Lost among the conversation of failing economies nowadays are the Asian markets, yet perhaps dutifully so. Standard conversation about Asian markets directs rhetoric towards the rapidly expanding economy of China and the East Asian Tigers, but lost among the success is the historically prosperous island of Japan. Although it still possesses the world’s 4th largest economy– a big feat considering its population comprises 66 million less than next highest competitor, Brazil— there is no country that raises bigger economic red flags than Japan today. Even so, the lack of press surrounding the country indicates no one is noticing the urgency of the issue. That is, unless you are Japan.
Japanese Prime Minister Yoshihiko Noda delivered his address at the U.N. General Assembly on Wednesday, focusing on the domestic issues plaguing his country rather than the discordant, hot button issues of Syria, Israel and Iran like the seeming rest of the world— with good reason, too. The days of the vast Sony and Toyota empires are very clearly in the past for the country that has seen their GDP growth steadily decline for the better half of a decade. In Quarter 2 of this year, Japan saw the infinitesimal rise in private consumption of just .1%. To put this number in perspective, its rise in Quarter 1 was thirteen-fold this number; similarly, its neighbor China’s “disappointing” growth during this same period was 81-fold.
While there is a negative forecast for most of the world’s major economies, Japan is truly on the precipice of a monumental collapse. This slow decline started years ago when the seemingly infallible electronics industry lost out to Chinese and South Korean competitors. During the mid- to late-2000’s, former industry giants Panasonic and Sharp halted production, and went on to shut down a majority of their electronics factories. Even more shocking, Sony estimated a nearly $6.4 billion loss for the last fiscal year— a number they expect to increase even greater this year. At the time of writing, Sony stock sat at $12.15, a figure that pales in comparison to the $156.75 mark set just over a decade ago.
Even more alarming is the foreseeable future of Japan’s workforce. To put it simply, Japan is old— and remarkably so. A couple statistics to consider: Japan’s median age is 44.8 years (compared to 36.9 of the U.S.); and Japan’s youth, from 0-14 years, comprises just 13.1% of the population (compared to 20.1% of the U.S.). Even more, Japan’s life expectancy is nearly five years greater than that of the U.S. at 83.91 years, but their average retirement age is three years less. These statistics forebode disaster with their Social Security program, for which it is already devoting over 29% of its total budget.
The future of Japan looks grim, but the real question is: what are they going to do about it? In his speech Wednesday, Noda acknowledged the issues plaguing his country, and its procrastination towards addressing them thus far. As he put it, “current generations are exploiting future generations,” and he called for an end to the inaction. Indeed, he expressed, it is item to think of future generations— but how?
Put simply, energy. Noda seems to have conceded the title as the bleeding-edge electronics innovator of the world in order to become the new leader in energy efficiency. This can be partly attributed to Japan’s current overdependence on nuclear power—a fact magnified after the country closed nearly all nuclear power plants because of the earthquake and tsunami that struck the nation last year. The Prime Minister also notes the humanitarian impact of such a move, alluding to the Japanese-introduced Resolution on Human Security passed in the U.N. on September 10th. Noda emphasized this idea of human security and the importance of being, “more conscious of each life on Earth.”
While it may be overly ambitious to completely refocus Japan towards an unfamiliar field, especially by a Prime Minister who has barely eclipsed one year in office, Japan clearly lacked any direction before this. Throughout the past decade, the government looked to adjust borrowing interest rates to zero and purchase shares in multiple Japanese companies in an attempt to jumpstart the quiescent economy, but all these measures failed to meet expectations. Moreover, Japan is facing a rapid rise in commodity prices because it is not a resource-rich country like many of the other top economies, and it must thus import most of its food and oil. This rising import bill, namely for fossil-fuel imports, is exacerbated because of the lack in nuclear energy. Therefore, while it may seem naive to enter a new sector without established experience, Noda has made a cogent case for the world to support Japan in its efforts. It will certainly be the first Asian country to look towards eco solutions (for the record, Asia claims three of the top eight polluting countries— Japan is at five). While Japan may be facing a different type of “resource-curse,” it was able to prosper once through its innovation— a clear, although potentially singular, bright spot as it looks to try its hand at it once more.