The economy of Japan
A potential superpower is a state or other polity that is speculated to be—or to have the potential to soon become—a superpower. Currently, only the United States fulfills the criteria to be considered a superpower. However, the United States is no longer the only uncontested foremost superpower and the world’s […]
A potential superpower is a state or other polity that is speculated to be—or to have the potential to soon become—a superpower. Currently, only the United States fulfills the criteria to be considered a superpower. However, the United States is no longer the only uncontested foremost superpower and the world’s sole hyperpower to dominate in every domain. Since the 1990s, China, the European Union, India, and Russia have been described as potential superpowers. Japan was formerly considered a potential superpower due to its high economic growth. However, its status as a potential superpower has eroded since the 1990s due to an aging population and economic stagnation.
In the 1980s, many political and economic analysts predicted that Japan would eventually accede to superpower status, due to its large population, huge gross domestic product, and high economic growth at that time. Japan was expected to eventually surpass the economy of the United States, which never happened. However, Japan is considered a cultural superpower in terms of the large-scale influence Japanese food, music, video games, manga, anime, and movies have on the world. In 2021, U.S. News & World Report ranked Japan as the most culturally influential country in Asia and 5th in the world.[citation needed] Japan is also considered to be a technological power, being the leader in the automotive, electronics, and robotics industries. Japan was ranked as the world’s fourth most powerful military in 2015. The military capabilities of the Japan Self-Defense Forces are held back by the pacifist 1947 constitution. However, there is a gradual push for a constitutional amendment. On 18 September 2015, the National Diet enacted the 2015 Japanese military legislation, a series of laws that allow Japan’s Self-Defense Forces to collective self-defense of allies in combat for the first time under its constitution. In May 2017, former Japanese Prime Minister Shinzo Abe set a 2020 deadline for revising Article 9, which would legitimize the JSDF in the Constitution, but the constitutional revision was never implemented before Abe’s resignation as prime minister in 2020 due to health problems. Although still the world’s tenth-largest population and third-largest economy as of 2016, in terms of nominal GDP, Japan has experienced a period of continued stagnation during the last decade Since the 1990s, Japan has experienced population aging since the early 2000s, with total population declining sharply starting in 2011 eroding its potential as a great power. The Lost Decade is a term initially coined to refer to the decade-long economic crisis in Japan during the 1990s. Japan’s economy rose meteorically in the decades following World War II, peaking in the 1980s with the largest per capita gross national product (GNP) in the world. Japan’s export-led growth during this period attracted capital and helped drive a trade surplus with the U.S… To help offset global trade imbalances, Japan joined other major world economies in the Plaza Agreement in 1985. In accord with this agreement, Japan embarked on a period of loose monetary policy in the late 1980s. This loose monetary policy led to increased speculation and soaring stock market and real estate valuations. In the early 1990s, as it’s became apparent that the bubble was about to burst, the Japanese Financial Ministry raised interest rates, and ultimately the stock market crashed and a debt crisis began, halting economic growth and leading to what is now known as the Lost Decade. During the 1990s, Japan’s gross domestic product (GDP) averaged 1.3%, significantly lower compared to other G-7 countries. Household savings increased. However, that increase did not translate into demand, resulting in deflation for the economy. From 2011 to 2019, Japan’s GDP grew an average of just under 1.0% per year, and 2020 marked the onset of a new global recession as governments locked down economic activity in reaction to the Covid-19 pandemic. Together the years from 1990 to the present are sometimes referred to as Japan’s Lost Decades. While there is some agreement on the events that led up to and precipitated the Lost Decade, the causes for Japan’s sustained economic woes are still being debated. Once the bubble burst and the recession happened, why did it extend into an entire Lost Decade? Demographic factors, such as Japan’s aging population, and the geopolitical rise of China and other East Asian competitors may be underlying, non-economic factors. Researchers have produced papers delineating possible reasons why the Japanese economy sank into prolonged stagnation. Keynesian economists have offered several demand-side explanations. Paul Krugman opined that Japan was caught in a liquidity trap: consumers were holding onto their savings because they feared that the economy was about to get worse. Monetarist economists have instead pointed to Japan’s monetary policy before and during the Lost Decade as too restrictive and not accommodative enough to restart growth. Austrian economists have, on the contrary, argued that a period of extended economic stagnation is not inconsistent with Japan’s economic policies that throughout the period acted to prop up existing firms and financial institutions rather than letting them fail and allowing entrepreneurs to reorganize them into new firms and industries. They point to the repeated economic and financial bailouts as a cause of (rather than a solution to) Japan’s Lost Decades.
However, The Japanese government tried to instill confidence through large-scale stimulus packages. It built new roads and bridges, even when they weren’t completely necessary, and by doing so, created new jobs. These efforts helped boost the economy, but it wasn’t enough to lift it out of the malaise—in fact, they just added to the country’s deficit in the long run. What finally helped was the quantitative easing program Japan’s central bank began in 2001, which would last until 2006. By 2003, GDP reached a healthy 2% clip, and exports grew once again, due in large part to China’s emergence into the global marketplace, since many of China’s products depended on Japanese parts.
https://www.investopedia.com/terms/l/lost-decade.asp
This article is a part of the class “751309 Macro Economic 2” supervised by Asst. Prof. Napon Hongsakulvasu Faculty of Economics, Chiang Mai University
This article was written by Ployped Auppanate 651615034
