Japan

Campaigning in Putney in 1978, Mrs Thatcher famously took out a pair of scissors and cut a pound note down the middle, telling her audience that the remaining stump represented what was left of the pound in your pocket after four years of Labour and high inflation. David Cameron may soon be able to repeat the stunt — except rather than cutting a note in half he will be able to stick a bit on the end to represent the extra buying power being granted to consumers courtesy of deflation. Inflation on the government’s preferred measure, the Consumer Prices Index (CPI), has fallen to 0.5 per cent. With the price of crude oil slumping and a supermarket price war in full cry, it may well dip below zero in coming months. That is to say: the cost of living is about to fall.

This is a good time to write about a nation’s resilience in the face of calamity. I am referring to the stoic discipline with which the Japanese bore hardship and the death of 15,000 people in March 2011 following a nine-magnitude earthquake, the strongest ever known to have hit Japan. I can remember the TV coverage as if it were yesterday. Very young and very old Japanese formed a long orderly line for disaster supplies. There was no looting whatsoever as there had been in Los Angeles or in Mexico City, no weeping on camera so that the world would send more funds, just plucky resolve (gaman in Japanese) and ganbaru (to endure with pride). As anyone who is familiar with Japan knows, tenacity is highly celebrated both as an individual and a collective trait.

I’m hovering starkers beside a hot spring, or onsen, in a faded resort in southern Japan, while the Japanese grandmother standing naked next to me explains the form for the steaming pool I am about to enter. It’s an open-air mud hot spring, known as a doroyu and quite unusual, even in Japan, where the hyperactive geology means onsen of all kinds spring up — literally — everywhere. I love a scalding bath, so it was perhaps inevitable that I should love onsen from the moment I first dipped a toe in one many years ago, close to Mt Fuji on a day trip from Tokyo. The ritual of washing before bathing, soaking in piping hot waters, the tranquillity, the beautiful settings, the deep sense of relaxation — I simply can’t get enough.

Deflation terrifies economists because once it starts, they have no idea what to do about it. When demand in an economy shrinks, companies cut jobs, and with fewer employed demand shrinks even more. The deflationary spiral is self-reinforcing. Central banks can cut interest rates to near zero and slosh money around like drunken lottery winners, but once hope flickers and dies, there is nothing they can do to persuade anyone to invest in the economy. Deflation took hold in Japan in the early 1990s and despite the government straining every sinew, its economy is still ailing 20 years on. Europe is right, then, to be in a panic. Inflation across the eurozone is just 0.

Will the military ever see any wrong in the execution of 306 soldiers for cowardice and desertion in World War One? I ask only because I have tried and failed to stage a new musical drama on the subject in a military museum. The Imperial War Museum said straight away that it had organised its own programme of events, but the events directors at the National Army Museum and the Royal Artillery Museum in Woolwich initially showed enthusiasm. They invited in the director and I to see what spaces were available. We discussed whether we would pay a hire charge or enter a revenue-sharing agreement where we paid the museum so much for every ticket.

Thank goodness for Shinzo Abe. Back in 2007, I wrote here that ‘over the next two to five years Japan will turn out to be one of the best investments UK-based investors can make’. By the middle of 2012, nearly five years on, that wasn’t looking like much of a prediction. Then prime minister Abe appeared on the scene. Since his election in November the yen has fallen 20 per cent against the dollar and the Japanese stock market has risen not far off 50 per cent. Phew. So what’s so great about Mr Abe? The short answer is that he has promised to do something about the Japanese economy after two decades of slow growth and semi-deflation, and — crucially — everyone believes him. He has what he calls a ‘three arrow’ strategy for change.