Japan: Lesson from History

• 1980s: Japan was destined for superpower status, economically speaking. Per Capita GDP was greater than that of the UK and USA by 1980 and it was a world leader in exporting exporting consumer electronics, ICT, cars and industrial machinery to the rest of the world
• Currently: seems that China is the next global superpower but Japan proves a warning against such assumptions
• Economists expected Japan's economy to grow in the 1980s but this id not occur and the economy has barely grown at all since 1995
• Since economic collapse in 1995, the term the 'lost decade' became popular in 2005, but it is now the lost two decades. This occurred because:

  • A property value bubble burst in 1989-90 which caused collapse in Japanese stock market
  • High interest rates of 4-6% encouraged saving rather than spending so economy slowed
  • Ageing population became a problem hence further slowing economy
  • More competitive Asian economies e.g South Korea and then China overtook Japan's lead on hi-tech goods for consumers