Canadians are coming to recognize that the balance of power in the international economy is shifting inexorably toward Asia. Already home to three-fifths of humanity, the next two decades will see Asia grow to account for half or more of global output.
In recent years, much attention has been given to the implications of rapid economic growth in China and India, and to the emergence of these and other Asian countries – Korea, Vietnam, Indonesia – as expanding markets as well as important participants in global supply chains.
Often overlooked in discussions of what some refer to as the “Asian century” is the country that, until recently, was largest economy in the region: Japan. Interest in Japan by Canadian policy-makers and business decision-makers has been eclipsed by excitement over other, faster growing Asian countries.
The past two decades have been unkind to Japan, as it has grappled with natural disasters, a long period of economic malaise following the collapse of its stock and real estate markets in the early 1990s, deteriorating public finances, and the onset of negative population growth.
Many in North America and Europe appear to believe that Japan no longer matters. But it would be a mistake to discount the Land of the Rising Sun.
Consider, first, that Japan is still the third-biggest national economy, behind the United States and China. It is also a prosperous one: per capita gross domestic product stands at US$34,000, using purchasing power parity exchange rates. This puts Japan ahead of most European countries and makes it almost five times richer than China (US$7,600) and 10 times more affluent than India (US$3,500). The country is highly productive, with a well-educated population, strong manufacturing sector and modern infrastructure. Over the two decades from 1990 to 2009, Japan outpaced all other G7 economies in productivity growth, despite its well-advertised macroeconomic and structural problems.