Japan’s Economic Outlook; The Good, the Bad, and the Ugly

The majority of the news regarding the Japanese economy in recent years has been negative. In many respects the country still hasn’t fully recovered from the economic downturn that took hold in the 1990s. However, as is the case with any modern economy, there are both positive and negative things going on in the Japanese economy at the moment.

The Good: Strong Infrastructure and Industry

Japan’s overall infrastructure quality is still among the world’s best. Its transportation infrastructure is particularly excellent, and helps to support the country’s industry as well as its quality of life.

High speed Shinkansen or Bullet trains are a common form of transportation

Japanese power infrastructure is also very stable and relatively efficient. Although not as far along as countries like Germany with respect to renewable energy development, Japan proportionately relies less on petroleum than most others, with about a third of its energy needs provided by nuclear plants.

Of course, the best known area of strength for the Japanese economy is manufacturing. In addition to cars and electronics, Japan is a major producer of semiconductors, data storage media, aerospace parts and equipment, heavy machinery, and chemical products, among many other things.

The Bad: Political Troubles

Japan’s current difficulties stem back to the end of the 1989 real estate and stock price bubble. The government’s response at that time triggered what was a harsher than necessary economic backlash, which it was then also slow to respond to.

Shibuya Crossing, Tokyo

A lack of ideas and a kind of political stagnation have been issues for Japan ever since the end of the bubble era. Whereas the Japanese economy and society in general were energized with the political reforms of the postwar period, its bureaucracy has become overwrought, and the major parties have largely come to be seen as being primarily in it for themselves.

Although Japan has had six prime ministers over the last six years, meaningful change has been slow in coming. Among the reforms that have been suggested by economists are sweeping changes to tax laws, and a better strategy for curbing the issue of inflation.

The Ugly: Manufacturing Competition

Perhaps the most pressing issue on the horizon for Japan is the emergence of other manufacturing powers. More so than any other factor, manufacturing is what’s kept the Japanese economy strong since the end of the war. Even though big Japanese manufacturers, particularly in the auto and electronics industries, have moved significant portions of their factory operations to other countries, manufacturing remains a Japanese strength.

The problem is that manufacturers from other countries are increasingly muscling in on the Japanese giants’ territory. In the auto industry, South Korean companies like Hyundai are in a position eerily similar to that occupied by Japanese makers in previous decades, steadily increasing in sales, quality, and reputation. There’s also the burgeoning Indian auto industry.

South Korean manufacturers might be even further along in electronics. Though it was once unthinkable, Samsung is now regarded as a serious competitor to Sony as the world’s premier maker of televisions.If overseas competition continues to grow stronger, it will only make Japan’s path to recovery that much more difficult.

Minato Mirai, Yokohama City