1) Lost in the “lost decades”
Nearly two decades after the asset price bubble burst in the early 1990s, and buffeted by 2008 financial crisis, Japan’s economy has failed to recover. There was a record-breaking 11.5 trillion yen full-year trade deficit in 2013. Japan also has the world’s heaviest debt burden of 1 quadrillion yen, giving it an approximated 140 percent debt-to-GDP ratio. Prime Minister Shinzo’s economic policies are so far failing to reboot the Japanese economy going into 2014.
Credit Suisse downgraded its economic growth outlook for Japan in 2014 from 2.2 percent to 1.6 percent. In January alone, there was a 2.79 trillion yen trade deficit. The Topix stock index is down 7 percent so far in 2014. Even though the 18 percent drop in value of the Japanese yen against the US dollar this past year has helped Japan’s car companies, it has inversely raised the cost of imported products for the average Japanese household. The Japanese consumer is also facing a new sales tax coming into effect in April, raising the tax from 5 percent to 8 percent. Japan’s trade deficit is expected to continue to be negatively impacted by the growing reliance on crude oil: imports went up by 28 percent in January.
2) Abenomics: A bearish proposition
Abe came to power in December 2012 on a new economic platform to reboot the Japanese economy and stem 15 years of deflation, known popularly as “Abenomics.” His platform rests on three tenets: fiscal stimulus, quantitative easing and modest structural reforms.
Abenomics initially raised hopes, with consumer confidence rising to its highest level in six years in May 2013. However, since then consumer confidence has been on the decline based on perceptions of declining income growth, fewer durable goods purchases and slower asset-price growth. January 2014 was the worst month in terms of consumer confidence in Abe’s economic policies since he took office. Base wages fell by 0.6 percent in December 2013, and in the fourth quarter of 2013 the GDP inched up by only 1 percent. A Bloomberg news survey of economists had projected a median forecast of 2.8 percent for this economic year.
Even with these bleak numbers, Abe is pushing forward with his economic policies. On February 18, the Bank of Japan introduced new incentives to increase bank lending, and is expected to continue to try to stimulate the economy with further quantitative easing.
3) Fixing the gender gap
Japan has one of the world’s starkest gender gaps in the workplace. Despite more women being at university than men, the employment rate for women is 25 percent lower than that of men. The World Economic Forum’s Gender Gap Report ranked Japan 102nd out of 135 countries. Adding to this, Japan has the worst gender pay gap in the Organization for Economic Cooperation and Development. Japanese women only earn 72 percent of the salary men receive in the same job. Reasons for this gap include cultural traditions, tax policies, working hours and the lack of available childcare.
To address this gap, Abe has sought to increase women’s participation in the workforce with a number of policies. He has promised to create 200,000 new daycare slots by 2015, with an additional 200,000 by 2017. He has asked that companies expand childcare leave to three years and that women hold 30 percent of leadership roles in both the public and private sectors by 2020. Abe is also looking into tax reforms to incentivize women to work and is interested in introducing new training programs for women.
4) Depressing demographics
With one of the highest longevity rates in the world and one of the lowest birth rates, Japan is facing a population crisis. The International Monetary Fund projects that Japan’s working population will decline by 40 percent by 2050, when 38 percent of the population will be above the age of 65. The ratio of the working population to the elderly population will be 1:1. By 2060, Japan’s population will drop to 87 million. One of the main reasons Abe has sought to increase women’s participation in the workforce has been to increase the share of the population working. Increasingly, a smaller and smaller workforce will be required to pay for the pensions of the growing elderly population. Abe hopes his new sales tax will help pay the costs of Japan’s growing pension burden.
