Embracing the lost art of “creative destruction” will
allow the once booming economy to flourish again.
There is no advanced economy more in need of fixing than Japan. Three decades of economic stagnation have been caused by relatively weak productivity, poor demographics and world-record public debt. This is undermining economic prosperity. South Korea’s GDP per capita has now overtaken that of Japan. And China has overtaken Japan as the world’s leading motor vehicle exporter as Japanese producers have been slow in moving into the electric vehicle space.
The stagnation is also constraining Japan’s commitment to lift its military expenditure, against a background of heightened geopolitical tensions, including among its neighbours North Korea, Russia and China. Umpteen policy recommendations to fix Japan have been made over the years by the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD). And the administration of former prime minister Shinzo Abe (2012–20) adopted an ambitious program for economic revitalisation — dubbed “Abenomics”. But overall, not enough has been done to shift the dials.