Made in Japan
There is a vague sense among many Indians that Japan is a nice country with polite people and both are in genteel decline. “Haven’t they been in recession for over 20 years?” I am often asked. Asia’s number two economy isn’t a write-off yet.
First off, Japan has seen some decent economic growth the past several years. Their automobile and electronics sectors boomed during the, well, boom years. They have been both deflated to normal levels after the Lehman meltdown but it’s not the case that Japan is only a southward story.
Second, Japan is still the technology leader of Asia. South Korea is the only other Asian country with a full innovation cycle. And if the future is green, as I found out during a recent climate change conference in Kyoto, Japan is positioning itself very well. Here’s a startling stat from a Stanford research fellow: Japan is filing nine times more renewable energy patents than the United States. In fact, they lead the world.
Third, while everyone has doubts about whether the new Democratic Party of Justice government knows what to do, that it has come to power means Japan is far more capable of dramatic change than anyone had thought. “The Japanese people just wanted change,” was a line I kept hearing while in Kyoto. If Japanese politics, something I used to be told was immutable as Mount Fuji, can go through this sort of convulsion, perhaps the various things that tie down Japan’s economy can be removed as well. For example, their amazingly inefficient service sector – it took three people at the airport to politely convert my dollars into yen.
Finally, I had always seen Japan’s resistance to immigration combined with its rapidly ageing population as a sign the game was all over. Old demographics meant old mindsets. It also meant falling investment rates, dropping household demand, blah blah. But it seems immigrants are entering Japan, most notably from China. Tokyo is just looking the other way and regularizing post facto. Immigrants now constitute two per cent of the population. More importantly, they represent some 6 per cent of the country’s entrepreneurs. So there is some young leavening amid the stale dough.
This doesn’t mean Japan will be the economic terror of the West that it was in the 1970s. And I think geopolitically it will continue to give way to China over the coming decades. But tales of its imminent demise are exaggerated.