Since the Fukushima nuclear disaster triggered by
the giant tsunami that hit Japan in 2011, the country has gone through a
difficult transition as a developed country and as one of the global economic
leaders. As of 2012, Japan had the third highest GDP in the world but
placed as the top nation with the greatest deficit in its national budget.
Several primary factors have brought about the
present economic
challenges of Japan in relation to the global market which used
to be its primary source of its wealth, if not its virtual playground, from the
1960’s to the 1980’s. Here are the reasons for its economic woes at present.
1. Decrease in consumer confidence
Almost every country that experiences a calamity
suddenly undergoes a period of depression, both economic-wise and socially.
That is an obvious result to such devastating causes that can disrupt the
natural, political and social environment, as well the human infrastructure
needed for the delivery of essential public and private services. Business
activity slows down as well as the consumption of non-essential goods. People
prefer to save whatever resources they have for their daily survival needs.
As things improve, however, as they must have
already done so in the interim in Japan, people might become more upbeat. Other
factors, nevertheless, complicate the situation, as we can glean from the other
factors that continue to challenge Japanese society.
2. Unbalanced Demographics
Japan, not unlike many developed and developing
countries such as Singapore, Sweden and others, has a shrinking population with
a big part of which is made up of aging citizens. On the average, Japan has a
ratio of two workers for each retiree, a rather large and unsustainable ratio
compared to its previous more productive years.
This ratio means the government will have a harder
time sourcing out funds to support its growing elderly population while seeking
to address the other side of the equation by enhancing its number of productive
workers that will support and sustain its economy into the future.
3. Energy Insecurity
Ever since the Fukushima event, the use of nuclear
energy to provide power for industrial and general use has greatly diminished.
Energy shortage and power costs have battered the Japanese economy as if it
were a daily tsunami hitting its shores and wreaking havoc over its traditional
role as a powerful economic and trade force in Asia as well as in the entire
globe.
Previously providing one-third of its energy
requirements, nuclear energy has almost lost out totally to other power sources
(coal or gas) which have to be imported; thus, aggravating the economic
landscape that is already bleak as it is.
4. Lack of Confidence in Political Leadership
Until Prime Minister Abe came out with policies to
revive the Japanese economy, the post-Fukushima scenario was a period of gloomy
outlook for the nation’s economy. Inviting local and foreign investors to
rejuvenate the dwindling economy in the face of natural and global economic
causes has somehow given new impetus for people to spend more aggressively than
before.
The renewed confidence might just be the signal for
Japan’s recovery in spite of the existing challenges. However, implementation
of new policies and economic thrusts sensitive to the realities of the present
will determine how the nation will fare into the near future.
5. Establishing Productive Trade Relations
One factor that observers have felt must be
addressed is the repositioning of Japan as a more active trade partner with
growing economies in Asia as well as those in the trans-Pacific Region. The
road ahead is not very clear; however, like most nations in general, the
prospects of growth are rife. It could be the right direction that Japan needs
to reinvigorate its economy and reclaim its position as a leader in global
trading.
Rising from the literal ashes of the last world war
to become a world economic power, Japan is not a newcomer in terms of
overcoming great odds and achieving dramatic success and economic development.
The character of the Japanese people has been proven time and time again in the
past. No doubt, the nation will be able to face its challenges with the
cooperation of other nations which share the same challenges. The great nation
that once tried to live as an isolated island separated from the rest of the
world cannot afford to move on without joining the global family of nations
toward a more united, progressive and equitable global community.
Reference: “How can Japan compete in a changing
global market?”, A round table report, Clara Gillispie.
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