The Japanese Economy: A Rebirth
For the past quarter of a century, Japan has become caught in a spiral of economic stagnation - commonly called the “lost decades”. During this time, according to Japan Inside, the economy had only grown by 0.9% per year between 1992 and 2022. In contrast, the US economy averaged 2.2% growth rates and China’s was in the double-digits. Yet, much like the exuberant and lively characters of Japanese anime that draw millions' eyes, Japan’s workforce has also become dynamic- changing jobs and spending more money.
Economically, it really isn’t hard to see why its economy has grown. Naturally,
an increase in exports and slight inflation cause consumers to spend more. Yet, why didn’t this happen 20 years ago? The Japanese asset bubble burst in the early 1990s, causing a dramatic decline in asset prices, with the Nikkei 225 index plummeting from 38,921 in January 1990 to 21,902 by December 1990 according to data from Yahoo Finance UK, and real estate values experiencing a similar sharp downturn. This event - the Lost Decades - left profound scars in the hearts and minds of the Japanese economy.
Since the 2000s, Japanese companies and citizens have saved money in droves, which naturally reduced the money available in the economy. Additionally, a decrease in the economic activity of housewives - currency traders known as “Ms. Yamamoto’s” - further decreased disposable income according to Japan Insides.
Yet recently Japan's economy has experienced a rise in inflation, and for the first time in three decades, economic analysts have placed year-on-year growth above 3%. This growth has coincided with a monumental boom in tourism to the island chain.
Tokyo, the world’s largest urban metropolis , has experienced a meteoric rise in tourism. Budget airlines such as Zipair have made travel across the pacific more affordable. On the other hand , luxury high-end travel has also increased thanks to Japan’s high quality attention to detail and service.
Japan, unlike Europe and the U.S., also has less stringent requirements for Chinese travelers and is also much closer - leading to many more travelers from the most populous country in the world. The central bank of Japan has also increased the value of the Yen, for the first time since 2016.
Japan has always been a powerhouse in technology and high-end manufacturing. According to a study using the Smiley-Face curve - a curve in business studies showing the distribution of wealth from global value chains - Japan received the most money as a percentage of iPhone sales despite the iPhone never being constructed on its shores.
The rise of Artificial Intelligence has also boosted Japan’s economy. Along with China, the US, and Israel, Japan has some of the highest numbers of AI startups in the world, defining its position as a global leader in this rapidly growing field.
Japan's economy is showing signs of recovery after decades of stagnation, driven by increased tourism, a weaker yen, export growth, and advancements in technology and AI. This revival comes after the "lost decades" following the 1990s asset bubble burst.
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