Japan’s Economy Fades Fast
Kurt Brouwer February 4th, 2008
Remember back in the 1980s when so many politicians and media pundits decried the fact that Japan was out-competing the U.S. That Japan was going to buy out this whole country and so on. Well, consider again. And, when you hear or read as people predict that China is going to take over or buy us out or something like that, just remember this tale of national futility [emphasis added]:
Japan’s Long, Slow Economic Slide Washington Post, February 3, 2008, Blaine Harden)
“As the United States frets noisily about a recession, Japan is quietly enduring a far more fundamental economic slide, one that seems irreversible.This country, which got rich quick in a postwar miracle of manufacturing and alarmed Americans by buying up baubles such as Rockefeller Center, is steadily slipping backward as a major economic force.
Fifteen years ago, Japan ranked fourth among the world’s countries in gross domestic product per capita. It now ranks 20th. In 1994, its share of the world’s economy peaked at 18 percent; in 2006, the number was below 10 percent.
The government acknowledged last month what has long been obvious to economists and foreign investors, if not to the Japanese public and many politicians. The minister of economic and fiscal policy, Hiroko Ota, told parliament that Japan could no longer be described as a “first-class” economy…
…Japan is still the world’s second-largest economy, as measured by gross size, although the island nation has been surpassed by China in purchasing power. In coming decades, the economies of China and India will dwarf Japan’s, according to many projections. By 2050, Japan’s economy will be about the size of Indonesia’s or Brazil’s, according to a study by PricewaterhouseCoopers.
Japan’s slide relative to other major economies is not a tabloid tale of suddenly squandered riches. It is rather an insidious petering out of growth, productivity and innovation — and of political will to stop the slippage.
The slide has dovetailed with another quietly insidious crisis — the petering out of the population. Japan has the world’s highest proportion of elderly people and the lowest proportion of children.
By 2050, population decline will have reduced economic growth to zero, according to the Japan Center for Economic Research. Seventy percent of the country’s labor force will have disappeared…”
Japan’s economy is stagnant while the U.S. economy keeps moving on, growing, adapting and innovating. The next time someone tries to claim that China is overtaking us economically, just consider that they were probably saying the same thing about Japan 20 years ago (for more on China see Can China Dump the Dollar? and Is China’s Economy Smaller Than We Thought?).
It is important to point out though that a big part of our economic miracle has been due to our climate of welcoming people from other countries as well as our ability to keep our population growing — the old fashioned way. Population growth and economic vitality are two sides of the same coin. Japan has more old folks and fewer young folks than most other countries. Though they are comfortable today, I would not want to bet on things working out well for them.
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Gee, I bet Japan won’t have to invest nearly so much energy and resources in trying to reduce greenhouse gas emissions then, huh? Meanwhile here in the U.S. we’ll still be choking on our very expensive exhaust all the way to the bank. Poor, Japan, can’t grow its population and economy forever!
Sorry, I can’t resist pointing out the sheer folly of this belief in growth everlasting. I’ll take a declining population and the wonderful benefits that go with it (granted there will be a few challenges attached to getting unhooked from our growth Ponzi scheme) anytime. The alternative would be called suicide.
Dave Gardner
Producer/Director
Hooked on Growth: Our Misguided Quest for Prosperity
www.growthbusters.com
Sounds as though you have a particular interest — and perspective — on this issue.
Kurt, I do agree that Japan has some serious economic problems ahead as it grapples with the aging and shrinking population. Their only solution in the long-run may be to promote more immigration into the country. Most developed countries would mirror Japan’s dilemma if they didn’t enjoy a steady stream of immigrants.
Yes Japan has problems and, unfortunately, they will be difficult to solve. I believe last year there were more deaths than births in the country. I think it will be hard to get immigration ramped up enough to make a difference, but I hope I’m wrong.