Bankrupt planning

In the unlikely event that you were outside of earshot of radio or TV news yesterday, and outside of eyeshot of a newspaper, and outside of web shot of your computer, you may have missed this news. Item: Corporate bankruptcies in Japan are reported to have ballooned 21.2 percent in June, using year-on-year data.

Does this grim news mean that Japan’s economy is going to get worse, and that it’s going to drag down our economy here in the CNMI? Not necessarily.

We have to first consider if an increase in the raw number of bankruptcies means that there was a correspondingly large increase in the amount of money at issue in these affairs. A small company going to the wall isn’t as big of a financial deal as a large company going to the wall.
And, the data reports this: although the number of bankruptcies went up 21.2 percent, the amount of money at issue went up just 1.8 percent.

A 1.8 percent increase over a year sure doesn’t alarm me, at least in and of itself.
If the bankruptcy story is supposed to betray a weakness in the Japanese government’s failed economic policies, then I don’t think it’s really newsworthy. Nobody with any sense had any faith in Japan’s economic policies to begin with.
Japan seems determined to make itself economically obsolete, and I, for one, think they may succeed in doing just that.
The economy is so unproductive that the
returns to capital (i.e. interest rates) are essentially zero, or close to it. That’s an industrial funeral song, at least to my ears. Three years ago I predicted that Japan may enter a depression, and I’m still sticking by that prognostication.

So much for them–what about us? A lousy Japanese economy doesn’t necessarily have to spell doom for the CNMI, if our tourism services are so affordable that we become a budget destination for yen-pinching customers.
In other words, when times are tough, the steak house might go out of business, but the hot dog stand might do very well indeed. In microeconomics, this is known as an “inferior good,” one in which the amount sold actually increases when consumer incomes decrease. To use this to your advantage, you need to have a keen understanding of how to price and market your product, which may or may not play to certain industrial interests here, and which decidedly is not understood by anybody else.

Unless and until Japan goes into a bloody economic death spiral, it will remain the most viable market for our tourism industry. But there’s more to tourism planning that pointing our fingers at Japan’s lousy economy and saying “that’s the reason our hotels seem empty.” Such a philosophy betrays a lack of sophistication, to put things mildly. The real news for our tourism industry isn’t Japan, then; the real news is what’s happening, or not happening, right here at home.