Japan's resilience is a telling tale

Tokyo is a success story when it comes to trade regulations and macroeconomic statistics Tokyo is a success story when it comes to trade regulations and macroeconomic statistics

Japan, the floating island, has a fluctuating economy. Being one of the highly-developed and market-oriented economies, it sends shivers down the spine for all others by virtue of its currency manipulations. This is why it is said keeping a tab on Japanese currency is a must to stabilise the world economy.
Tokyo boasts a success story in itself when it comes to trade regulations and macroeconomic statistics. It is the third-largest in the world by nominal GDP and the fourth largest by purchasing power parity, with a gross domestic product of $4.9 trillion, it is rated as the second largest economy after the United States.
Japan is highly industrialised and a free market economy. Its profile is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services.
Japan's major export industries include automobiles, consumer electronics, computers, semiconductors, copper, iron and steel. Moreover, petrochemicals, pharmaceuticals, bio-industry, shipbuilding, aerospace, textiles, and processed foods are a booming business in Japan. Manufacturing is one of Japan's major potentials, irrespective of the fact that it has fewer natural resources. Japan is one of the biggest importers of raw materials and owing to its skilled and supersonic industrial base processes them, and makes them exportable stuff.
But Japan's miseries are untenable, as it is home to natural calamities and man-made disasters. Tsunami to nuclear fissures are some of the tragic cases in point. Likewise, it has a rising problem in the form of an ageing population, which has reportedly given birth to poverty traces in the country. A huge population of Japan is dependent on pension and state-laden privileges, which is instantly a burden on the national exchequer. Since Japan's economy depends heavily on human labour, the government intends to lift barriers on foreign immigrants to counter the effects of the declining population.
The system of the economic module at work in Japan is highly enterprising, as it is a combination of private and public sectors. Nonetheless, the government has a say in the private sector as it controls some of its production in the market. It has a competitive base due to the trade tariffs and quotas and is one of the world's most innovative economies having the largest electronic goods industry and patent filings. Last but not the least, its financial assets worldwide are estimated at $13.5 trillion, and is home to 54 Fortune Global 500 companies.
Rising debt, however, is an irresistible problem for Japan. This aspect has led to a slowdown and unsteady growth in yesteryears, which has impacted several of its mushrooming sectors such as agriculture and mining. Due to this aspect, Japan's economic recovery is slippery for the last many decades, which has led to enhanced domestic spending.
The credit for reviving the economy, of late, goes to Prime Minister Shinzo Abe's doctrine of Abenomics. This policy has led to enhanced bank lending, buoying capacity of buyers and soaring investment opportunities. The country has worked closely on building state-of-the-art Infrastructure across the country, and invested immensely in the energy, industrial, education and health sectors. After decades of sluggish growth, the present growth rate of around four per cent with low levels of unemployment is a positive sign of recovery.
Japan has a history of turmoil and a trajectory of deflation since 1980, when the real estate bubble burst. Since then the government has pumped in trillions of dollars to lift the economy. Some of its drastic measures included introducing zero-interest rates on borrowing to promote entrepreneurship and investment. Though, the strategy worked, it has left the country under the world's largest public debt.
Japan's resilience has helped it stage a comeback on the global economy stage despite political instability and a trail of hung parliaments. Prime Minister Abe's pledge to reignite the economy with a unique package of reforms and government spending has made the difference. Yet, it has a number of challenges to confront. Prime among them is the age factor: one of four Japanese is now 65 or older. It is estimated that in the next four decades, more than 45 per cent of the population will be a liability, by virtue of their health and age issues. At this point, the government is spending almost 80 per cent of social welfare on the elderly.
While Japan is one of the biggest raw material importing nations, it is in need of a Marshal Plan for a talented workforce. This intergenerational inequality is directly proportional to not only its GDP growth but also its leadership in world affairs. Moreover, it has to revitalise the economy on a sound footing, reform the labour market and cut down on subsidies.
Japan has led from the front whether it be world affairs or reforming the shrinking economy. All it has to do to compete with the gigantic economy of China and the capitalist crunch of the United States is to put its house in order and speed up the tangibles for a robust production era. Japan is indispensable, and it has a way to go. It is, undoubtedly, a role model state for the developing world. Its rise from the ashes of Hiroshima and Nagasaki to become the world's top industrialised state is worth-emulating.
- mehkri@khaleejtimes.com