No, the US Isn’t Japan
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No, the US Isn’t Japan


The recent S&P downgrading of US treasuries has prompted a bout of soul-searching among economic commentators in the United States. Quite how the S&P retains any credibility after its AAA-rated subprime CDO fiasco is something of a mystery, but being booted from the AAA sovereign debt club has clearly been upsetting for the United States, if not for bond investors.

One of the memes that has emerged—in fact, it first made its appearance in the wake of the Lehman Brothers collapse—is that the United States is becoming the new Japan. Finance bloggers like to buttress the argument with charts showing the recent performance of US stocks and bonds, looking ominously like Japan’s in its post-bubble days. This time, opines a recent Wall Street Journal article, maybe the United States is Japan.

No, it’s not. Certainly, it’s tempting to draw the comparison. Two rich, post-industrial countries experience massive asset bubbles, followed by crashing prices, bank bailouts, debt retrenchment, burgeoning public debt, and ultimately downgrades.

But they are not the same, for the simple reason that in Japan the economic cycle is dead. The fundamental assumption that underpins the usual tools of economics no longer applies, and Japan’s only way out of a painful decline is structural reform that goes beyond its economy and into the heart of its social fabric. These reforms will be far more painful than anything required by the United States, which still has an economic cycle, meaning monetary and fiscal policy can still be effective, and which could achieve a recovery with a dose of sensible policy and patience.

This isn’t to be sanguine about America’s problems. S&P did get one thing right: US politicians certainly aren’t inspiring much confidence these days. For as long as the country remains in thrall to the arrant nonsense spouted by cartoonish fringe characters, there’s an ongoing risk of poor policy choices that will continue to damage the economy. The recent shift in favour of the policies of Herbert Hoover, circa 1931, puts a fragile recovery at grave risk. An inability to re-regulate its financial sector (the reintroduction of Glass-Steagall would be a good first step) will encourage new asset bubbles, wreaking more havoc. Even with an economic cycle, a country can defenestrate itself. Nor is it to suggest that the United States doesn’t have some deep-seated structural issues—income equality and the evaporation of well-paying, blue-collar jobs, eviscerating the middle class, will require sustained action. But the point is, whether or not it actually chooses to exercise them, the United States still has policy options that Japan now lacks.

Let me explain. In 2009, the United States had a population of 307 million, Japan had 127 million. In 2050, the US is projected to have a population of 393 million, according to the middle series estimate of the US Bureau of the Census. Japan, by contrast, will have just 95 million people, according to its Ministry of Health. So, over the next 40 years, if these projections hold, the US population will grow by about 30 percent, while Japan’s will shrink by 25 percent.

October 8, 2011 at 10:43

You’re putting words in those peoples’ mouths, and yes, I have seen many posts from Sinodefender and John Chan. Also, your comment regarding crime in Canada is completely irrelevant to this article.

October 6, 2011 at 21:17

They are an inalienable part of China territory according to historical facts and international law; Japan claim untenable —

Situated in the East China Sea, due east of Fujian province and northeast of Taiwan, the Diaoyu Islands are the farthest eastern islands of China. They are about 190 nautical miles from the Dongshan Island of Fujian province, 90 nautical miles to the northeast of Keelung city of Taiwan, and 78 nautical miles from the Yunaguni Island of the Ryukyu Islands. The Diaoyu Islands refer to a group of islands that include the main one, Diaoyu Island, and some smaller islands and reefs like Huangwei Island, Chiwei Island, Beixiao Island, Nanxiao Island and three other islets. They are scattered in a sea area at 123 degrees 20 minutes ~ 124 degrees 45 minutes east longitude and 25 degrees 44 minutes ~ 26 degrees north latitude, covering a total land area of 6.5 square kilometers. The surrounding waters of the islands have rich fishing resources and have long been an important fishing ground for people in Fujian and Taiwan of China since ancient times. The well-known Emery Report pointed to the existence of abundant oil and natural gas resources on the continental shelf of the East China Sea.

(1) The Diaoyu Islands are an inalienable part of China’s territory.

