By Ichiro Suzuki Philadelphia is reinstating mask mandate on indoor activities as highly contagious Omicron’s Ba.2 subvariant refuses to slow down. While Japan is behind North America and Europe in spreading of the Omicron variant, mask mandate has never been issued officially, either by the health authority or local governments. It doesn’t have to be. People don’t have to be told. Everyone wears a mask, regardless of age, sex, occupation or political affiliation, which appears to have some meaning in the U.S. There is a long, long tradition of wearing a mask in the Japanese society. It has been propagated by seasonal flus in winter and hay fever in early spring. Few people openly show their discomfort in wearing a mask, and it is probably one of the reasons behind low COVID caseloads in Japan as opposed to countries outside of East Asia. The only thing Dr. Omi, who is Japan’s Dr. Faucci, had to say a few months ago was “Make sure you wear a non-woven mask (as opposed to ones made of other materials).” Everything appears to be going well. Here’s a catch, however. People wear a mask without giving much thought to why they do it. In the absence of official mandate, public transportation systems, shops, restaurants and theaters softly ask people to wear one and they do so. On top of where they are requested, people wear a mask without fail to walk a street outside, not only in the heavily congested Shibuya section of Tokyo but also residential sections where there are not many people and even on a rural street where other pedestrians are hardly seen within 100 meters from him or herself. COVID transmission mechanism has been a public knowledge for over two years, and they still wear a mask in perfectly socially-distanced situations where catching the virus is highly improbable. So a lot of people wear a mask, and this is a problem. Japanese people’s adherence to mask showcases their aversion to risks. Being perfectly socially distanced on a rural road, pedestrians wear a mask to reduce the already very, very low probability of catching the virus to as close to anything as zero. This excessive cautiousness has so much in common with other aspects in the Japanese society. Businesses often fail to take appropriate and well calculated risks, thus falling behind aggressive foreign competitors. That’s what happened to Corporate Japan since the 1990s. In financial asset allocation Japanese households are obsessively worried about risks of losing money and hold onto principal-guaranteed deposits that yield 8 bassists points (0.08%) after tax. Cash and deposit account for 54.3% of Japanese households’ financial assets with another 1.4% in bonds, most likely in Japanese government bonds that are the closest asset to principal-guaranteed deposits. Stocks account for only 10.0% with another 4.3% in mutual funds that include bond mutual funds. For American households, in contrast, cash and deposits are only 13.3% of their assets and another 4.2% is in bonds. It is highly likely that municipal bonds account for a large proportion of their bond holdings, due to muni’s relatively higher yield and a preferential tax treatment even if they are not as safe as Treasury securities. Stocks and mutual fund represent 51% for American households. Between Japanese and American households, risk assets and safe assets receive completely reversed allocations. (What is common between the two countries is insurance’s weight: 27.4% for Japan and 29.0% for Americans.) For a long time, shunning risks made sense for Japanese households amid persistent mild deflation. While safe assets yielded nothing, real (inflation-adjusted) value of deposits still rose in an economy where prices fell. Those days, however, are over. Inflation is coming back even to the Japanese economy at long last. It is not 8% that is witnessed in the U.S. Official statistics says inflation in Japan is only 1% at most. A 1% inflation still erodes the value of deposits that yield 0.08%. Erosion in reality is a lot worse than 1% to anyone who lives in the country. There is no shortage of consumer items whose price has registered double-digit hikes. Utility rates are edging up in response to higher energy prices, especially in terms of yen. Even in the public transportation sector, railway companies have announced a fare hike well over 10% next spring after three decades of total stability except adjustments to higher consumption tax rates. Holding onto safe assets have become a losing game definitely, but the majority of people still holds onto them for fear of losing money. Religious love of masks is also a display of people’s inability, or unwillingness at least, to make judgment on their own. In the blazing heat of last two summers, medical authorities warned a higher risk of heatstroke with a mask on. The vast majority of people still kept a mask on wherever they were, and will do so this summer again. Some said that they wanted a specific guideline on when to take it off. Can’t they simply tell themselves when they feel too unbearable to have one on? There are no shortage of people incapable of making such a decision, wanting to be told. This is perhaps a consequence of Japan’s post-war education. They have not been educated to make decisions and speak out what they think. The system valued listening to the authority/ teachers, uncritically and at times subserviently. It produced reasonably well-educated workforce that cranked out highly competitive manufactured goods to be sold in the export markets. Beyond the catch-up stage and in the post-industrial society of the Internet, this attribute that was once a virtue is now a dragging the country down. People can’t think on their own, and Japan’s struggle continues to persist.
About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.