The central bank expects some inflation and positive interest rates will kick-start the economy. Having to pay interest on the debt will have a huge impact on the Government’s budget. If lenders lose confidence that the Government can service such enormous debt, the effects will be disastrous.
Japan is the world’s third-largest economy and is our fourth-largest export market. As we are both signatories to the Trans-Pacific Partnership, trade between us is predicted to grow.
It is the Japanese politicians running massive deficits funded by issuing more and more government bonds that look unsustainable.
I first visited Japan in 1976 as a member of a parliamentary delegation. The Japanese had never seen a 28-year-old MP. The youngest member of their parliament, a 43-year-old MP, met with us. His mission seemed to be to find out more about me.
“How big is your majority?” he asked.
“287,” I said.
“Will you be re-elected?” I deferred to my fellow MPs.
“He will be re-elected with Parliament’s biggest majority,” they said.
“Was I popular,” he asked.
“Better than that,” the MPs said. “His electorate boundaries have been changed.”
“Are you rich?”
“No,” I said. Maybe that meant I was really rich. He tried again.
“I have just joined a golf club,” he said. “It cost me US$1 million. Do you belong to a golf club?”
“Yes,” I said, “two”. I did not tell him I was patron of one and the other was the Lautoka Golf Club, a goat track, that cost me $30 a year.
He must have reported that I was the godfather of New Zealand politics, able to change my electorate boundary. For the rest of the trip, our hosts would ask, “Who is Prebble San?” and then bow significantly lower.
This deference annoyed my fellow MPs until we ran into a diplomatic problem. We had been advised that gift-giving was not expected. We had taken some gifts, but they soon ran out. Jonathan Hunt had brought some perfume in wooden bottles which one of his constituents made and sold in a farmers’ market.
I was entrusted to respond to the lavish hospitality by presenting the perfume. If it came from Prebble San, it must be expensive.
It was a valuable lesson. As Minister of Civil Aviation, I travelled to Japan to try to secure landing rights for Air New Zealand. No gifts, I was told. I instructed my secretary to bring the most lavish gift Ministerial Services could supply.
My officials advised me their talks were unsuccessful.
That night I had dinner with the Japanese Transport Minister. I told the minister that as a young MP, I had visited Japan and had been unable to properly reciprocate the hospitality.
“I have brought a gift as a thank you,” I said. I presented him with a huge lambskin rug. The Japanese minister was extremely embarrassed that he had no gift.
When we met next day for the formal negotiations, to reciprocate the gift and restore his loss of face, the minister overrode his officials and granted landing rights.
My present visit to Japan confirms impressions from half a century ago. It is a remarkable country. Good design, everything works, fun gadgets and marvellous toilets. Ordinary Japanese are well-educated, hardworking, polite and honest. Outside a jewellery shop there were wedding rings in an open display. Our jewellery shops are like forts in comparison.
There is speculation in the media that factions of the ruling DLP, in power with minor interludes since 1955, will replace the prime minister. The successful candidate will owe his election to some godfather rather than any democratic mandate.
It is competition from China that is shaking up Japan. Chinese carmakers are winning the electric car technology race. However, Toyota is promising to gain the lead by producing long-life, solid-state batteries that will charge in 10 minutes with a range of 1200km.
Toyota will be successful. The market believes the Bank of Japan will succeed. And the politicians will go on borrowing and spending until the inevitable bust.
- Richard Prebble is a former leader of the Act Party and a former member of the Labour Party.