China was the first country that discovered and explored the Diaoyu Islands and obtained sovereignty by occupation. Since ancient times, the Chinese have fished, collected medicinal herbs and sought shelters on these islands and in their surrounding waters. No later than the Ming Dynasty (1368-1644), the islands had been discovered, explored and named by the Chinese. Ancient Chinese books, such as the Book on Voyage Routes and the Voyage with a Tail Wind, kept a complete record of the navigation routes used by Chinese fishermen in this sea area. Due to the natural conditions at sea and the possession of technology such as ship-building at that time, only the Chinese military and civilians could reach the islands during the monsoon season. They navigated through the islands and sought haven there in stormy weather. They carried out economic activities such as fishing, collecting herbs and picking fruits. For about five centuries until 1895, China had never been interfered in its exercise of these rights.

One cannot speak of the Diaoyu Islands without mentioning Ryukyu Kingdom. Ryukyu Kingdom was a vassal state of the Ming and Qing dynasties to which it paid tributes, while the latter sent envoys to grant honorific titles to the kings in Ryukyu in recognition of their rule. The Diaoyu Islands were on the navigation route from China’s mainland to Ryukyu Kingdom. Chinese officials on mission to Ryukyu all referred to these islands as their navigation marks. They put down in the official documents such as the Record of the Mission to Ryukyu with detailed descriptions of their voyages through the Diaoyu Island, Huangwei Island and Chiwei Island and repeatedly confirmed the boundary between China and Ryukyu. Historical facts tell us that the Diaoyu Islands do not fall into the domain of Ryukyu. China’s historical records and official documents all show that it was the Chinese people who first discovered, developed and utilized the Diaoyu Islands. According to the international law of that time, discovery means occupation and occupation means obtainment of territorial sovereignty. Therefore, China obtained sovereignty over the Diaoyu Islands by occupation.

The Chinese government exercised effective rule and administration, and strengthened its sovereignty over the Diaoyu Islands. Successive Chinese governments all included the Diaoyu Islands into the confines of China’s territory and exercised sovereignty and effective rule by taking measures to develop, utilize and administer the islands. In 1171, General Wang Dayou guarding Fujian established military camps on Penghu Islands and sent officers to station in the islands. Taiwan and its affiliated islands including the Diaoyu Islands were under the military command of Penghu and, in terms of administration, they were under Jinjiang of Quanzhou, Fujian province. Both the Ming and Qing dynasties incorporated the Diaoyu Island and its affiliated islands into their territory and designated them as part of the maritime defense areas. The Book on Managing the Sea (1562, Ming Dynasty) and Imperial Map of Chinese and Foreign Lands (1863, Qing Dynasty) made clear descriptions about the area. Historical facts show that the Chinese government has administered the Diaoyu Islands in various ways and effectively exercised and strengthened its sovereignty over the Islands.

(2) Japan’s arguments about its claim of sovereignty over the Diaoyu Islands are untenable.

There are mainly two legal arguments that Japan has evoked to justify its occupation of the Diaoyu Islands: First, occupation of so-called terra nullius, second, acquisition by prescription (prescriptio acquisitive). Both arguments are untenable.

By international law, the object of occupation shall be limited to terra nullius. Terra nullius refers to land which has never been subject to the sovereignty of any state or over which any prior sovereign state has expressly or implicitly relinquished sovereignty. The fact is that Diaoyu Island and its affiliated islands have been subject to the sovereignty of the Chinese government as its sea defense area since the Ming Dynasty. They are an inalienable part of China’s territory. Due to the inhospitable natural environment, these islands are not permanently inhabited and fishermen only take up abode on these islands for seasonal activities. But having no permanent residents does not make these islands terra nullius. The Diaoyu Islands are not terra nullius. They are China’s territory. The Japanese government and society are well aware of this fact. The official archives of the Japanese government and documents and correspondence of Japanese officials all record and give evidence to this. For example, in the letter to Home Minister Aritomo Yamagata, then Japanese Foreign Minister Kaoru Inoue wrote in explicit terms that these islands had already been given Chinese names by the Qing government and that the Japanese government had been admonished by the Qing government for coveting these islands. Since the Diaoyu Islands are not terra nullius, Japan’s so-called occupation is non-existent. Ex injuria jus non oritur (A legal right or entitlement cannot arise from an unlawful act or omission) is a fundamental principle of international law. Japan’s so-called occupation is mala fide, illegal and unjustifiable; it therefore does not have the legal effect as what may arise from occupation recognized by international law.

