Given how much most of us here respect, admire, and love cars (and most everything else) made in Japan, the country's current and emerging problems are very serious. Japan's population is also aging and shrinking rapidly. But don't take it from me:

Zakaria: The end of an era for Japan

By Fareed Zakaria, CNN
Wherever you are in the world, you've probably used or coveted some Japanese product - a Honda four-wheeler; a Toyota Prius, a Sony, a Panasonic TV, a Nikon camera. Since the 1950s, Japan's exports have flooded the world and fueled an economic miracle at home, making that country one of the wealthiest in the world. Well, this week marks a turning point - one of the world's great export engines has run out of gas.
What in the world is going on?
For the first time in 31 years, Japan has recorded a trade deficit. In simple terms, that means Japan imported more than it exported last year. Now this is not that unusual for some rich countries: the U.S. has had a trade deficit since 1975, and yet we've grown. But the U.S. economy is not built on exports. Japan's economic rise on the other hand, has been almost entirely powered by exports.
So what has changed in Japan?
The Japanese government would like to blame one-off events: Last year's earthquake and tsunami crippled factories and shut down nuclear energy reactors. The offshoot of that was decreased economic output, plus they needed to import expensive oil from the Middle East. But natural disasters have only highlighted and accelerated existing trends in Japan: A decline in competitiveness and an ageing work force.
China and other East Asian countries can now produce cheaper products and in greater quantities. Add to that a rising Yen, and Japan's exporters have been at a disadvantage globally.
Toyota's chief perhaps said it best last year: "It doesn't make sense to manufacture in Japan."
Then add to this Japan's demographics. Between 1990 and 2007, Japan's working population dropped from 86 to 83 million. At the same time, the number of Americans between the ages of 15 and 64 rose from 160 million to 200 million. In a global marketplace, this is a major handicap for Tokyo.
Between 2001 and 2010, Japan's economy grew at seven-tenths of one percent - less than half the pace of America's. It was also well behind Europe. Contrast that with growth per person - or GDP per capita - and Japan actually outperforms America and the Euro Zone.
So while Japan's economy in aggregate has been hurt by this lack of workers, for the average Japanese worker income is still up and quality of life is still very high. That's partly why the country has not felt the pressure to reform.
Now it's easy to extrapolate from the data that Japan's low growth is not a failure of economic policy, but just a reflection of its demographics. But that's too simple. In reality, Japan's industry is becoming less competitive and even per capita incomes will start slowing down.
Tokyo's policymakers have failed its people - they could have opened up many of its closed sectors to competition, reformed its labor laws to make Japanese labor more attractive, cut pension benefits, and allowed more immigration. Its government could have put the country on a path to reduce its massive debt burden. Instead, we're now entering an era where one of the great manufacturing nations of history faces a looming current account deficit. With its debt at 211% of its GDP, if the cost of its borrowing increases, Tokyo would face an even greater crisis: A default.
Keeping a rich country competitive is very hard, especially in a democracy where interest groups keep asking for more - more benefits, more subsidies, more protections. They want to be shielded from competitive forces. It is happening in America, just as it happened in Japan. It's easy to forget how powerful a growth engine Japan was in the 1960s, 70s, and 80s.
But eventually, it was unable to change its ways, reform, and get less rigid. The result was decline.

http://globalpublicsquare.blogs.cnn....pan/?hpt=hp_c1

 

It appears that Japan is falling into the same economic trap the US did about 30 years ago. They are losing their manufacturing base to nations that are making similar products, even if sometimes of questionable quality. With a little historical perspective it's easy to see the nation that once was known for manufacturing cheap tin toys in the '50's, and knockoff American products in the '60's, before arriving at competitive consumer products during the '70's and market domination in consumer electronics, automobiles, and offshore manufacturing by the '80's has now begun to repeat the American experience with low-cost manufacturing fleeing overseas.

I can recall the hoots of derision raised at markings like "Made in Japan" that designated poorly designed and shoddily made products. the J.A. Pan company couldn't compete with J.C. Penny. Over the years that epithet was reversed, as Japan's innovation and quality improved at a dramatic rate and "Made in Japan" became a signature of quality. The problem was as their industrial output rose, their wages and standard of living kept pace, arriving now at the point that Japan is on the verge of being Wal-mart'ed out of the market, with manufacturers fleeing to Korea, Malaysia, and China to save a nickle at wholesale.

