News / Asia

Q&A: Is Japan Facing an Economic Sunset?

Q&A: Is Japan Facing an Economic Sunset?
Q&A: Is Japan Facing an Economic Sunset?

Japan may be wishing for a more prosperous year in 2011, after suffering a series of setbacks in 2010. Not only did the economy temporarily slip from second to third place, but Japan’s largest automaker, Toyota, struggled through a series of humiliating quality-control and product recalls.  To make matters worse, successive Japanese governments have failed to reverse three decades of economic stagnation.

Jeffrey Kingston, director of Asia Studies at Tokyo's Temple University, discusses Japan’s ongoing economic struggles.

Is the “Land of the Rising Sun” seeing an economic “sunset”?

“The news is pretty grim all around. I think most Japanese think Japan’s best days are behind it. So, I do think that many people here feel that it is the land of “the setting sun.”  One-quarter of the population is now over 65- years-old.  Young people increasingly can’t find fulltime jobs.  Even though the unemployment figure in Japan is only about five percent, that really masks the real extent of the problem. One-third of the entire workforce is working on a part time or temporary basis, which is double what it was 20 years ago.  So, yes, we are now in the third decade of the “lost decade.”  Stock prices remain down 70 percent from their high in 1989.  Land prices remain down two-thirds since their high in 1990. So all around people look at the economic landscape and it’s hard to see much glimmer of hope.”

Do you think the Japanese have accepted this fate?

“Japanese are very stoic, perhaps to a fault.  I think that in corporate Japan there is perhaps undue complacency and a lot of resting on laurels.  If you look at the corporate sector, profits are doing okay.  There are a lot of problems that are stretching social cohesion.  There is a growing disparity in society between the “haves” and the “have-nots,” between the older generation that is doing pretty well and the younger generation that really doesn’t have much hope.

I think Japan does have fundamental strengths.  It does have some of the leading companies of the world, in the high-tech sector, in automobiles.  Another good thing for Japan is that it is well poised to tap into the growth of China and India.  Japan is the largest investor in China, so the growth story of China actually benefits Japan.

But I think overall, people think because of political gridlock, and because of corporate complacency, Japan’s problems are a lot worse than they might be. And, they are taking half-measures that mitigate the problems, but don’t really address the fundamental issues.”

Does Japan have to remake itself economically?

“I think many people feel that they have to ‘fine tune.’  It’s not a massive overhaul, but it is changing certain policies and overhauling the tax structure and perhaps addressing medical care reform.  But I think the structural reforms that Japan needs [to do] are politically difficult.  Economically it is going to be painful for some people.”

What are the foreign policy implications of Japan’s economic downturn?

“Japan has just issued new defense guidelines in which it has identified China as a growing threat in the region.  North Korea is clearly identified as an existing threat.  So, I think Japan’s defense posture is shifting away from a Soviet Union-Russia--northern focus, to redeploying some of its strength to the south and trying to upgrade its navy and air force.  So, the problem for Japan is now that, given the shrinking economy, given the fact that the public debt-to-GDP ratio is 200 percent, there are question marks about just to what extent they can actually contribute to the Japan-U.S. alliance.”  

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