This year, Japan will be hosting the Summer Olympic and Paralympic Games for the first time in 56 years. But today’s Japan is far different than the one that hosted the games in 1964.
The 1964 Tokyo Games provided Japan with the best opportunity to demonstrate its reconstruction from the devastation of its defeat in World War II. With its rapid economic development and growing population, it was on a trajectory to become one of the world’s top economic powers. Now a mature advanced economy, Japan faces low economic growth and its rapidly aging and shrinking population raises doubts over the sustainability of its economy and social security system. The estimated number of newborns in 2019 is 864,000 — dipping below 900,000 for the first time since the government began taking relevant statistics 120 years ago.
The Olympic year should provide each of us not just the excitement of hosting the games for the first time in more than half a century, but a chance to reflect on the state of the nation and how we must respond to the multitude of challenges it faces.
On the political front, the administration of Prime Minister Shinzo Abe — who pledged to tackle the aging and shrinking population as a “national crisis” — has entered its eighth year, with Abe now the longest-serving prime minister in the nation’s history. Along with the lack of potential rivals in both the weak opposition camp and the ruling Liberal Democratic Party after an uninterrupted wins in major elections under his watch, what supported Abe’s long-running administration was the economy — which is deemed by the government to be in its longest boom cycle in postwar history.
At the same time, structural problems including the shrinking and aging population have bred an underlying weakness in consumer spending, leaving the economy’s growth still fragile even after the extended recovery. The performance of big companies, which for years enjoyed record profits due to the weak yen and robust demand in overseas market, is slowing down with the decelerating growth of world economies amid the bitter trade war between the United States and China. Listed companies are expected to report falling profits in their business year to March for the second year in a row — for the first time since the global recession more than a decade ago.
The consumption tax hike in October is widely believed to have plunged the GDP growth into the negative territory in the last quarter. The Japanese economy is indeed at a crossroads as we enter 2020. The prime minister’s signature Abenomics policy has relied heavily on the Bank of Japan’s massive monetary stimulus and the government’s aggressive fiscal spending — which were initially meant as short-term measures to end deflationary pressures. On the other hand, the administration’s track record of addressing structural problems — such as tackling the demographic woes behind the low growth and exploring new avenues of growth through regulatory reforms — remains poor.
The rise in share prices under Abe’s watch — the Nikkei index on the Tokyo Stock Exchange ended the 2019 trading on a 29-year high at yearend — and the much improved picture of the job market — with the latest unemployment rate at 2.2 percent and the ratio of job openings to job seekers near decades-long high — have been hailed as the key fruits of Abenomics. However, the 2 percent annual inflation target set by the government and the BOJ to bust deflation remains nowhere in sight.
There are multiple factors behind the nation’s aging population, but a key solution lies in creating social and economic conditions that dispel the economic uncertainties of young people that deter them from marrying and having children. Policy measures have been pledged to make that happen, but data show that the efforts have been insufficient to bring tangible results.
By the time the Tokyo Olympic and Paralympics Games are over, there will be roughly a year left before Abe’s tenure as LDP president comes to an end in September 2021 — unless party rules are changed again to allow him to run for another three-year term. Talk abounds that Abe might dissolve the Lower House for yet another snap election this fall — or even earlier in the year. 2020 is also the year that Abe has said he wants to see the Constitution amended — his long-cherished political goal. How Abe spends his political capital during his remaining time in office may be up to the prime minister himself, but he needs to consider whether amending the Constitution is truly a priority given the pressing economic and demographic challenges confronting the nation in the new year.