I visited a large chemical complex here on the Texas Coast in the late '70's to shoot a recruiting video for a customer. They took us to a brand new process unit for our filming location. Usually very secretive about chemical processes, these plants don't often let you take photographs inside because a skilled chemical engineer with only basic information can accurately estimate product, yield, and cost, just by scaling off pipe sizes. Why were we even allowed in there? They were in the process of getting permits to tear the unit down. Here was a sophisticated chemical process unit costing millions of dollars and occupying a couple of city blocks, but had never produced an ounce of product, why tear it down? It was obsolete. Someone had developed a slightly more efficient process that would save about two-cents per hundredweight (100 pounds) of product, and considering the hundreds of tons that unit could produce every hour or two, it was too expensive for the current market. It went to the breakers, a victim of technology that was moving faster than construction.

In the retail world, consumers are buying on price rather than quality. I think everyone has had the experience of a home appliance failing after four or five years. Whether a coffee pot, a toaster, or a can opener, most of us grew up with ONE of these items in our homes. Today they are replaced every few years; we use them like Dixie Cups or disposable razors, use them up and throw them away. The market really doesn't demand a long life cycle for many products because they will be obsoleted in only a few years. Who would buy a computer to keep for ten years? We reach the point that OS updates slow the system to a crawl, that both RAM and ROM are too limited for newer software, and the cost of upgrading components after a few years is cost-prohibitive with the price of new computers falling rapidly.

It would appear that the advance of technology, the increase in competitiveness, and the shift of the market to accept lesser quality for a better price is creating a "perfect storm" of circumstances to drive manufacturing toward third-world nations where cheap labor, minimal regulation, and friendly taxmen make the opportunity irresistible to many retailers.

 

interestingly enough, reason Yen is so strong is because investors see it as safe heaven, compared to euro and usd.

 

Thats interesting to read, though not very surprising.

Have there been any successful examples where a industrialized nation made it through de-industrialization?

It seems both the US and the UK are still struggling with it.

 

It is a shame what has happened and what is happening in Japan where it makes more and more sense to build their cars and electronics in other places. I hope people will not complain much, bash them as being inferior, or even refuse to buy Japanese brand cars built in the US as more and more Japanese car lines will be built in the US. US built Japanese cars are still some of the most reliable and best built in their classes, US auto workers can build cars just as good as Japanese autoworkers. It is all in the design and standards the car is designed to be build to.

I don't see why in the interest of what is best for Japan that the Japanese government does not step in and try to make it less expensive to build cars and electronics in their country like offering domestic Japanese companies tax/reg breaks for keeping production in the country. It is in Japans best interest to have its population building stuff and making money instead of everything going out of the country and have unemployment climbing. I have noticed many newer Sony products are now built in China which is a shame.

 

Interesting read.

The main question is once China goes through it's current industrial age (say in the next 20-30 years), what country/countries will replace it as the new manufacturing hub?

India, Brazil, another South American country, or somewhere else?

We all know one country has to manufacture the goods we use.

 

Probably those you named plus the other SE Asian countries will be the main mfg hubs in the future

 

there are already some companies moving out of china into poorer nation where cost of labor is cheaper....

 

If Mainland China labor costs start to rise, then companies will start to look elsewhere like India or Vietnam or maybe even Bangladesh.

 

Or up north to Russia, it aint pretty outside of the Moscow and St.Petersburg

 

Another possible outcome, is that manufacturing may move back to the US, depending on how far our wages and costs associated with manufacturing deflate along with our general standard of living.

 

I think with the fall of the dollar, we could potentially see more manufacturing here. It would also help if we relaxed some regulations as well.

 

yeah, dont kid yourself, it is not going to deflate to $250/month a good earning Chinese makes...

 

I guess they will be making everything in China.......

 

What I don't understand is everyone knows Chine makes cheap but low quality crap and still people do business with them.