They got overtaken by Germany a country with 50% lower population and the gap is widening. Their gdp per capita is below some Eastern European countries and way below other developed countries that used to have similar gdp per capita. Yen’s devaluation is getting faster so in the future I don’t think Japan can even be called a first world country anymore. What exactly caused this? I know Japan has been in recession since the early 90s but this last few years seem to be extra harsh on Japan
In: Economics
I just have to comment that Germany’s population is 84m and Japan’s is 123m. That’s not 50% lower, that’s 37% lower
50% lower would be 74m
I think the top answers are poor, sorry.
By far the main reason is China (and to lesser extent South Korea, Taiwan, others) outcompeted them. For all its prowess, 80’s/early 90’s Japan was export-oriented and relied on the traditional West, above all the USA, to import their goods.
Its not. GDP is very strongly related to population growth. It is not necessarily a good way to measure “health” when the population is shrinking.
You really can’t look at Japan with a keynesian point of view (that growth is infinite for all intents and purposes, the next generation being larger, so the current generation can incur debt as long as the future revenue is greater than the interest, etc).
Japan is doing alright. The weak yen is bolstering its exports, and people have adjusted to fewer imports or more expensive imports. Japan has been focused on trying to be more self sustaining for decades. Its fluctuation in global significance won’t impact it nearly as much as a country like, say, Sri Lanka, which is entirely dependent on outside trade for essential infrastructure.
Also, Japan’s infrastructure is relatively strong. If you want to say Japan has a week economy, you’ll need to be more specific by what you mean. Japan’s devalued yen and its economic health aren’t quite as strongly related as you are implying.
That is because GDP is not a good measure of the economy.
Japan’s GDP has fallen mainly because of the weak yen. So why did the yen weaken? That is because countries other than Japan have raised interest rates.
So why did countries other than Japan raise interest rates? That’s because inflation has intensified due to the failure of the Covid measures.
Japan, on the other hand, had far fewer infected people than the West and did not lock down its cities.
So to tell the truth, Japan’s economic situation is no worse than in the West.
While the Japanese still maintain a middle class, working regular jobs, saving money, and buying houses, that model is collapsing in the West.
Furthermore, Japan’s economy is growing despite its declining population. On the other hand, the West have managed to achieve economic growth by accepting large numbers of immigrants, but in reality, the lives of individual people are suffering.
Incidentally, Japan’s economy has deteriorated since the 1990s because of the Plaza Accord with the U.S., which made the yen stronger. This weakened Japan’s export industry, and China and Korea rose to prominence.
So people think of a weak yen as a bad thing, when in fact it is not necessarily bad. Although there is some confusion due to the sudden change in exchange rates, Japan’s economy has been sluggish to begin with because of the strong yen, which has restrained the export industry. So now that Japan currently has the highest stock market average since the 1990s. Conversely, China’s stock market is in freefall. Japan may be entering a decade of revival.
edit:
Looking at other comments, some people have answered that Japan can’t raise interest rates because of its debt, which is also wrong.
In fact, Japan’s external net worth has always been the highest in the world, and Japan is the least indebted country on a global scale. Since most of Japan’s debt is domestic, it can be repaid by printing money if it wants to. But of course, that is not good for the economy, so Japan simply has not done so while other countries have inflated.
I mean, do you really believe that countries with good economic conditions can raise interest rates and countries with bad ones cannot? Even Russia is raising interest rates to about 16%. And Japan, which until recently was 0%, has raised it to 1.1% because Japan is also somewhat inflationary. Perhaps those who express this opinion believe propaganda to try to prevent criticism of the government.
edit2:
I guarantee 90% of the comments here are bullshit lol They don’t seem to understand basic economics.
So the OP will probably never get to the truth.
The yen devalued almost 50% in a short span of 5 years. If you use gdp per capita it’s going to look pretty bad as that’s usually in USD.
This drop in JPY is much more recent. Japan may have had near zero growth due to the housing bubble bursting in the 90s, but it wouldn’t lead to this sharp drop.
No, what you’re seeing is the result of a largw interest rate difference between USD and JPY. Everyone’s doing carry trades to benefit from the near zero JPY interest rates. Domestic investors are also selling JPY to invest in other foreign securities.
Once the bank of Japan decides to intervene in the currency market + raise rates continuously, the lights come on and we’ll see it return to normal. When that is is anyone’s guess. They have a tendency to intervene on big US holidays 😉
They are unfortunately quite xenophobic, at least the older generations are, and the government really does not want to open up immigration. Couple that with an increasingly large portion of their population who are senior citizens, and the actual working pool is drying up incredibly fast. It really doesn’t help that the Japanese work culture is practically the number one cause of depression in the country.
Latest Answers