The other argument that Japan presents is “long and continuous effective administration”, that is, to obtain sovereignty over the Diaoyu Islands based on acquisition by prescription (prescriptio acquisitive).

“Acquisition by prescription” of territory has been all along an extremely disputable issue in international law. Those against it totally deny the legitimacy of prescription as a way to obtain territory. They are of the view that this is “merely a legal argument serving expansionist countries for occupying others’ territories”. Those for it see prescription as a way to obtain territory, it is defined as “the acquisition of sovereignty over a territory through continuous and undisturbed exercise of sovereignty over it, and during such a period as is necessary to create under the influence of historical development the general conviction that the present condition of things is in conformity with international order.” International judicial practice has never clearly confirmed the status of “prescription” as an independent way to acquire territory. As for the exact time span of the “period as is necessary”, international law has no final verdict to make it 50 years or 100 years.

If we put aside the legitimacy of “acquisition by prescription” and merely examine the key factors, it is clear that both the Chinese central government and the Taiwan local authority have been firm, explicit and consistent on issues concerning China’s sovereignty over the Diaoyu Islands and in opposing Japan’s attempt to steal them. They have launched protests, especially diplomatic protests, against official and government-supported civilian activities, including setting up a lighthouse on the Diaoyu Island by Japanese right-wingers, “nationalizing” the lighthouse by the Japanese government, paying the “rent” for land on the Diaoyu Islands to those so-called non-governmental owners, and submitting a chart specifying the so-called baselines of the territorial sea of the Diaoyu Islands to the United Nations by the Japanese government. Japan can never gain legitimate rights over the Diaoyu Islands through occupation no matter how long it may last.

(3) Agreements between Japan and the United States cannot grant Japan sovereignty over the Diaoyu Islands.

In the wake of World War II, the Cairo Declaration and the Potsdam Proclamation, the outcome of the Anti-fascist victory clearly defined the territory of Japan. According to the Cairo Declaration issued by China, the US and the UK in December 1943, their purpose is that “Japan shall be stripped of all the islands in the Pacific which she has seized or occupied since the beginning of World War I in 1914, and that all the territories Japan has stolen from the Chinese” shall be restored to China. “Japan will also be expelled from all other territories which she has taken by violence and greed”.

The Potsdam Proclamation issued in 1945 reaffirmed that “the terms of the Cairo Declaration shall be carried out and Japanese sovereignty shall be limited to the islands of Honshu, Hokkaido, Kyushu, Shikoku and such minor islands as we determine”. On Jan 29, 1946, the Supreme Commander for the Allied Powers Instruction No 667 explicitly stipulated the range of the Japanese territory, which included the four major islands of Japan (Honshu, Hokkaido, Kyushu, Shikoku) and the approximately 1,000 smaller adjacent islands, including the Tsushima Islands and the Ryukyu Islands north of 30 degrees north latitude. The delimitation of the Japanese territory by the Cairo Declaration and the Potsdam Proclamation is clear-cut. The Diaoyu Islands are not included in the Japanese territory in any way.

On Sept 8, 1951, Japan and the US concluded the San Francisco Peace Treaty in the absence of China and the Soviet Union, two victorious countries in the war against Japan, putting Nansei Shoto south of 29 degrees north latitude (including the Ryukyu Islands and the Daito Islands) under the US trusteeship. The Diaoyu Islands were not mentioned in the treaty, nor by the Japanese government’s later explanations thereof. On Dec 25, 1953, the United States Civil Administration of the Ryukyu Islands issued the Civil Administration Proclamation No 27 on the geographical boundaries of the Ryukyu Islands and defined the areas administered by the US government and the Ryukyu Civil Administration as the islands, islets, atolls, rocks and territorial waters along 24 degrees north latitude and 122 degrees east longitude. This proclamation included the Diaoyu Islands, China’s territory, into their areas of administration. These islands were also included in the areas to be returned to Japan under the Japan-US Okinawa Reversion Agreement signed on June 17, 1971. The Japanese government takes the above-mentioned agreement as the legal ground for its claim of territorial sovereignty over the Diaoyu Islands.

