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Japan’s Economic Decline: From “Economic Giant” to “Political Dwarf”

  The recent remarks made by the famous economist Yukio Noguchi have once again aroused Japanese society’s great concern about its economic decline. Noguchi pointed out that Japan’s per capita gross domestic product (GDP) ranking is declining rapidly, falling to 27th among 40 developed economies in the world, and is on the verge of being kicked out of the ranks of developed countries. In fact, Noguchi is only concerned about per capita indicators. If we focus on aggregate indicators, the decline of Japan’s economy is even more obvious, and whether it is viewed from the long-term trend, current trends, or future trends, it is showing an increasing trend.
  Long-term Trend: The Lost Thirty Years After World War II, Japan once created the “myth” or “miracle” of sustained and rapid economic growth. In the 1950s and 1960s, it lasted for 20 years and reached double digits. of rapid growth. Even in the 1970s and 1980s, it still maintained an obvious growth advantage in the world, especially in Western developed countries. Based on this, after its comprehensive economic strength surpassed West Germany and the Soviet Union and ranked second in the world, it began to accelerate to catch up with the United States. By 1995, its GDP converted at nominal exchange rates (the same below) once rose to 72.6% of that of the United States. It accounts for 3/4 of the total U.S. economy. By 1990, Japan’s total GDP was eight times that of China, while its total population was only about one-tenth that of China. This means that its per capita GDP was as high as 80 times that of China!
  But in the 1990s, the giant bubble that had inflated crazily in the second half of the 1980s suddenly burst, and the Japanese economy fell into a long-term depression known as the “Lost Thirty Years”, from which it has still not been able to get out. During this period, Japan’s economic growth rate declined sharply, and the gap between Japan’s economic aggregate and the United States rapidly widened. By 2022, it had dropped to only 1/6 of that of the United States. Especially in 2010, its total GDP was surpassed by China for the first time, and its second position in the world was lost. By 2022, it will drop to one-quarter of China’s.
  Current trends: House leaks coincide with continuous rain. The epidemic caused the global economy to encounter the most serious recession since the Great Depression in the 1930s in 2020. However, in 2021, it formed the strongest recovery after all post-war recessions. In the new round of global economic recovery, Japan has failed to keep up, and instead its economic decline has intensified again. In 2021 and 2022, Japan’s real GDP growth rate is only 2.2% and 1.0% respectively, which is not only 4.1 and 2.5 percentage points lower than the global average growth rate, but also 3.4 and 1.6 percentage points lower than the average growth rate of developed countries. Japan’s real GDP growth rate in 2021 is 3.7 percentage points, 6.2 percentage points, 1.0 percentage points and 6.9 percentage points lower than that of the United States, China, Germany and India respectively. In 2022, it will be 1.1 percentage points, 2.0 percentage points, 0.8 percentage points and 7.2 percentage points lower respectively.
  To make matters worse, because the economy is too sluggish, when Europe and the United States continue to “aggressively raise interest rates” in response to inflation, Japan has to bear inflationary pressure and is forced to continue to endure ultra-low interest rates without daring to follow up on interest rate increases. As a result, Japan The yen depreciated rapidly. Only half a year after the Federal Reserve began to “aggressively raise interest rates” in March 2022, the Japanese yen depreciated by about a quarter against the US dollar. The obvious disadvantage in terms of growth rate, continued high prices, and rapid depreciation of the yen have caused unbearable “triple suffering” to Japan. The economic decline has intensified unprecedentedly: on the one hand, it is being pulled further and further away by the United States and China; on the other hand, it is being pulled further and further away by the United States and China; Germany and India are getting closer and closer. In 2020, Japan’s total GDP was equivalent to 24.1% and 34.1% of the United States and China respectively. In 2021, it has dropped to 21.5% and 28.2% respectively. In 2022, it has dropped to 16.6% and 23.7% respectively. In two years, it has dropped by 7.5%. and 10.4 percentage points. In 2020, the total GDP of Germany and India was equivalent to 76.9% and 52.9% of Japan respectively. In 2021, it increased to 85.4% and 62.8% respectively. In 2022, it increased to 96.4% and 78.1% respectively. In two years, it increased by 19.5 and 19.5% respectively. 25.2 percentage points!
  Future direction: Ranking continues to decline. Noguchi focuses on per capita indicators because he is worried that Japan will be kicked out of the ranks of developed countries. At present, Japan’s per capita GDP is not only at the bottom among the Group of Seven, but is also being surpassed by the “Four Asian Tigers” around it. It is not only “looked down” by the traditional powers in Europe and the United States, but also “underestimated” by the rising stars around it. And if we pay attention to the total indicators, Japan’s ranking in the global economic landscape will further decline in the future, which can better reflect the future trend of its economic decline. According to the latest forecast of the International Monetary Fund, Japan’s total GDP will be surpassed by Germany by 2025, and its global ranking will drop from third to fourth. By 2026, it will be surpassed by India and dropped from fourth to fifth. This means that in five years, the economic strength of the major countries will be re-ordered: the United States first, China second, India third, Germany fourth, and Japan fifth.
  Noguchi placed the time when Japan’s economic decline intensified in 2012, when “Abenomics” began to be implemented, emphasizing that the Abe government’s excessively loose monetary policy led to the continued decline of the Japanese yen exchange rate, which was the main reason for the sharp decline in Japan’s per capita GDP ranking. Of course, it is also due to the continued sluggish economic growth. Although “Abenomics” has long been replaced by Kishida Fumio’s “new capitalism”, Japan’s economic decline has not been able to reverse or alleviate, but has further intensified. What the international community has seen is that while the Kishida government has made no achievements in revitalizing the domestic economy, it has increasingly shifted its strategic focus to the political and diplomatic level, trying to use the U.S.-Japan alliance and the “Indo-Pacific Framework” to accompany the United States to contain China and enhance its international political status. When Japan’s economy was at its peak, the international community mostly evaluated Japan as an “economic giant and political dwarf.” However, as the economic decline continues to intensify, the “economic giant” has long since faded, and Japan’s international political status is even more difficult to maintain through the above methods promote.

The recent remarks made by the famous economist Yukio Noguchi have once again aroused Japanese society’s great concern about its economic decline. Noguchi pointed out that Japan’s per capita gross domestic product (GDP) ranking is declining rapidly, falling to 27th among 40 developed economies in the world, and is on the verge of being kicked out of the ranks of developed countries.

Japan’s economic decline is a complex issue with deep roots. The country’s once-dominant industries, such as electronics and automobiles, have lost their competitive edge, and its aging population is a drag on economic growth. Additionally, Japan’s government has struggled to implement effective economic policies, and its political system is often gridlocked by factionalism.

The consequences of Japan’s economic decline are already being felt. The country’s standard of living is falling, and its social safety net is under strain. Japan is also becoming increasingly reliant on foreign capital, which makes it vulnerable to external shocks.

If Japan is to reverse its economic decline, it will need to undergo a fundamental restructuring of its economy. This will require bold leadership, difficult reforms, and a willingness to embrace change. However, if Japan fails to act, it risks becoming a second-tier economy, with diminished global influence and a bleak future.

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