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The Value Of Japanese Inefficiency And Make Work

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I read this article in the fantastic media/news analysis website "New Matilda". I think this guy has Japan down pretty well (based on my obversations of living here since 1996), and I am curious to know what HPCers think. I am not saying he gets everything right, but he goes fairly close to summing up how I feel about Japan. Could it be a model for how to hold your country together over decades of slow or no growth?

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Japan

24 Aug 2009

The Value Of Japanese Inefficiency

By Jonathan Gadir

Japan's inefficient domestic economy could show the world how to live without constant 'growth', but this weekend's election will be crucial

Among the many things which impress the visitor to Japan are the very low crime rate and virtual absence of anti-social behaviour in public spaces. These things are connected to a sense of safety that's present in many parts of everyday life.

Hotels don't feel the need to have security measures to stop anyone picking up your room keys from reception. Automatic coin laundromats in the centre of Tokyo are unattended and remain clean and free of vandalism, their coins unpilfered; students go into a Starbucks, leave their $300 electronic dictionaries on a table and go wandering off.

Another aspect of city life in Japan is the incredible density of small — sometimes very small — retail stores, restaurants and bars. And then there is the routine experience of what appears to be over-staffing. One person opens the shop door, another person assists in distributing trays, another takes your money and operates the cash register and yet another deposits your items into a bag and wraps it.

There are old guys everywhere whose job it is to stand on the footpath next to a car park entrance and wave red flags around to "warn" pedestrians when a car is emerging.

These apparently disparate impressions are all actually related.

Japan has what some analysts call a "dual economy" — a hyper efficient export-oriented big business sector including companies like Sony and NEC producing whizz-bang technologies, and a protected, domestic-oriented sector made up of small and medium-sized businesses. For customers of this sector, the standard of service and attention to quality are generally exquisite, but it is described by economists as inefficient because it is low-tech, staff-heavy and high-priced.

Yet this inefficient sector is an important part of the social fabric of everyday life in Japan.

The system of protection for this sector has various arms. There are the Government's "active" employment policies. For example, the Government subsidises small and medium-sized businesses to keep and hire staff. It also spends enormous sums on construction projects (including projects like the five-star subway lines in the city of Kobe which nobody uses) and purchases the crops of small farmers at way above the market price.

As for employment, the Government's preference has been to keep people on the job instead of collecting welfare payments. Indeed, the dole has strict eligibility requirements, benefits are low and their duration short. It is also difficult for people to move jobs — or as economists would say: labour market flexibility is low.

"Unemployment inside companies" is a peculiarly Japanese phenomenon as staff are often kept on even if they are not doing anything.

This way of doing things, until recently, has worked.

It has protected and promoted inefficiency as economists think of it, yes. But whether something is inefficient or not depends on what you think its function is. Is it to make money for shareholders — or to serve other social ends such as minimising economic inequality and preserving social cohesion?

In recent years, however, the system of protections has come under pressure. How can the spending be kept up if the efficient exporting sector isn't able to bring in the money it once did? What if the money is not there to be redistributed to all those job subsidies, construction projects, shopkeepers and farmers?

In the early part of this decade former prime minister Junichiro Koizumi tried to push through free market reforms and cut back the spending but these efforts were only slightly successful. Under Japan's political system, the executive simply was not able to impose its will on local politicians and stop them from doing what comes naturally — generating "inefficient" projects and subsidies for their constituents.

In Japan, relatively few politicians have been captured by neoliberal values — perhaps because there is very broad acceptance of the value of economic equality and social harmony. This co-exists with a resilient cultural heritage of hierarchical "groupiness". Schools, universities, neighbourhoods and workplaces are permeated with personal relationships of mutual obligation (usually of a rather unequal mentor-apprentice type). Within these various groups everyone has their place on the junior-senior scale and a stake in the social order. Most Japanese are quite aware of this distinctive feature of their society, and whatever frustrations they may have with it, the US-style neoliberal society is not an attractive option to most.

Survey research reveals the features of their social system most valued by Japanese people are: "maintaining employment", "personal relations at the community level" and "protection of small and medium enterprises and the self-employed".

This means that while it's possible to view all that inefficient public spending as "pork barrelling", another way to interpret it is as protection and preservation of a remarkable level of social harmony.

Japan has chosen, consciously or unconsciously, to make a trade-off at the expense of maximising GDP growth, higher shareholder returns and career-choice for individuals in favour of social harmony. And, indeed, why not? To see the benefits, compare the carefree experience of walking through the centre of Tokyo late on a Saturday night with a similar walk through Sydney, Melbourne, Brisbane or Perth, with their crime, aggression and social dysfunction.

But the social model is looking increasingly shaky. Income inequality in Japan has risen from well below the OECD average to just above the average in the last two decades. Meanwhile, Japan's crime rate, while still low compared to other developed nations, has risen dramatically.

Paradoxically under tougher economic conditions, the commitment from successive Japanese governments to protecting jobs has played a part in undermining the very economic equality it was supposed to protect. In the last decade, in order to avoid onerous legal obligations which make shedding regular staff difficult, firms have stopped hiring or hired only temps on much lower pay-rates. There has been an explosion in the proportion of temp and contract workers who can be fired at will and do not benefit from any of the job security and the system of mutual obligation enjoyed by regular staff. Contract workers now account for over one-third of the workforce.

Strict eligibility criteria for welfare benefits have meant an unprecedented number of people with these insecure and low-paying jobs have fallen into poverty. One can see them in Tokyo — mostly young — sleeping in 24-hour internet cafes because rent is unaffordable.

Japan is at a turning point. The ruling LDP has failed to address any of the country's fundamental problems. After 50 years of almost unbroken LDP rule, the Japanese finally seem ready to take a punt on the opposition, perhaps more because of the many scandals that have plagued the LDP rather than a deep belief in the main opposition party, the Democratic Party of Japan (DPJ). Can a new government re-design the system of social protections to properly maintain the values of economic equality and social harmony that Japanese rightly cherish but which are now threatened?

There is more at stake here than the well-being of 127 million people in northern Asia. Japan's social model is valuable for other reasons. A society which has already shown itself willing and able to make trade-offs in favour of its economically inefficient social values offers the intriguing possibility they might also be able to make similar choices in response to the worsening global environmental crisis.

There is another crucial facet to this situation. Part of the package of Japan's commitment to social harmony is stubborn resistance to immigration, one of the key drivers of economic growth in other developed countries such as Australia and the US. There is therefore no quick fix to Japan's widely discussed ageing population and near zero population growth. If they maintain their resistance to immigration, the Japanese will have to break new economic policy ground.

Japan seems to be uniquely positioned to show how such ideas as a no-growth or steady-state economy could work and redefine for the world what a healthy economy is.

If it is able to hold on to its social structures and values, perhaps it can show the world how we can have a high material standard of living with no population growth and even low (or no) GDP growth.

That's why the world, as well as Japan, has a lot to gain if Japan succeeds in protecting its "inefficiency" and its unique heritage of social harmony.

http://newmatilda.com/2009/08/24/value- ... efficiency

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The writer (J Gadir) is on to it.

Individual rights are often subordinated to the greater need of the family or local community. At the same time, the government provides far less of a "safety net" in Japan than in many Western countries. It's often a case of "the state is not going to look after you, but you have to look after your family, community and your elderly parents."

Societal harmony is an important intangible social asset. How is a society "wealthy" when one can not walk the streets at night?

The old people are the "police" of Japanese society. They are everywhere. They are on the street, day and night. They know the rules. They know their duty. They watch. They listen. They know what is right and what is wrong. They have their mobile phones, and the local bobby is only a few minutes' away by bicycle.

There is a lot of freedom in Japan, but society really lets you know right from kindergarten that you have a whole pile of responsibilities and obligations, and God help you if you fail to live up to them.

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It shows the power of a nation's culture.

We could no more foster these Japanese traits than we could embrace the elusive cafe culture that the half wits wittered on about when licensing laws were changed.

I do think these things are broken down relatively quickly though. The social engineers took just fifty years to demolish British culture.

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The writer (J Gadir) is on to it.

Individual rights are often subordinated to the greater need of the family or local community. At the same time, the government provides far less of a "safety net" in Japan than in many Western countries. It's often a case of "the state is not going to look after you, but you have to look after your family, community and your elderly parents."

Societal harmony is an important intangible social asset. How is a society "wealthy" when one can not walk the streets at night?

The old people are the "police" of Japanese society. They are everywhere. They are on the street, day and night. They know the rules. They know their duty. They watch. They listen. They know what is right and what is wrong. They have their mobile phones, and the local bobby is only a few minutes' away by bicycle.

There is a lot of freedom in Japan, but society really lets you know right from kindergarten that you have a whole pile of responsibilities and obligations, and God help you if you fail to live up to them.

An accurate summary I feel. But what about the role of the following in maintaining this society:

"There is another crucial facet to this situation. Part of the package of Japan's commitment to social harmony is stubborn resistance to immigration, one of the key drivers of economic growth in other developed countries such as Australia and the US."

If this is important, surely the stable door is already opened and the horse has bolted in the UK?

Edited by Tokyo_Expat

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As for employment, the Government's preference has been to keep people on the job instead of collecting welfare payments. Indeed, the dole has strict eligibility requirements, benefits are low and their duration short. It is also difficult for people to move jobs — or as economists would say: labour market flexibility is low.

"Unemployment inside companies" is a peculiarly Japanese phenomenon as staff are often kept on even if they are not doing anything.

This way of doing things, until recently, has worked.

We do the same in Britain. It's called the Civil Service.

That said, I am sure in Japan these jobs are effectively for the retired and they receive low wages. In the UK they get annual pay rises and gold plated pensions - so really a transition from no work to no work without missing a pay packet.

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It shows the power of a nation's culture.

We could no more foster these Japanese traits than we could embrace the elusive cafe culture that the half wits wittered on about when licensing laws were changed.

I do think these things are broken down relatively quickly though. The social engineers took just fifty years to demolish British culture.

I think we could create a cafe culture, but it would require forcing pubs and bars to become cafes, somewhere you can eat, sit and talk instead of stand in a crush with music blasting out making it very difficult to do anything but drink and oggle.

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An accurate summary I feel. But what about the role of the following in maintaining this society:

"There is another crucial facet to this situation. Part of the package of Japan's commitment to social harmony is stubborn resistance to immigration, one of the key drivers of economic growth in other developed countries such as Australia and the US."

If this is important, surely the stable door is already opened and the horse has bolted in the UK?

Ah, well. That's the tricky one. Immigration.

I think what is going to happen is that Japan will encourage its elderly boomers to work until the end, out a sense of duty and responsibility. Japanese know that their society is far too fragile to cope with a huge influx of guest workers. And if they do let some in, it will be using the guarantor system, whereby each immigrant worker has a personal guarantor (usually their employer) who bears total liability for them. If your boy overstays his visa, then we come after you!

The Japanese will not sacrifice their culture for the sake of GDP growth. Some things are not for sale. How would you feel if you walked into a shop in your neighbourhood that you had gone too all your life, and you saw that it was full of strangers, speaking a language that you didn't understand. Can you imagine how betrayed by your government you would feel?

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The UK had Thatcher, Japan did not. 30 years ago the UK embarked upon an era where the cost of everything became all important ,it's value less so. In the UK, financial return on investment is all that matters and the result is the product of the law of diminishing returns we now have. When you have a system that survives on consumerism and at the same time that system dismantles the means whereby those same consumers have the wherewithall to consume then the only possible outcome is an indebted and consumed out population and a society that has lost any sense of purpose.

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Ah, well. That's the tricky one. Immigration.

I think what is going to happen is that Japan will encourage its elderly boomers to work until the end, out a sense of duty and responsibility. Japanese know that their society is far too fragile to cope with a huge influx of guest workers. And if they do let some in, it will be using the guarantor system, whereby each immigrant worker has a personal guarantor (usually their employer) who bears total liability for them. If your boy overstays his visa, then we come after you!

The Japanese will not sacrifice their culture for the sake of GDP growth. Some things are not for sale. How would you feel if you walked into a shop in your neighbourhood that you had gone too all your life, and you saw that it was full of strangers, speaking a language that you didn't understand. Can you imagine how betrayed by your government you would feel?

Interesting points. Wonder if the predicted defeat of the LDP on Sunday will mark a significant change in this policy?

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The UK had Thatcher, Japan did not. 30 years ago the UK embarked upon an era where the cost of everything became all important ,it's value less so. In the UK, financial return on investment is all that matters and the result is the product of the law of diminishing returns we now have. When you have a system that survives on consumerism and at the same time that system dismantles the means whereby those same consumers have the wherewithall to consume then the only possible outcome is an indebted and consumed out population and a society that has lost any sense of purpose.

On the whole, yes, but mass immigration to the UK (without the agreement of the UK population) had already started way before Thatcher. Of course, mass immigration plus the destruction of traditional jobs, communities and identities has been an absolute nightmare, and the results are now clear for all to see. The UK is in a terrible social, cultural and economic malaise, and where this is heading nobody knows.

The Japs, otoh, can seem stubborn, xenophobic and retarded in western neo-liberal eyes, but at least theuy've identified what they think is worth preserving and are prepared to make sacrifices for it.

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The thing missing from this analysis is the demographic bombshell. The birth rate has collapsed and without immigration, Japan is dying. Who would want to have kids if you know they'll face the prospect of intergenerational mortgages, temporary jobs and harsh working conditions?

I have a hunch that their credit bust and response (QE, ZIRP, fiscal stimuli) has created the economic conditions that discourage baby-making.

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The UK had Thatcher, Japan did not. 30 years ago the UK embarked upon an era where the cost of everything became all important ,it's value less so. In the UK, financial return on investment is all that matters and the result is the product of the law of diminishing returns we now have. When you have a system that survives on consumerism and at the same time that system dismantles the means whereby those same consumers have the wherewithall to consume then the only possible outcome is an indebted and consumed out population and a society that has lost any sense of purpose.

Entire post is gold

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The writer (J Gadir) is on to it.

Individual rights are often subordinated to the greater need of the family or local community.

At the same time, the government provides far less of a "safety net" in Japan than in many Western countries. It's often a case of "the state is not going to look after you, but you have to look after your family, community and your elderly parents."

Societal harmony is an important intangible social asset. How is a society "wealthy" when one can not walk the streets at night?

The old people are the "police" of Japanese society. They are everywhere. They are on the street, day and night. They know the rules. They know their duty. They watch. They listen. They know what is right and what is wrong. They have their mobile phones, and the local bobby is only a few minutes' away by bicycle.

There is a lot of freedom in Japan, but society really lets you know right from kindergarten that you have a whole pile of responsibilities and obligations, and God help you if you fail to live up to them.

The old people are not the police in Japan (the police are!) but they are respected as educators by example. In a seniority-based promotion hierarchy, old people are assumed to have wisdom in Japan. Here in the UK they are assumed to be over the hill. The truth is probably somewhere in between.

Perhaps you'd have illustrated your point better by mentioning that approximately 22,000 businesses in Japan have existed for more than 100 years. That tells an outsider a lot about how Japanese corporate culture works. The equuivalent number in the UK? Dunno. Are there any UK businesses that have existed for more than 100 years?

There is little freedom in Japan in the conventional western sense - if you have that impression it is because you are a westerner. As a native Japanese citizen you have any number of social and economic obligations which you would not fall under within the UK, and not be subject to (for the most part) as a westerner - these have a bearing on your time and freedom. Do you know what the Japanese word for 'privacy' is? Ask a Japanese person and they'll tell you - you'll be surprised.

We do the same in Britain. It's called the Civil Service.

That said, I am sure in Japan these jobs are effectively for the retired and they receive low wages. In the UK they get annual pay rises and gold plated pensions - so really a transition from no work to no work without missing a pay packet.

You don't know anyone and have never worked with anyone in the civil service, have you Mike?

Most of the people I've worked with in central government are remarkably asutute and could probably get better salaries in the private sector. Not all of them - but a good percentage of them. That's why its difficult to get a job in the civil service - because most people are not good enough. I work in the private sector but I have worked with some central government departments. You may well be correct about local government though.

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The thing missing from this analysis is the demographic bombshell. The birth rate has collapsed and without immigration, Japan is dying. Who would want to have kids if you know they'll face the prospect of intergenerational mortgages, temporary jobs and harsh working conditions?

I have a hunch that their credit bust and response (QE, ZIRP, fiscal stimuli) has created the economic conditions that discourage baby-making.

I think that Japan will auto-correct in about 20 years' time.

Today, a 3-bedroom (110 square meter) detached house within 45 minutes' commute from Tokyo costs about 80 million yen. (Boy, that's a broad generalization....!)

Average salaries are about 6 million yen, and it was announced today on NHK News that unemployment in Japan has reached an all-time high of 5.7%. (The unchi is hitting the senpuuki). So, average house is roughly 10-12 times salary.

How can Taro Tanaka afford to have any children?

What we are going to see is a fall in the Japanese population from 127 million down to 90 million or so, accompanied by a decline in house prices (but no immigration). What this will mean is that 20 years or so from now, after house prices normalize, there will be a baby boom in Japan which will set the stage for their long-awaited recovery, after some 40 years of stagnation. (The lost generations)

Don't write the Japanese off yet, but it will take another couple of decades before they bounce back.

All natural populations self-regulate. It's the natural way, and Japan is no exception.

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An accurate summary I feel. But what about the role of the following in maintaining this society:

"There is another crucial facet to this situation. Part of the package of Japan's commitment to social harmony is stubborn resistance to immigration, one of the key drivers of economic growth in other developed countries such as Australia and the US."

If this is important, surely the stable door is already opened and the horse has bolted in the UK?

It always makes me smile when westerners living in Japan point to systemic xenophobia in Japan.

Japan is doing immigration on its own social and cultural terms. If you want to stay in Japan long enough and learn the language, you can become an æ°¸ä½æ¨© - the equivalent of the UK 'indefinite leave to stay'. However if you want to do this, you will need to be a fluent Japanese speaker and show economic autonomy - these are also requirements for the UK now - in fact there are tests now.

The key issue is that the Japanese language is hard and Japan stubbornly refuses to turn into Singapore or Cambodia where English is spoken on the street in the larger cities. Language is a convenient barrier to entry for Japan though, not because Japan hates foreigners but because Japanese people see being Japanese as implicitly requiring a social contract.

Putting your rubbish out on the right day, helping the neighbourhood by trimming back hedges and picking up litter on shared ground and paying your TV license to the NHK man are all part of the implicit contract of 'being Japanese'. Most foreigners are not comfortable or able to fulfil these obligations.

Which is why there are not many foreginers in Japan long term. No xenophobia involved.

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The old people are not the police in Japan (the police are!) but they are respected as educators by example. In a seniority-based promotion hierarchy, old people are assumed to have wisdom in Japan. Here in the UK they are assumed to be over the hill. The truth is probably somewhere in between.

You are right, hence the " " around "Police."

There is little freedom in Japan in the conventional western sense - if you have that impression it is because you are a westerner. As a native Japanese citizen you have any number of social and economic obligations which you would not fall under within the UK, and not be subject to (for the most part) as a westerner - these have a bearing on your time and freedom. Do you know what the Japanese word for 'privacy' is? Ask a Japanese person and they'll tell you - you'll be surprised.