5) Skyscrapers to a fault
Japan has been no stranger to earthquakes; the 2011 tsunami and associated earthquake caused substantial damage. Despite this, as a small country with a growing number of people wanting to leave the countryside and live in Tokyo—30 percent of Japan’s population lives in and around the capital—skyscrapers offer a practical housing option. Japan’s roaring economic growth, which reached its peak in the 1980s, helped transform Japan’s metropolises into gleaming cities of skyscrapers. Despite the economic downtown, new skyscraper projects, including hotel and retail developments, are continuing in Tokyo.
6) Technology of globalization
The products of Japanese companies have substantially changed how we live and interact in this globalized world. From car companies such as Toyota to personal electronics companies such as Panasonic and Sony, Japanese companies have made technology both more user-friendly and indispensable to our daily lives. This technology has changed how we interact with one another and also raised our quality of life. Japan’s technological revolution has been one of the main primers of globalization. Without such technology, many parts of the developing world would not be where they are today.
7) Japan and Saudi Arabia: a historic relationship
The state visit to Japan of Crown Prince Salman Bin Abulaziz marks nearly 60 years of strong bilateral relations and an opportunity to further deepen relations as these two states look towards the future. Japan’s relations with Saudi Arabia began a century or so ago, when a Japanese Muslim went on Hajj. The first official contacts began in 1938 when Hafiz Wahba, a Saudi envoy, visited Japan for the opening of the Tokyo mosque. In 1939, a Japanese envoy met with Ibn Saud in Riyadh. Japan and Saudi Arabia established diplomatic ties in 1955, and the late Crown Prince Sultan Bin Abdulaziz visited the state in 1960. Since then, the relationship has deepened on a number of levels, with frequent visits by both governments’ leaders and ministers. A growing number of Saudi students come to Japan every year to study.
8) Japan and the Middle East
Japan’s energy security rests on its relations with the Gulf. Japan receives the majority of its crude oil from Saudi Arabia, and in fact imports more crude oil from the Kingdom than any other country in the world, and is also the main purchaser of natural gas from Qatar. With the suspension of its civilian nuclear program following the 2011 Fukushima disaster, Japan will depend further on these states’ energy exports. Japanese companies, including those in the car industry, have also sought new customers in the region. A popular TV children’s show about Sinbad shown on Saudi TV in the 1980s was produced in Japan.
Importantly, Japan is a substantial provider of humanitarian aid to the refugees from Syria’s conflict. It has provided more than 100 million US dollars of assistance to the UN High Commissioner for Refugees and to regional states’ aid agencies.
9) A center for Middle East scholarship
A number of Japanese universities have vibrant Middle-East studies programs including the University of Tokyo. The Institute for Energy Economics Japan has a strong record of scholarship on the political economy of the region. Japan’s diplomatic service has an impressive number of diplomats fluent in Arabic. Several Japanese students study in Iran. Takashi Hayashi is one of Japan’s most noted academic experts on the region and has travelled frequently to Saudi Arabia and Numi Tsujigami is Sultan Qaboos Professor of Middle East Studies at University of Tokyo.
10) Tokyo 2020, or the “Abe’lympics”
Japan was recently chosen to host the Summer Olympics in Tokyo in 2020. The first time they were held in Japan was in 1964, in Tokyo. Japan will be the only Asian nation to have hosted the Summer Olympics twice. Iraqi–British architect Zaha Hadid will design the new National Olympic Stadium.
Abe hopes the Games will showcase the emergence of a revitalized and re-energized Japan. “We’ve got a great chance to make Tokyo and Japan shine,” he said in September 2013. “I want to overcome 15 years of deflation. Hosting the Olympics and Paralympics will have good effects on a wide range of areas such as infrastructure and tourism.”
Abe hopes the Olympics will further stimulate economic investment and consumer confidence in Japan. The Japanese government expects that the country will receive a 0.3 percent boost in GDP from the Games in 2020. Some economic analysts have referred to it as the fourth component of Abenomics. The Games will also usher in a new construction boom in Tokyo to prepare for the event. However, all this runs the risk of adding to the country’s debt and, like Abe’s economic reforms, the Games could fall short of expectations.