Where Is the Forgotten Giant Heading to? The Current State and Future of Japanese Economics and Politics

Abstract

An old Japanese proverb portraits Japan’s situation fairly well: “Ten wa ni butsu ataezu”—“Heaven does not give two things”. On one hand Japan is blessed with many ingredients of success. It has a well-developed business culture, is an industrial power with global reach, equipped with a first class bureaucracy and financial strength. To be sure, a highly developed industrial country like Japan needs all of that, especially as it sees itself confronted with unfavourable demographics. The country’s population will shrink to less than 100 million in a few decades which will mean a smaller domestic market, less manpower, higher public debt and rising social costs. What to do? As will be sought to explain below, economically, Japan must stay on the higher edge of the ‘Smiley’s curve’ and focus on products and services with the highest possible added value. Japan is equipped with the instruments, manpower and know-how to do all of that although we should always keep in mind that “history is sometimes the result of mistakes” as the saying goes.