On Dec 30, 1971, the Chinese Foreign Ministry pointed out in its statement that “the incorporation by the United States and Japan of China’s Diaoyu and other islands into the area of reversion under the Okinawa Reversion Agreement is totally illegal. It does not in any way change the territorial sovereignty of the People’s Republic of China over the Diaoyu and other islands”. The US government also stated that returning the administrative authority over these islands gained from Japan to Japan does not in any way undermine relevant sovereign claim. The United States cannot increase the legal right Japan had prior to its handover of the administrative authority over these islands to China, nor can it undermine the right of other claimants because of the return of the administrative authority to Japan. All the conflicting claims over these islands are issues that should be resolved by the parties concerned among themselves. On Sept 11, 1996, US State Department spokesperson Nicholas Burns said further that the US neither recognizes nor supports any country’s sovereign claim over the Diaoyu Islands.

On Sept 1951, the Chinese government issued a statement regarding the San Francisco Peace Treaty signed by the US and Japan without the involvement of the Chinese people and the lawful government of China. It pointed out the illegal nature of the treaty. The “trusteeship” and “reversion” deriving from the treaty included the Diaoyu Islands, thus violating China’s territorial sovereignty and becoming the source of the territorial dispute between China and Japan. The San Francisco Peace Treaty and other relevant documents have no right to cover or determine the ownership of the Chinese territory, and cannot have any legal judgment that extends the sovereignty of Diaoyu Islands to Japan.

The Diaoyu Islands are an inalienable part of China’s territory. The so-called administrative authority the US “got from” and “returned to” Japan is unjustified. Japan’s claim over the sovereignty of the Diaoyu Islands on that basis has no legal ground in international law.


Japan has never given up its attempt to gain sovereignty over the Diaoyu Islands. It first destroyed China’s markings on the islands, then renamed the islands, and built a heliport and other facilities. In recent years, Japan went even further. It abetted what it called “civilian actions” to create a fait accompli of “actual control” of the Diaoyu Islands, followed by government renting and “takeover” actions. All this aim to pave the legal grounds for its occupation of the Diaoyu Islands and gradually win recognition from the international community. However, Japan’s claim to sovereignty over the Diaoyu Islands and its encroachment are illegal in the first place. Therefore, its carefully designed “government actions” have no legal ground and do not constitute the execution of state power. They never had, and will never have, any legal effect.

Article II of the Law of the People’s Republic of China on the Territorial Sea and the Contiguous Zone promulgated in 1992 makes clear that the Diaoyu Islands and other islands are Chinese territory, and reaffirms the legality of China’s ownership of them. In 2009, a Chinese marine surveillance and law enforcement ship was sent to the Diaoyu Islands in repudiation of Japan’s “acquisition by prescription”. This was also a concrete action of China’s exercise of sovereignty over the Diaoyu Islands.

August 25, 2011 at 15:01

When did I say China is heaven and the West is Hell?Rich Chinese want to make business what is wrong with that?Chinese are responsible for crime in Canada,then why aren’t Chinese the top ethnic group in jail?

August 25, 2011 at 01:56

@tst: You meant people are moving away from John Chan’s, Sinodefender’s, Frank’s … heaven? What a shock!

BTW, a number of those people committed a lot of crimes here in Canada.

August 24, 2011 at 04:59

More rich Chinese are moving to live in the US or Western countries such as Canada and Australia than rich Americans/Westerners are moving to live in China (if any – temporary moving to work do not count).

Readers, you make the call.

August 22, 2011 at 22:49

@John Chan: Just to prove your knowledge prowess, can you tell the bloggers here where the natives of America came from? Then we can talk about ownership of the land.

John Chan
August 21, 2011 at 00:26

@Kung Pao:
Only people with small and narrow mind will constantly be suspicious other’s motive as well as undermine others non-stop. There are plenty of people in world working hard for the good of human beings and advancing civilization.

You need to be got educated before putting out pitiful and laughable ignorant comments to reflect your small and narrow mindedness, so that you can be a true patriot of the USA not a zombie of the international neo-con.

Here are some videos to get you started to be a true patriot of the USA, and the real deal of the Fed. Please start with the titles “End of Liberty”, “The Dollar Bubble” and “Debt Slave” at You can always ask for more help if you want to be a true patriot of the USA.

Kung Pao
August 20, 2011 at 06:20

Given his “love and passion” for America; when John Chan suggests how to build a better US, do the opposite way likely we would get a good chance.

Item no. 4 is Chan’s focal point here.

