The Economy of Japan and Shinzo Abe struggle to enhance the Japanese economy through new measures.
Widley Marcelin
Supply Chain Business Analyst | Economist | Self- Published Author of 6
Shinzo Abe is the current prime minister in Japan. Japan was once the greatest economy in Asia. Since 2013 they were knocked down by their peers and neighbors from China. Since then they still struggle to become one more time the best economy in the Asian region. Anyway, they do have three main competitors in the region, those competitors are basically China and South Korea, but some countries such as Hong Kong and Singapore might become very powerful in the future.
Through their history, the Japanese have done a lot of success. Their successes are not from yesterday. Since the 15th century, they started having a flourishing trade relationship with the European. Their different achievements are not fruits of luck or hazardous. Their economic evolution has traveled throughout centuries. So, we can divide the economic growth into different phases or periods. Their early flourishing period can also be divided into 3 specific periods. The periods chosen are Nanban trade period, Edo period, Meiji Period.
So, we can understand that economic measures and advancement in Japan are registered in a long Saga of efforts brought by governments or any form of government existed in Japan. This helps us see the importance of Shinzo Abe economic measures. Traditionally, the Japanese have shown a very rigorous implication in chasing excellent numbers. So, the Abenomics (economic measures from the Abe Shinzo government) has the mission to keep this tradition and even surpass in less time. But the conjectures and challenges are a lot more different from the previous. So let’s try to deepen our understanding of those challenges. We’ll not forget the bubble collapse that hit the Japanese economy which was known as the lost decade.
What are the different challenges of the Japanese economy?
Just before showcasing the different challenges let’s give a quick reminder of the Abenomics content. Yuwa Hedrick-Wong wrote for Forbes: “Abenomics consists of three arrows: monetary policy, fiscal policy, and structural reform”.
With that being said let’s get to the points for this paragraph. In my opinion and based on Yuwa Hedrick-Wong (point of view) the different challenges are the following:
Mountain debts.
Long-live retirees.
The population is aging and shrinking. So it will have a negative impact on the market, where the domestic consumer market will be reduced. This brings some companies to rethink their strategies.
Relocation of some Japanese companies (outside of Japan).It decreases the possibility of an increase in Japanese wages. And has a negative impact on the GDP, even though it affects positively the GNP (Gross national product) where it’s 3% bigger than the GDP.
A stagnant economy, for instance: “The IMF estimated that Japan’s GDP growth slowed to 0.9% last year from 1.9% in 2017”.
How did they face their previous challenges in the past?
As I mentioned it before, current challenges are sometimes completely different from those in early periods. Conjectures were different. Nonetheless, we can’t really have a scale of comparison for challenges. So let’s try to look at them tightly. One of the biggest challenges was how to drive a “recovery from world war 2”. Their occupation by the United States could be considered as a challenging situation but it helped them in some manner, it was a different type of occupation. Some decades later Japan was shocked by the oil crisis in mid-1970 as they were dependent on imported petroleum at this time. As usual, they’ve found alternatives to this crisis by specifically reducing their dependency on petroleum. They’ve invested in a new alternative source of industrial energy. And advances were brought in microcircuitry and semiconductors in the late 1970s and 1980s. We’ll not eternize on the different earthquakes that stroke Japan throughout the years, those are real and even bigger challenges that they’ve also overcome.
Is the Japanese economy need to be strengthened?
For those types of economy, progress is always needed. However the Abenomics positive impacts on the economy. During Shinzo era, they’ve faced some of the previous challenges enumerated before and more. For instance, the third arrow which is structural reform has a lot of impact such as: rising in women’s labor-force participation, a rise of the prime age labor force participation. So by focusing on those aged between 24 and 54 years old, it reduces the longtime retirement, and also the number of lifetime workers, which will give the chance to younger to get more jobs.
One of the most interesting impacts of Abenomics is seen in the increase in wages. Some legislation related to wages increase have been adopted in 2018, if this works it will be impacting for households who will tend to spend more. As their spent increase the domestic consumer market will be more attractive for Japanese companies, they won’t need to relocate outside of Japan. But one of the things is that it requires a little bit of patience as the different measures are working slowing for the success of the Abenomics. Japanese population understands that. So, in 2018 they have reelected Shinzo Abe for another term. The Japanese economy is still in strengthening the process.
Numbers related to the Japanese economy
Based on Hedrick-Wong article on the Japanese economy in 2019, we’ll present the following numbers of the Japanese economy:
- The Benchmark Topix stock index slid almost 8% in 2018
- Annual GDP growth averaging 1.2% since 2012
- Japanese Gross National Product (GNP) is about 3% bigger than the Gross Domestic Product (GDP) year after year since the global financial crisis
- The number of contract workers nearly doubled to 20 million in 2017 from 11 million in 1999
- Women’s labor force participation increased to 51% in 2017
- Prime age women’s labor force participation was 76% in 2016
- Japan has high IT literacy rate ( No specific number)
- Fast and extensive internet connectivity ( No specific number)
- High mobile penetration (No specific number)
How well the Japanese economy is doing internationally, regionally and globally.
From what we’ve said it would be easier to say that the Japanese economy is doing very well. But as a very high competitive country and economy they still have work to do as China is their main challenger in the region, and Korea is also a very competitive and challenging country. Globally the United States is also one of their biggest challenges. But the Japanese still have a chance to overcome and surpass their two main challengers (the United States and China) as those countries are currently faced to each other in a trade war.
And everyone knows that trade war is never good for any of those countries concerned. Tariffs or Quotas or any other measures used are just actions that might bring reactions that will basically weaken the two countries. So as an outsider Japan can take advantage of this as they’ve done it for the cold war. However, this war is more complex and they must act smarter as Chinese are so smart. Furthermore, some economists point out that there’s rising trade protectionism and weak global demand. As an economy most relied on exports, that can be hurtful for the Japanese economy. But, we still remain positive as the Abenomics are working to make the Japanese economy more domestic dependent than external dependent.
Widley Marcelin
Reference/ Webography