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Thursday, 2 August 2012

Old against young in Japan

If you read about a country with economic problems where "already indecisive leaders [are] loath to upset retirees from the baby boom who make up more than a quarter of the population and tend to vote in high numbers," you might guess that the article was about the U.S. and Medicare. It's not.

It's about Japan and the value of the yen.

In 2007 the Japanese yen was trading at 123 to the dollar. In the post-2008 economic crisis the yen was seen as a safe haven currency. Its value went up. It now trades for about 78 to the dollar.

So what does the exchange value of the yen have to do with intergenerational conflict? An article in today's New York Times explains why the old and the young are fighting about currency.

The strong yen makes imports cheaper. Cheaper imports drive down domestic prices as well. Older people on fixed incomes can buy more. What cost them 123 yen in 2007 costs them only 78 yen now. But a strong yen makes exports more expensive, and Japanese industry - very export dependent - is suffering. This hurts the young.

Japanese political scientists say the government has tolerated the strong yen out of fear of the elderly. Shigeru Ono, a 62 year old retired oil company manager who lives on a monthly pension of 130,000 yen (approximtely $1,660), understands the intergenerational conflict:
The strong yen and deflation have been a boon for us baby boomers. But I also know that they cannot be good for my son’s generation.
The U.S. is struggling to contain the cost of Medicare. Japan is struggling with the impact of a strong yen. In families, grandparents cherish children and grandchildren. But in wider society the relationship between generations is playing out differently.

The future well being of both countries depends in large measure on the balance of competition and cooperation between old and young.


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