

Rebalancing the world economy: Japan

Stuck in neutral

Japan’s long-standing inability to rebalance its economy is bad for the world and even worse for its own people. The last in our series

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D Gunz

being obsessed with GDP and GDP growth rates as a measure of wealth, power and influence is part of the madness of our world. Countries like India and China NEED to grow because they don't produce enough to generate a decent standard of living for their people. Japan does not NEED to grow because its people already enjoy a relatively high standard of living. I would argue countries like Japan (and i can think of many countries in the West) should be focusing on how to stabilise or even reduce consumption and energy use and become more environmentally sustainable.

I say again - growth is NOT necessary to sustain a decent standard of living if you're already earning $25,000 per capita.



I have to disagree with your first point. Despite all the environmental and philosophical implications of uninterrupted GDP growth, it is the measurement by which a country's wealth and power grows. A country as concerned with its influence as Japan should take care to grow continually. And also a decent standard of living can only be sustained by growth.


Here are some of Japan's problems & Solutions
1. Japan is weak in investing in equipment recently. Many people still use single screens with their computers, whereas they should be using dual screens and also larger monitors.
2. Younger generation Japanese are not so interested in studying hard. Educationalist complain that their mathematical ability is declining.
3. HR strategy needs rethinking. Japan needs to appoint more academically qualified people to key positions.
4. Japan is not addressing skill shortages in their labour market. The Governement should conduct a survey of the labour market and identify skill shortages. Then the people will acquire those skills. In other words people might study more IT and accounting to meet shortages.
5. Japanese towns needs to be built in earthquake resistant areas. Currently Tokyo appears to be sitting on a time bomb.
6. Japan has made a mistake during world war 2 with neighbouring countries such as China and Korea. Japan may need good peace treaties to keep security related expenditure low.
7. Japanese scrap their cars after 10 years. Poorer countries buy second hand cars for low prices and use them for another 10-20 years. As a result, after writing off their vehicle costs within 10 years, many Japanese cannot afford to have children. Japan should allow rural people to use their vehicles for much longer.
8. Japan still follows consumption led growth. Whereas they should shift to wise investment led growth with moderate consumption. Japan cannot afford to borrow too heavily and consume.
9. Japanese have over confidence in their wealth. Many Japanese feel they are close to being the second richest in the world. Whereas Per Capita GDP adjusted for prices bring Japanese to around the 20th richest. Additionally taking into consideration the lack of natural resources in Japan, and also heavy costs incurred during natural disasters such as earthquakes etc makes Japan less richer.
10. Shift more towards new businesses, producing goods & services, new online businesses, more online marketing etc.
11. Developing the Financial sector. Both investing and lending do not appear to be strong in Japan. Research in these areas appear to be inadequate.
12. Developing Government monitored online databases of shares & securities traded in Japan, so that investors have updated access to vital information required to make investment decisions. It should be mandatory for issuers to update and disclose vital information to investors.
13. Developing National Level Exams for certain skills. Ex: IT skills such as MS Office etc
14. The Government should get more involved in Economic & Financial research and publishing results so that the private sector can make wise investment decisions.
15. Consider changes in immigration policy to address skill shortages, but avoid mistakes made by other countries such as allowing terrorists in.
16. Maintaining a Governemnt inititated law web site where ordinary people can refer laws etc.
17. Consider changes to the school syallabus to accomodate areas such as Accounting, Personal Finance, Introductory Law, Basic Political Science etc.
18. Strenghthening IT education specially among school children. Defining and aiming to attain a above 90% IT Literacy rate . Currently even some University Graduates from non mathematical backgrouds are incapable of using MS Excel.
19. The current Recession policy mainly focuses on Government Fiscal Policy. The Government should give an idea to Companies and people of what to do so that the country can grow out of the recession.
20. Remember that Japan needs to keep growing even to stay in the same place.

Thinker Mayor

Fully agree with ghaliban.

Would also like to add that this paragraph surely is supposedd to be a joke?
"There is also a reluctance to borrow. Consumers rarely shift credit-card debts from one card to another. Small businesses are still paying off loans from the previous crisis; banks are shy of lending because of the current one."

So it's a bad thing that Japanese people aren't juggling multiple credit card balances?


this article is an interesting illustration of three basic flaws in economic thinking.

The first flaw is the implicit assertion that a country whose GDP isn't growing rapidly must be doing something wrong. A moment's reflection will show that this is nonsense, particularly in a country with a stable or declining population like Japan's. If you're a country with high per capita GDP, relatively decent standards of living and low rates of unemployment, then growth shouldn't be your first obsession.

The second flaw is the assertion that countries where savings are higher than investment must spend, spend, spend - that their households should save less, "let their hair down", even borrow more for its own sake. Again, this is nonsense, particularly in a country where the population is getting older. People in such countries should either work longer (i.e retire later) or save more when they're young.

The third flaw is the assertion that a stable current account surplus is a bad thing. Current account surpluses are heavily influenced by the trade balance, which in turn depends on the balace of imports and exports. There is no logical reason why it is a bad thing for exports to exceed imports - it may simply reflect the fact that the productive potential of a country exceeds its needs. Rather than letting its resources stand idle, it makes sense for open economies to export and over time, this can lead to stable current account surpluses. Some economists would argue that recurring surpluses of exports over imports means that more foreigners want to buy your currency (to pay for exports) than your people want to buy their (for imports). So this should put pressure on the home currency to appreciate, which over time should remove the surplus. Perhaps. But price is only one factor in purchase decisions, and exchange rate changes represent only a modest proportion of product price changes. It is entirely possible for trade surpluses to persist over time irrespective of exchange rate movements.

To understand whether or not there are "structural imbalances" in the economy requires an understanding of what a "desired balance" is, and whether a balance is even desirable in the first place. Many economies may be fundamentally non-equilibrium systems.


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