Japan’s Economic Journey

Introduction

• Known for cultural and technological exports: bullet trains, gadgets, anime, vending machines.
• Experienced severe WWII destruction; rebuilt to become a major economy.

Post-War Economic Boom

• 1955-1973: Economic growth rate of 9% annually.
• 1973-1990: Continued growth at 4% annually.
• Dominated industries: automobiles, semiconductors, entertainment, consumer electronics.
• Reached 75% of USA’s GDP.

Economic Stagnation Begins

• 1980s: US dollar appreciated, making US exports expensive and hurting trade deficit.
• Plaza Accord: G5 agreement to depreciate US dollar against the yen; adversely affected Japanese exports.

Responses to Economic Challenges

• Monetary Policy: Lowering interest rates to combat deflation and encourage spending.
  • Increased loans and investments, primarily in real estate and capital markets.
  • Led to economic bubble formation in stocks and real estate.

Consequences of Bubble Burst

• 1991-2001: Lost Decade; economic stagnation persists.
• Aging Population: 27% over 65; highest life expectancy (85 years).
• Depopulation: Low fertility rates; rural areas decline.

Structural and Policy Issues

• Kiretsu: Monopoly-like collaboration hampers free market, innovation.
• Long-term employment: Deters skill improvement, counterproductive for tech advancements.
• Competition: Asian neighbors becoming competitive in electronics and manufacturing.

Financial Challenges

• Yen Carry Trade: Low interest rates lead to investment in foreign currencies, hurting yen’s value.
• National Debt: Over 250% of GDP, highest globally.
• Energy Dependence: Relies on imports; post-Fukushima nuclear hesitancy.

Fiscal Policy

• Government spending and taxation; increase in debt with limited economic growth.

Future Considerations

• Addressing aging and shrinking population.
• Possible solutions: immigration, tackling high debt ratios, diversifying energy sources.
• Importance of taking drastic measures to end stagnation and promote growth.

Conclusion

• Japan remains an economic force but faces significant structural and demographic challenges.
• Future growth depends on substantial policy changes and adaptation to global economic trends.