Animal Spirits Needed

During the 1980's Japanese companies dominated their respective markets. Since then the Japanese economy has fallen into a multi-decade funk.

Japan’s post-war economic miracle produced firms such as Sony and Sharp that dazzled the world, yet today many of them have lost direction. In consumer electronics and appliances they have been left behind by the likes of Apple of the United States, Samsung of South Korea and Haier of China.[snip]

there are few signs of entrepreneurship in the world’s third-largest economy. Only 4% of the working population was engaged in starting a business last year, compared with 14% in America.

But the biggest obstacle to jumpstarting the economy is the Japanese method, once highly lauded, of managing people [bold added].

Japanese firms have clung to their traditions of lifetime employment in a single workplace, and of paying and promoting people according to seniority, because they believe those traditions have merits. Indeed, they foster loyalty, and thereby encourage firms to invest in training graduates without fear of them being poached by rivals, argues Yoshito Hori, the founder of GLOBIS, a business school. However, it is no way to produce the sort of managers needed to lead modern, knowledge-based industries. “Imagine if you took managers at Apple, Google and Amazon and replaced them with people promoted on the basis of length of service rather than merit,” says Atul Goyal, an analyst at Jefferies, a stockbroker. “How long do you think those companies would last?”

Japan's moribund spirits aren't limited to business:

The Japanese press has taken to calling it sekkusu shinai shokogun: celibacy syndrome. Basically, the country just isn't that interested in sex...A full 49.3% of respondents between the ages of 16 and 49 in the [Japan Family Planning Association] 1,134-person survey said they hadn't had sex in the past month.

Japan's birth rate hit a record low in 2014 at just over 1 million infants. When combined with 1.3 million deaths in the same year, that's a deepening population crisis. According to Japan's population institute, the overall population could dip to 107 million by 2040 — or 20 million lower than today.

At the same time, Japan's population is shrinking and graying, setting up a "demographic time bomb" that could radiate out globally through the country's Greece-level national debt and deep economic ties with China and the US.

It's easy to tell someone that he's got to work harder, get a wife, and raise a family. But actually making wholesale changes to one's life is usually a daunting multi-year task. When the number of people who must do so number in the millions, the difficulties facing Japan are enormous.

Let's hope for Japan's sake that demography is not economic destiny (zerohedge.com graph)