Japan: leading from behind

Abstract

By the end of the 1980s, Japan had caught up in technology, productivity and living standards to the advanced economies of the West. After the end of the 1980s boom, economic growth plummeted after the bubble burst in 1991 to an average rate of around 0.7 per cent for the remainder of the 1990s, rising slightly to 0.9 per cent in the first decade of this century. Those two so-called ‘lost decades’ have frequently been cited as an object lesson in failed economic policies, from central banking to innovation to failure to reform financial institutions. Growth remains low and there are a host of challenges facing Japan in the longer-term because of its hyper-ageing and shrinking population, high government debt and a revolving-door political regime. On top of all this, Japan suffered the triple disaster of a massive earthquake, tsunami and nuclear meltdown in March 2011. Reform and change seems frustratingly slow and not even the triple disaster seems yet to have stimulated the changes that many hoped for. Yet Japan is a very prosperous society. Its people are safer and enjoy greater longevity than the people of most other countries. Its social infrastructure is the envy of the world and unemployment is low. The cities are efficient and clean. It has modernised while maintaining its uniqueness, with Japanese fashion, music and culture (even anime) a major soft-power force in Asia and beyond. Despite what seem to be insurmountable problems, Japan appears to get things done and the idea of policy and institutional failures in the ‘lost decades’ is being re-evaluated. At the same time, aspects of Japanese infrastructure have become less competitive, the under-utilisation of the talent and potential of females in the workforce, a cosseted agricultural sector and uncompetitive service sector all beg reform. Political stalemate hampers national reform and international influence. In this issue of EAFQ, those areas that are in urgent need of change are set out alongside stories about, and in the context of, what Japan has done right and where Japan continues to lead. Show more