Kung Pao
August 20, 2011 at 02:30

My understanding is to replace the Fed with Mao’s system ! :-) :-)

John Chan
August 19, 2011 at 22:52

I think you don’t know your own history well. The Fed is a privately owned entity which is above all USA jurisdictions, and its biggest shareholder is the British Crown. American does not need to pay interest to use their own money. Many presidents tried to get rid of the Fed, but they all got killed, Lincoln, JFK, etc.

Ron Paul, Peter Schiff, NIA, etc. have been telling American the alternatives to the Fed, but nobody listens.

EU is a highly integrated entity. For the long term peace and prosperity of Asians, China needs to deeply integrate North East Asia like EU. China should have the capacity to respect Japanese culture like all other minorities in China.

August 19, 2011 at 21:08

Get rid of the Fed and replace it with what? Free banking? The gold standard? A different central bank model? Simply suggesting we get rid of the Fed doesn’t answer any problems.

August 19, 2011 at 16:07

How would Japan become an EU like government with China? The wounds are still fresh from The 8 year war of resistance… With Shintaro Ishihara worshiping at the Yasukuni shrine progress is going to get no where…

Oro Invictus
August 19, 2011 at 08:28


I’m fairly certain Bill was using the term sarcastically (thus why it was in quotations) to highlight his view that Japan is too xenophobic, particularly towards those of Chinese origin, to allow widespread immigration. True, if he did mean to infer that those of Chinese descent were somehow inferior that would (of course) be unconscionable, but I can say that the chances he meant to do so are nugatory.

John Chan
August 19, 2011 at 07:43

The solutions for USA to get out its doldrums are:
1. Switch American political system to British parliamentary system, for better or for worse, things get done in a clear direction. Or
2. Make presidency and congress term at 5 years, and all of them to be re-elected at the same time, so the new government can start anew.
3. Make public funding for all election, ban private funding for election.
4. Finally, get rid of the Fed.
So that politicians are elected to server the people and the nation, nobody else.

The only hope for Japan is to form a EU type of relationship with China, free trade and free travel between the nations.

August 19, 2011 at 04:28

@Bill. A less than careful use of the word ” inferior ” race of Chinese is utterly irresponsible.

August 19, 2011 at 00:12

Pach is almost certainly right in the long run, beyond the next 10 years. In the short run, we are more like his Japan description than he realizes. We have a net outflow of immigrants at this time, and we have the big demographic shift mentioned below. We also still have jobs (and factories) going offshore. There is a big risk that the next few years will look a whole lot like Japan.

The wild card in the longer run will be the probable scarcity of key resources which will put a damper on everyones growth, regardless of demographics.

Demographics “Professor Shiller and a few of his graduate students conducted a study to discover a data series that fits closely with the Shiller P/E ratio. The study revealed that demographics heavily determine stock market valuations. It compared the number of 40-year-olds with the number of 20-year-olds through time. If the number of 40-year-olds grows faster than the number of 20-year- olds, valuations rise. If the number of 20-year-old grows faster than the number of 40-year-olds, valuations fall. In statistics jargon, the “r-squared” of this variable, in explaining valuations, was 0.79. That’s very high, meaning the demographic trends are important in determining long-term stock market returns. Over the next several years, the number of 40-year-olds will decline, due to the lower birth rates between the Baby Boomers and the Boomers’ kids. So the Shiller P/E ratio is very likely to fall.”

August 19, 2011 at 00:03

So far, what happened in the US and Japan is basically the same. A real estate bubble burst, next stop: financial crisis and bank bailouts. From surplus to massive public debt. Short term “recovery” – double dip to come.

Now, the differences are Japan’s private sector and the general population still have a high saving rate, the middle class still exists and public debt is held domestically. The manufacturing sector is competitive even with lower-cost China and Korea as neighbors. Japan is less dependent on foreign investors and still runs a current account surplus.

As in all industrialized nations, except for the US, the negative population growth is a problem. Taxes will have to rise and benefits might be cut. The 200%-to-GDP public debt and nuclear disaster are serious issues as well. Younger people are having a harder time then their parents in terms of jobs and wealth. However, comparing all the above indicators to the average US quality of life, the US just seems to be in a bigger mess. Just take a walk down the streets of New York City and Tokyo. Much more visible poverty, crime and anger in NYC, effectively restricting freedom and the pursuit of happiness.

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