Japan as Number Three

The Times of London runs an article, “Don’t write Japan off.” The newspaper's headline unintentionally implies that we should.

Author Bill Emmott used to be the Economist’s Tokyo correspondent. Briefly, here’s Emmott’s case:

➢ China, 10 times Japan’s size, now displacing Japan as the world’s second largest economy is no more a big deal than when Japan, with more than twice West Germany’s population in 1970, displaced that country as economic #2.

➢ China’s economic development is good for Japan. China is already Japan’s biggest trading partner, Japan sells a lot more to China than it buys from it, and Japan’s surplus will grow even more with Chinese currency revaluation.

➢ an obsession with manufacturing at the expense of services is Japan’s main weakness. To help manufacturers, Japan created a two-tier labor market resulting in Japan’s being the only OECD country to increase its absolute poverty level in the past two decades. The second tier also provided service firms a pool of ultra-cheap labor.

➢ Japan has just begun a political revolution that has the potential to bring its economic strength back too. The new government wants to expand the pensions and welfare benefits that help labor and the poor, though that costs money the government may not have.