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The View | As China fights Japanification, Tokyo should look in the mirror
- For all the talk of China’s urgent need to take action to avoid Japan-like lost decades, Japan itself should take heed of lessons from the past 25 years
- Both Tokyo and Beijing must boldly undertake reforms, encourage consumption over saving and tackle inefficiencies to weed out ‘zombie’ companies and sectors
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The most tantalising question in global economics is which nations are at risk of a Japan-like lost decade? China, of course, is the top candidate for this dreaded “Japanification” trajectory, whereby growth and inflation flatline year after year.
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South Korea often comes to mind among economies at risk of a prolonged funk. So do nations as varied as the UK and India. But what if the place that most needs to internalise the lessons from Japan these past 25 years is, in fact, Japan?
Look no further than Tokyo’s continued obsession with keeping the yen weak to support exports and corporate profits. With the world watching, both Prime Minister Fumio Kishida and Bank of Japan (BOJ) governor Kazuo Ueda are welcoming the yen’s drop to 150 to the US dollar – and perhaps 160 next.
There are the perfunctory warnings that speculators shouldn’t test Tokyo and that Kishida’s team won’t tolerate “excessive” yen moves. Yet it’s not sizeable moves that Tokyo abhors, just those that boost the yen in ways deemed to hurt competitiveness.
There is a huge problem with this strategy: it’s the same one Tokyo has pursued since the mid- to-late 1990s. It is also at the heart of why Japan has never quite shaken off two-plus decades of negligible growth, stagnant wages and fallout from China surpassing it in gross domestic product terms.
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Can China learn lessons from Japan’s ‘lost 30 years’?
Can China learn lessons from Japan’s ‘lost 30 years’?
One can point to myriad reasons Japan Inc. refuses to raise its game. They include a change-averse political system, epic bureaucracy standing in the way, a sense of national pride that Tokyo does economics better than anyone and changing governments too often for big reforms to get implemented.
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