dealing with today—lacklustre growth, a real estate slump, price disinflation, or an ageing population—you quickly realise Japan has been through a lot of the same challenges.
What can we learn from Japan’s experiences? Is there a policy playbook there for how to respond to similar economic pressures for China, or indeed, any other country confronting these challenges?
In October’s episode, Catherine Yeung, Investment Director, and Marty Dropkin, Head of Equities, Asia Pacific, are joined by Miyuki Kashima, Head of Investments, Japan, and Eric Nie, Co-Head of Investments, China, to talk through the lessons learned from Japan’s economic journey and what’s going on in China today.
With additional contributions from Ying Lu, Analyst & Portfolio Manager, and Reggie Pan, Investment Analyst.