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Japan’s Hidden Economic Strengths

Updated: Jan 4

Some hope for Japan’s economy has come from China amid the ongoing pandemic. Many Japanese firms are anticipating new orders from China, especially for new infrastructure spending. This bit of good news mitigates Japan’s declaration of a national state of emergency from April 16 until May 6, and the postponement of the Tokyo Olympics to 2021. Japan has a special need to protect its high-risk age population.

It’s still anyone’s guess what happens next. The global base case is for the worst to be over by July—though the world economy could still spiral into a deeper contraction from slumping profits, rising bankruptcies and growing unemployment. But assuming the base case for July and containment of the virus’s spread in Japan, a recovery in China should soften the pandemic’s blow for the country. More info

Japan’s economy has some hidden strengths. While it may seem Japan’s GDP growth has been anemic for decades (even prior to the pandemic), what’s been overlooked is that Japan’s per-capita GDP growth has actually been accelerating despite a shrinking population. That’s because, with the number of citizens dropping, even a slender 1% or 2% growth in real terms translates into a very tangible improvement in economic output.

At the moment, though, Japan’s tight labor market bodes well for a key objective of Abenomics to further rejuvenate the economy: raising women’s participation in the labor force. Japan has made much progress in recent years to get more women into the workforce, a positive development that both improves household incomes and eases labor shortages due to Japan’s aging population.

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