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Japan “Hitting the Wall”

Henry Blodget recently interviewed popular financial writer John Mauldin and geopolitical analyst George Friedman (See video).  It is George Friedman’s comments that we find implausible.  We should start by saying that, in general, we like Friedman’s work.  His Stratfor is a fine resource for geopolitical analysis, and he is simply one of the best in the business for what he does.  We’ve quoted Friedman before in the HS Dent Forecast (see March 2009 issue), and even recommended his latest book.

So, we’re going to have to chalk up his recent Japan comments to temporary insanity.  Friedman believes that a debt crisis in Japan will lead to a fundamental shift in the character of the Japanese state.   The pacifist and democratic Japan of the post-WWII era will be replaced with militantly aggressive Japan — essentially a return to Japan’s WWII fascistic past.   In this view, Friedman has drawn the wrong conclusions from history and has in the process absolutely divorced himself from reality.

Yes, the financial crisis of Wiemar Germany led to a new German militarism and to the rise of Adolf Hitler.  All around the world, authoritarian and totalitarian governments rose to power in a similar fashion.  Even recently, in Argentina, the financial crisis led to the rise of Kirchners — hard leftists with an authoritarian bent who are allied to the radical Hugo Chavez.   So, the historical precedent is there.

But where would Hitler have been without his “Brown Shirts,” his young ideological thugs?  It’s difficult to have a militaristic society without a large pool of aggressive young men.   And this is something that Japan is sorely lacking.

Are we to believe that a country in which the median age will be over 50 will take up arms and conquer its neighbors?  According to UN estimates,  Japan’s median age will be 50.6 by 2025.  It’s already 44.7 — nearly a decade older than the United States.

Furthermore, Japan’s population is shrinking!  How can Japan possibly field an army with a population that is greying and shrinking faster than any society in history?  Moreover, given that Japan is largely a country of only children…what parent or grandparent would want to see their only son fight and die in a war?

Had George Friedman asked himself any of these questions, we would hope that he would have reached very different conclusions.  If demographics are destiny, then Japan’s future will not be militarism.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy