If John Krasinski and Jared Diamond had a child, it would be Peter Zeihan.  

A native of Iowa, Mr. Zeihan began his career at the Austin based Stratfor before striking out on his own in 2012 to “specialise in customised executive briefings for his clients” according to the footer blurb from his website, Zeihan on Politics.

Expanding from client briefings, Mr. Zeihan and his team have authored three books on geopolitics that argue the end of the American led global security apparatus; Accidental Superpower (2014), The Absent Superpower: The Shale Revolution and a World Without America (2017) and Disunited Nations: The Scramble for Power in an Ungoverned World (2020).

All books are very informative and well reviewed but it was Disunited Nations that caught our eye, specifically the chapter dedicated to why Japan will be Asia’s future regional superpower in lieu of the United States.  

The book maps out what the geopolitical landscape will look like once “The Order”, as Mr. Zeihan refers to it, of the US maintained global security hegemony wanes due to the limitations and shrinking appeal of globalisation that developed in the decades after World War II. 

Disunited Nations outlines which countries are best positioned to pick up the mantle regionally where the Americans step away from; Argentina in South America, France and Turkey in Europe and Japan in Asia. 

Why does this matter to residential real estate?  Prices and rents are the result of many macroeconomic factors spanning from wage levels, household spending, interest rates, inflation and demographics; all themes that Mr. Zeihan covers extensively within his rationale why Japan is best positioned to be Asia’s next dominant superpower.

Why does this matter to you?  Simply put, your buyer or renter is very likely going to be Japanese.  Disunited Nations outlines an interpretation of where Japan is headed that defines the forest through the trees in an easy to understand way found nowhere else.  

Most economic commentary on Japan tends to lean negative due to the nation’s terminal demography and sky high debt-to-GDP ratio, not to mention persistent stagflation. 

However, according to Mr. Zeihan, as the US turns further insular, Japan has the ingredients necessary to take the reins as an Asian security and economic superpower; a transition of which will be directly felt by the Japanese consumer.

In other words, your buyers and renters.

Below are some excerpts from the Japan chapter that hopefully will compel you to read the whole book.  

Regardless of whether you agree or disagree with Mr. Zeihan, you’ll certainly be better off understanding his geopolitical world views.

Japan excerpts from Disunited Nations

There is good reason Japan had to be nuked to be forced into surrender.  The Japanese knew full well that military defeat meant the end of Japan as a country.  There could be no middle ground between a Greater Japan that was industrialised and the fractured nonentity of the Shogunates.

But the Americans surprised them, in large part because the Americans needed their defeated Pacific foe. 

The term “miracle” to describe Japan’s postwar boom is a misnomer.  It was as highly planned, tightly regulated, and deliberate as every step of Japan’s evolution since 1852, and the hoped-for outcome was the fruition of Japan’s considerable domestic ambitions backed by the full force of the American economic, political, and military system. 

In a single generation, Japan recovered from the destruction and despair of its World War II defeat to become the second-largest economy in the world.

Japan has the indubitable advantage of having gotten (very) rich before becoming old. As the country with the highest proportion of retirees in its population, Japan has the incentive for finding better and more cost-effective methods of caring for the elderly, but it also has the financial muscle and high-tech economy to do so.

Japan is approaching the worker shortage of the twenty-first century in the same way it approached its higher cost structures in the late nineteenth and early twentieth—by being more advanced. 

Japan is the most technologically advanced society humanity has ever produced, and it continues to push the limits of what humans consider possible.  You name it—automotive engineering, automation, mass electrification, battery capacity, supercomputers—Japan is at the leading edge of all of them, not simply in development but also application. 

The demographic challenge has become tangled up with Japan’s more traditional obstacle: materials access.  Japan is just as resource-poor in 2020 as it was in 1852. In fact, in many ways, its exposure has gotten worse. As the list of dominant technologies expanded from rail to automotive to semiconductors, the list of required inputs has expanded from oil and coal and iron ore and copper to bauxite and uranium and silicon and lithium. Name the input—Japan doesn’t have any of them.

Demographic ageing means Japanese labour is expensive (and getting more so). Japanese industrial inputs are huge and varied (and getting more so). Japan’s position at the far edge of Asia gives it some of the longest, most vulnerable supply lines in the world. Importing ever-larger volumes of ever-more diverse materials from ever-longer distances for processing and manufacturing by an ever shrinking and ageing workforce is a recipe for failure.

So Japan is changing its industrial model.

Japan has become the master of desourcing: shifting production to another country to serve that specific market (aka “build where you sell”).  Doing so does far more than place Japanese products on the right side of currency, military, political, and tariff barriers. 

It prepositions Japanese industry within the handful of countries with stable-to-growing demographics (and thus stable-to-growing markets).  It gives the host country a vested interest in protecting industrial and energy input supply chains that indirectly benefit Japan. 

It generates scads of hard currency that can come back home to mitigate the loss of income tax from a shrinking worker base.  And in the long run, it buys the goodwill of the host country, which Tokyo hopes to cash in on other issues.

In an environment in which global energy shipments become compromised because of destabilisation elsewhere in Eurasia, there would not be enough industrial inputs—first and foremost oil—available for everyone.  

Southeast Asia consumes about as much as it produces, so it is out of the game.  The Europeans retain a relevant mix of both naval reach and political links to their former colonies in Africa to secure those supplies.

That leaves the Persian Gulf…as the only significant remaining source.  

Japan…has four aircraft carrier battle groups that can make it that far.  The point is less that the Japanese would use carriers for convoy duty, and more that the Japanese could scrub Chinese naval power out of existence from Hormuz to Malacca with a minimum of fuss. 

In a shooting war, the only tankers that reach East Asia are the ones the Japanese let through. Even worse (for the Chinese), the Japanese only have one-third of China’s oil import requirements, and Japan will have the option of sourcing fuels from the Western Hemisphere to boot.

Japan doesn’t only build but also designs its own naval vessels and has since the 1880s.  Japan’s navy is easily the second-most powerful expeditionary force in the world…the entire Japanese fleet is blue-water capable. 

Few countries on Earth have as positive a relationship with all sides of the Persian Gulf as Japan does.  Japan’s status as one of the very few countries of the world that can bring naval power to bear in the Persian Gulf will induce the region’s quarrelling countries to take any requests from Tokyo very seriously.  

It is less gunboat diplomacy and more a client who leads a coalition who pays in cash and guards their own deliveries.

But the Persian Gulf is still the Persian Gulf.  Regardless of how China’s fall and Japan’s rise manifest, the Japanese still must ensure sanctity of supply, both for themselves as well as for anyone they wish to be in their orbit.  For the states of the Persian Gulf, their end markets will be wholly at the discretion of the only naval power that can reach the Gulf, ensure product delivery, and care enough to do so regularly.

That will no longer be the United States.  It will be Japan. 

One way or another, the politics of the Persian Gulf are about to be a Japanese problem.

Buy Disunited Nations: The Scramble for Power in an Ungoverned World wherever books are sold.