Japan – a small, insignificant island some time soon?

Japan Times columnist Kevin Rafferty knows more about Japan than I am ever likely to. So his new column is well worth a look.

It starts by lamenting the supposed fact that the Indian economy has just overtaken Japan’s in size, as China has also done. Terrible perhaps to slip to four in the world, especially given India’s glacial growth rate. But both India and China have about ten times Japan’s population. So Indians and Chinese are still poor compared to Japanese people. Japan’s recent economic sloth is visible in its slump to 24th in the world for GDP per capita, but that is still well ahead of China at 92 and India at 129. (US in sixth slot, since you ask.)

More tellingly, the Japanese employers’ group thinks that unless something happens, Japan will slump to developing world status, perhaps behind other fast-growth nations such as Brazil, in coming decades.

Why? Low birth rates, ageing population, low savings and investment, and following on from these, stagnant industrial productivity.

How does all this feel from the point of view of an observer in the UK, that troubled set of islands at the other end of the Eurasian land mass?

There is no doubt that Japan is still a world capital for style and technology. But it is also true that it has been badly overtaken by its regional rivals. Sony and Olympus, anyone? Or Samsung and HTC (let alone Apple)? Its society is often badly-run by complacent executives (Fukushima).

Of course, Japan is the world capital of ageing, although a recent social security clampdown did reveal that many of its alleged centenarians were in fact deceased and owed their apparent existence to family fraudsters. The ageing population has in turn meant a reduction in the famously huge level of Japanese savings, as have deflation and low interest rates.

However, it simply cannot happen in Japan or anywhere else that people enter the workforce in their twenties, retire in their fifties and live to 100. If they do, they will spend well under half their life

in the workforce. By contrast my late father got a job at 16 and retired at 62, living to 94. He was exceptionally long-lived but still spent most of his life in work. Japanese people are bound to realise this.

More importantly, what does the rise of China mean for Japan? A sophisticated nation such as Japan ought to be able to make money out of this development, not fall victim to some fallacy that one nation’s rise is another’s fall.

One field in which Japan can show the way is by finding a creative route through the ageing problem. China will be there itself soon enough, thanks in part to the disaster of the one-child policy.

Some further cost deflation, to make the fantastic Tokyo region a magnet for the tourists, investors, students and the like now being kept out by the high cost of Japan, would also be welcome if Japan wants to be more of a world destination.

It is now 20 years since everyone assumed Japan would take over the world economy. As usual, the time to sell is when the novelists, in this case Michael Crichton with Rising Sun, think it time to buy.

It came out in 1992. My own observation of current Japan is that it is doing something cleverer than this. It is turning into the first nation on Earth to adapt to a rich but modest future, getting along with the rest of the world rather than dominating it and thinking about the happiness of its people of all ages. Certainly Fukushima shows that Japan needs massive reform (including its university system, a subject for another time). It is tackling these issues too slowly, as the Olympus scandal shows. But it is doing so from a

position of strength that most nations would envy. Its national levels of angst and internal division are far lower than those seen in the US, and its sense of purpose certainly outdoes the EU. If Japan does shrink on the world stage, I think it will happen in a planned way rather than by accident.

About Martin Ince

UK-based science and higher education journalist, big strengths in universities and university ranking, futures, media strategy and training, Earth and space sciences
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