For Japan, a Long, Slow Slide

Blaine Harden – The Washington Post

Copyright The Washington Post
Washington Post Foreign Service
Sunday, February 3, 2008
TOKYO — As the United States frets noisily about a recession, Japan is quietly enduring a far more fundamental economic slide, one that seems irreversible.
This country, which got rich quick in a postwar miracle of manufacturing and alarmed Americans by buying up baubles such as Rockefeller Center, is steadily slipping backward as a major economic force.
Fifteen years ago, Japan ranked fourth among the world’s countries in gross domestic product per capita. It now ranks 20th. In 1994, its share of the world’s economy peaked at 18 percent; in 2006, the number was below 10 percent.
The government acknowledged last month what has long been obvious to economists and foreign investors, if not to the Japanese public and many politicians. The minister of economic and fiscal policy, Hiroko Ota, told parliament that Japan could no longer be described as a “first-class” economy.
“I have a sense of crisis because Japan has not nurtured industries that will grow in the future,” said Ota, who offered no specific remedies for the crisis.
Japan is still the world’s second-largest economy, as measured by gross size, although the island nation has been surpassed by China in purchasing power. In coming decades, the economies of China and India will dwarf Japan’s, according to many projections. By 2050, Japan’s economy will be about the size of Indonesia’s or Brazil’s, according to a study by PricewaterhouseCoopers.
Japan’s slide relative to other major economies is not a tabloid tale of suddenly squandered riches. It is rather an insidious petering out of growth, productivity and innovation — and of political will to stop the slippage.
The slide has dovetailed with another quietly insidious crisis — the petering out of the population. Japan has the world’s highest proportion of elderly people and the lowest proportion of children.
By 2050, population decline will have reduced economic growth to zero, according to the Japan Center for Economic Research. Seventy percent of the country’s labor force will have disappeared.
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