Concerns over Economic Slowdown and Contraction of the Japanese Economy
January 21, 2008 (Monday)
Signs of an economic slowdown have become conspicuous since the beginning of 2008. In addition to external factors such as the impact of the US economic slowdown as a result of the sub-prime problem and the surge in oil prices, the formulation of economic policy laws under the “twisted Diet” has stagnated, new construction has significantly decreased under the revision of the building codes, and the activities of non-banks have been cut back under the revision of the Money Lending Control Law. In this way, the impact of what could be called a Japanese political recession coupled with the phenomenon of a policy recession has been substantial.
Until now the Japanese economy had continued long-term recovery over an unprecedented six year period. As mentioned before in this column, the factors behind this were company reform and innovation, economic structural reform by the government, low interest rates that spurred investment, low yen exchange rates that promoted exports, global economic growth, and so on. However, as external factors starting with the US economy have swung backwards, and as domestic structural reform has stagnated, many of these factors that have traditionally buttressed economic growth have now reversed.
The long-term economic recovery over the last six years is a result of breaking free from the bubble collapse and serious deflation, and is a significant achievement for the Japanese economy. Among overall long-term global movements, however, Japan’s growth has been tepid, and the weight of Japan’s economy in the entire global economy has decreased from 14% to 9% over the last 20 years, while the per capita real national income has fallen from first in the world to 18th. In this way, in global terms the Japanese economy’s trend towards contraction is becoming clear.
At the root of Japanese economic contraction over the long-term is the megatrend of population decline, and in that sense it cannot be helped. That being said, there are various factors at play among which is a serious problem that cannot be overlooked. In a word, this problem is the loss of goals and mettle among the people. The lifeblood of the global economy is shifting from developed regions such as the US, Europe and Japan to the BRICs (Brazil, Russia, India and China) and emerging Asian countries. The people of these countries, and in particular the youth, carry a strong sense of passion and ambition for the future and yearn for economic growth and better living standards. It is not a great mystery that the people of a matured country that has achieved the highest global income level, as is the case with Japan, could lose their insatiable hunger for growth and improved living standards.
However, even in a country that is aging and maturing and contracting, as citizens of a developed and experienced country we should have goals that inspire us. What is of concern in present day Japan is that such goals for the future that can be shared among the people are nowhere to be found.
Until now Japan’s production sites have been anchored by laborers with the strongest sense of responsibility in the world. The recent spate of accidents at such sites, however, questions this sense of responsibility. In the past, Japanese students have carried a strong desire for learning with them in their studies around the world, but recently these young people seem to have lost this enthusiasm and interest. Japanese police have traditionally boasted the highest international rate of solved crimes, but Japanese society today is not as safe as it used to be.
What is most disheartening, however, is the political decay. The Diet falling into a twisted state as a result of a democratic election is not without global precedence. It is disappointing, however, that in the face of such a phenomenon there is no apparent sincerity and enthusiasm on the part of both the ruling and opposition parties to cooperate and establish effective policies for the sake of the country and its citizens. The problem is not economic contraction. Even in the midst of contraction, if people from all walks of life and especially our political leaders have forgotten about fulfilling their duties with political grace, then there we find the true crisis which can only be called the decay of our nation.