Japan's 21st Century Vision.

(From Journal of Japanese Trade & Industry (JJTI))

Byline: Shirai Sayuri

The 21st century heralds a new age for Japan: one characterized by an aging society with a decreasing population, and by globalization and computerization. On the domestic front, this society will restrain high economic growth rates, so the challenge is to increase productivity and sustain a mild but steady growth rate of 1-2%. On the overseas front, while rapidly growing China and the developing nations are intensifying price competition in the world market, economic integration driven by free trade agreements (FTAs) is progressing at a hectic pace. To avoid being left behind by this wave of globalization and to maintain its position in the global economy, Japan must adopt a new economic strategy for external trade. It has to create a new and vigorous national structure boldly focusing on such new trends and moves to come to grips with the issues of globalization. In particular, we can expect that in 20 to 30 years' time Japan's relative economic and national strength will have diminished in relation to that of China or India, which will catch up with scale of their economies, their plentiful supply of labor, their standard of education and technology, and their growing military power. What needs to be done to ensure Japan's continued economic prosperity and to create a society in which its citizens can live with hope? In this article, I will argue how Japan might take best advantage of globalization.

Can Japan Maintain Its Large Trade Surpluses? Apart from the two oil crises of 1973-1974 and 1979-1980, Japan has managed to maintain consistent trade surpluses for the last four decades. Despite such difficulties of repeated adjustments of the value of yen and the oil crises, Japan's manufacturing industry has proven to be capable of increasing its profitability, implementing energy savings, and producing industries that are truly price competitive on the international market. Also, since the latter half of the 1980s, Japan has succeeded in creating specialized manufacturing processes and moving some production bases to East Asia, carrying out labor-intensive production overseas and thereby reducing overall costs.

Trade surpluses peaked in 1985 (at 4.5% of GDP) before the major appreciation of the yen that followed the Plaza Accord, and while the extent of the surpluses has since then decreased, they are still running at a relatively high level. The 2004 surplus was equivalent to 2.8% of GDP. When the 0.8% deficit for trade-related services such as freight and insurance is included, the goods and services balance surplus equates to ...