Following the start of a recession in March 1991 triggered by the burst of economic bubbles, the Japanese economy’s real-term growth rate remained exceptionally low at an annual average of 0.9 percent through fiscal 2013, which ended at the end of March this year.
This is in stark contrast with an average 9.4 percent high growth that the Japanese economy achieved almost uninterruptedly during the period of from fiscal 1958 through fiscal 1973.
What put an end to the high economic growth was the oil crisis of October 1973, which sent shocks throughout the world. During the ensuing fiscal 1974, the Japanese economy experienced negative growth for the first time since the end of World War II with dark clouds hanging over its path.
Even so, Japan had sufficiently strong fundamental economic potential and managed to maintain an average annual growth rate of 4.2 percent from fiscal 1974 through fiscal 1990.
A driving force behind this growth was a steady increase in automobile ownership. A passenger car weighing 1 ton or more is not just a big chunk of steel and other materials. Its engine consumes a large amount of gasoline, serving to create new employment opportunities at gas stations lined up along major streets. The benefits from the growing car ownership also extend to nonlife, property insurance companies. Thus, automobiles created a significant economic ripple effect.
The percentage of Japanese households owning automobiles jumped from a mere 10 percent in fiscal 1965 to 80 percent in fiscal 1991. After hitting a peak of 87 percent in fiscal 2003, the figure has remained below the 85 percent level. It is forecast that the rate will fall to 80 percent in fiscal 2014, which ends at the end of next March.
The costs of having an automobile in Japan are quite high, as owners have to pay annual local taxes, insurance, and registration and inspection fees, and often have to rent a parking space. This, coupled with the aging population and loss of enthusiasm for owning cars among younger people, seems to indicate that car ownership ratio in Japan will level off around the middle of the 80 to 90 percent range.
The saturation of the auto market can appropriately be regarded as one of the major causes of the protracted virtual zero-growth of the Japanese economy since the post-bubble recession in March 1991 attributable to the burst of bubbles in 1990, which was accompanied by a sharp fall in stock prices.
Most of the products that have spread among consumers in and after the 1990s have been digital items. But their ripple effect among different industries is extremely small. For example, benefits from increased sale of smartphones are limited to component manufacturers. Although mail order firms may enjoy some benefit, it is offset by the negative impact on ordinary retailers.
The growing use of smartphones has also adversely affected newspapers, publishers, television stations, personal computer manufacturers, postal services and fixed-line telephone operators. Moreover, major Japanese manufacturers of smartphones have fallen behind their American and South Korean competitors and are also being caught up fast by those from Taiwan and China.
To make matters worse for Japan, the operating systems of personal computers, tablets and smartphones are virtually monopolized by the United States. In short, the frailty of Japan’s international competitiveness in the field of digital products is the most fundamental factor that has made the country plunge into an age of zero economic growth.
It also should be noted that Japan imports far more than it exports in the fields of not only agricultural, forestry and fisheries but also pharmaceuticals and medical equipment.
In view of these prevailing circumstances, it does not take much imagination to understand how difficult it is to work out an effective growth strategy.
As I’ve previously mentioned, for more than two decades the Japanese economy grew very little. But this has not done any damage to a variety of conveniences and comforts we enjoy in our daily life — the factors that should be regarded as the fruit of economic growth.
On the contrary, the progress made in information and communications technologies has provided us with a large number of convenient and useful equipment. Thanks to them, we can now see and hear the latest news anywhere, anytime. Smartphones instantly let us look up a Japanese-language dictionary, an English-Japanese dictionary, a Japanese-English dictionary, an encyclopedias, a train timetable or a map showing one’s position.
Information and communications technologies have increased the conveniences and comforts of our living to an unprecedented level while the nation’s economy remained stagnant.
Nor would it be an exaggeration to say that the progress made in medical technologies during the past 20 plus years is epoch-making. Healthy society characterized by long life expectancy is being built thanks to them.
It appears that while progress in information, communications and medical technologies has elevated the convenience and comfort in people’s lives, they have made little contribution to the growth of the nation’s gross domestic product.
As the administration of Prime Minister Shinzo Abe appears to be seeking to usher in once again an age of high economic growth, I would like to point out the following three things:
(1) There is little or no prospect for the advent of durable consumer goods having a far-reaching ripple effect on various industries and serving as a driving force for economic growth as automobiles once did.
(2) Japan’s international competitiveness is weak in the field of software, which includes computer operating systems, fine arts, literature, legal and financial services and education.
(3) Economic growth is neither a necessary nor a sufficient condition for achieving affluence — that is, convenience and comfort in people’s lives.
Takamitsu Sawa is president of Shiga University.
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