Japan’s Optimistic Path: A Snapshot of the Future By Peter Douglas and David Wagner

Japan’s “lost decade”?is in fact more like a lost three decades.?? What does that mean?? One clear impact is that Japan has not experienced many of the changes seen in other major developed economies over that period.? ?

Generational changes that have led to leadership impact on societal priorities is accelerating as a form of “catch-up”, but normalized changes obvious elsewhere around the world are still slow in coming. ?

Below we share our views on important issues Japan will continue to face in coming decades, focusing firstly with immigration.

The Big One: Immigration

Given the demographic realities, continued immigration is a fact.?? Even a transition to a smaller, stable economy will require a constant stream of immigration for the foreseeable future.

Japan’s lack of land borders and distance across oceans from other countries means that the overwhelming majority of immigrants will be willing economic migrants, not desperate refugees.? The challenge of acquiring Japanese language will also act as a natural filter against an unmanageable flood.

The current super-weak yen will not persist for 30 years.?? As the yen recovers strength the country will become more attractive for skilled workers.

Currently many Japanese appear to have accepted a 3% foreign population.?? At some point, as this percentage grows, there will be a backlash driven by the social changes inherent in a heterogenous population. Expect political pushback.? By the 30-year mark, this will have faded as ordinary Japanese will have got used to foreign faces/customs in their midst.?

A less homogenous population and degradation of “social order”?will surely lead to some inevitable frictions.? Count on crime by immigrants to be much more intensively reported than crime by Japanese.? However, Japanese society may be quite good at integrating people into the myriad social structures so integration may be less painful than many countries –plus most immigration will be economic (not desperate).? Expect to see more concentrations of immigrant groups in certain areas, but we don’t anticipate intense ghettoization. The “gaijin ghetto” - like Hiroo in Tokyo - will continue to grow but be anything but ghettoes.

While immigration will be mostly benign, as the composition of society changes a certain amount of what we love about Japan today- predictability, social courtesies, communal responsibility, etc. - will inevitably be diluted.? The “good old days”?will be lamented!

Gradually as they obtain residency and even naturalization, immigrants will gain political voice and start to influence change, certainly at a local level.? We witness this already in singular cases. Immigration will become an accepted arena for political debate and policy.

Culturally, Japan will be an extraordinary hub, with an indigenous culture older than most European-derived cultures overlaid with ever more imported layers.

Social Norms

Already today social norms (same-sex marriages, divorce, alternative lifestyles, gig economy, etc.) are way ahead of the legislature.?? This will change and Japan will become an almost Scandinavianesque liberal country –?Japanese tend not to judge so long as one doesn’t disrupt, and there is an expectation that society should include and support all its members – within reason.

A shrinking working population make this a golden age for younger Japanese workers.?? They will demand new conditions and norms and Japan will become a posterchild for worker’s rights, flexibility, and career progression.

The Gini coefficient will continue to expand and the “90% middle class”?moniker will disappear.? Income, and in particular wealth, distribution will resemble any other developed economy.?

Social polarization will be weaker than other developed countries due to the extraordinarily homogenous education system – everyone is almost literally “on the same page” –?although inevitably the trend will be towards some polarization at the margin as the education system absorbs non-native students

The education system is itself likely another “glue”?for integration. It will experience stresses as it absorbs non-Japanese parents (the kids will adapt well) but let us continue to have faith in the professionalism of Japanese teachers.

The revitalization of rural Japan, while not universal by any means, will be evident in many areas, due to inbound commercial investment, tourism, and remote working.

Technology

Japan has remained painfully analog for decades but is now playing very rapid catchup in digitalization.?? It will likely overshoot and within 15 years will be a leader in digitalized services, payments, contracts etc.? ?Its interfaces, however, will remain Japan-specific reflecting the transposition of societal norms into the digital sphere.

Japan will become a manufacturing hub again given its high level of mass education, relative geopolitical stability, and ready availability of resources.?? Immigration policy will facilitate the tech industry.? However, it may well take most of those 30 years, and maybe more, for Japanese higher education facilities to match the innovation/research/commerce interface that the best of US universities and Oxbridge/Imperial/ETH have achieved.

Japan’s belated acceptance of remote working will, by 2055, have matched the rest of the world.? This will revitalize certain – although by no means all – areas of rural and suburban Japan.

The demographic shortfall will continue to keep Japan at the forefront of robotics.

Geopolitics

Japan will be the de facto policeman in the Asian region, having taken over from the US in the mid-2030’s.?? A continually strengthening but domestically-focused India, and a waning and paranoid PRC, will wield immense potential power but only Japan will have the global diplomatic currency to hold the accepted middle ground.

Japan’s soft power (infrastructure investments, cultural exports, etc.) will have supported Japan’s resurgence on the international stage.

Japan’s new position as the stable anchor of the Pacific region will bring substantial inbound investment in manufacturing and technology.? The service sector is likely to remain more targeted in the English-speaking countries.

Unknowns

Although the major powers in the region are likely to prefer cold to hot wars, regional conflict may drag Japan into combat for the first time in three generations. ?Combat experience being the current missing link in the Japanese military, this may if anything strengthen Japan’s role as regional policeman.

Major natural disaster causing severe economic disruption (not just in Japan but globally) followed by equally huge economic stimulus, would cause another major increment of change in all the above fields.? That one massive earthquake under Tokyo or Osaka would be a game changer.

Overall, we see a thriving business and commerce environment as Japan adapts to aforementioned changes. ?Japan’s business landscape will “normalize”?with other democratic large economies.? Digitization and remote working will streamline business operations as nomad workers will be an accepted part of the mix.

Japan’s challenge maybe in accepting its fate.? Gone are the days where non-Japanese are expected to leave after five years.? Like it or not, non-Japanese are increasingly becoming an important component of Japanese prosperity.