プライãƒã‚·ãƒ¼ is the Japanese term for the Western concept of "privacy". (Pronounced "puraibashii") This would be in the context of "I am living in a fish-bowl of an apartment. I have no privacy."

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The old people are not the police in Japan (the police are!) but they are respected as educators by example. In a seniority-based promotion hierarchy, old people are assumed to have wisdom in Japan. Here in the UK they are assumed to be over the hill. The truth is probably somewhere in between.

You are right, hence the " " around "Police."

There is little freedom in Japan in the conventional western sense - if you have that impression it is because you are a westerner. As a native Japanese citizen you have any number of social and economic obligations which you would not fall under within the UK, and not be subject to (for the most part) as a westerner - these have a bearing on your time and freedom. Do you know what the Japanese word for 'privacy' is? Ask a Japanese person and they'll tell you - you'll be surprised.

プライãƒã‚·ãƒ¼ is the Japanese term for the Western concept of "privacy". (Pronounced "puraibashii") This would be in the context of "I am living in a fish-bowl of an apartment. I have no privacy."

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The old people are not the police in Japan (the police are!) but they are respected as educators by example. In a seniority-based promotion hierarchy, old people are assumed to have wisdom in Japan. Here in the UK they are assumed to be over the hill. The truth is probably somewhere in between.

You are right, hence the " " around "Police."

There is little freedom in Japan in the conventional western sense - if you have that impression it is because you are a westerner. As a native Japanese citizen you have any number of social and economic obligations which you would not fall under within the UK, and not be subject to (for the most part) as a westerner - these have a bearing on your time and freedom. Do you know what the Japanese word for 'privacy' is? Ask a Japanese person and they'll tell you - you'll be surprised.

プライãƒã‚·ãƒ¼ is the Japanese term for the Western concept of "privacy". (Pronounced "puraibashii") This would be in the context of "I am living in a fish-bowl of an apartment. I have no privacy."

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The old people are the "police" of Japanese society. They are everywhere. They are on the street, day and night. They know the rules. They know their duty. They watch. They listen. They know what is right and what is wrong. They have their mobile phones, and the local bobby is only a few minutes' away by bicycle.

I thought we'd gone for the CCTV route to achieve this aim?

Also the article fails to acknowledge that this inefficiency was cross subsidised by exports to the rest of the world. Now the exports have fallen off a cliff can this really be maintained?

Time will tell, but for me this model seems extremely unsustainable unless everyone works for less and we let deflation do it's job of reducing prices and getting rid of the leverage.

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Interesting points. Wonder if the predicted defeat of the LDP on Sunday will mark a significant change in this policy?

No it won't

The politicians don't run domestic policy in Japan, the bureaucrats do. The US runs their foreign policy. Politicians just fiddle at the edges. The DPJ is a mix of ex-LDP who couldn't get cabinet jobs, ex-socialists and various moaning wingnuts. DPJ policy changes as the wind blows and they will not get anything done, just argue with each other. Meet the new boss, same as the old boss.

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we cant have a society looking after and treasuring its elderly. It would set a precedent.

Nukem I say.

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No it won't

The politicians don't run domestic policy in Japan, the bureaucrats do. The US runs their foreign policy. Politicians just fiddle at the edges. The DPJ is a mix of ex-LDP who couldn't get cabinet jobs, ex-socialists and various moaning wingnuts. DPJ policy changes as the wind blows and they will not get anything done, just argue with each other. Meet the new boss, same as the old boss.

Yes I agree with all of that. It is a rare thing that a politician is willing to fall on their sword for a policy initiative. Koizumi threatened to resign unless post office privatization reform was instigated (I don't remember the details) - imagine a UK politician doing that! In the UK they have to find gay porn rentals on the expenses bill before a poltician is removed from office.

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Japanese unemployment at record 5.7% for July...Bloomberg breaking.

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