Japan: Economic History and Current Challenges

Introduction

• Japan is known for:
  • Bullet trains
  • Electronic gadgets
  • Anime and manga
  • Vending machines
  • Frequent earthquakes
  • Geishas
  • Mount Fuji
• Post-WWII recovery led to becoming a major global economy.

Economic Growth and Miracle

• Post-WWII, allies helped Japan rebuild economically.
• 1955-1973: Annual growth rate of 9%.
• 1973-1990: Annual growth rate of 4%.
• Dominated industries:
  • Automobiles
  • Semiconductors
  • Entertainment
  • Consumer electronics
• Japan's GDP reached 75% of USA's GDP.
• Predicted to surpass the U.S. economy, but faced an economic crisis instead.

Plaza Accord and Economic Impact

• Early 1980s: US dollar appreciated against Japanese yen.
• Plaza Accord (G5 meeting): Aimed to depreciate the US dollar.
• Yen appreciation hurt Japan's export industry.
• Japanese response:
  • Lowered interest rates.
  • Encouraged borrowing and spending.

Economic Bubble and "Lost Decade"

• Easy borrowing led to real estate and stock market bubbles.
• 1991-2001: Stagnation period referred to as the "Lost Decade."
• Continued slow growth for three decades.

Demographic and Economic Challenges

• Aging population:
  • Highest life expectancy (85 years)
  • 27% over 65 years old
• Decreasing demand for goods and services.
• Low fertility and birth rates.
• Challenges with immigration due to cultural norms.
• Depopulation impacting rural areas.

Structural and Policy Issues

• Kretsu system creates monopoly-like environments.
• Long-term employment model hinders innovation.
• Increased competition from Asian countries.
• Yen carry trade impacts the economy.
• Heavy reliance on energy imports.

Fiscal Policy and Debt

• Japan's debt-to-GDP ratio over 250%.
• Fiscal policies failing to stimulate significant growth.

Current Outlook and Future Prospects

• Some signs of recovery in stock market and employment.
• Stagnation persists without significant growth measures.
• Need for drastic policy changes to end stagnation.

Conclusion

• Japan remains a significant global economy, but challenges persist.
• Essential to implement new policies for long-term growth.