- (October 2009)
The decline of Japan.
China is about to pass Japan as the second largest economy in the world.
The change will have dramatic political and psychological consequences.
Politically, it will mark a change from a world economy dominated by the USA
and its allies (Japan and Germany were traditionally the second and third
largest economies) to a world economy that shifts towards a non-USA ally.
Psychologically, it will reverse more than a century during which Japan was
consistently ahead of China. Truth be told, it will take more than a century
before the average Chinese can compete with the wealth of the average Japanese.
The Chinese will remain poor for a long long long time. However, China as a
whole projects the image of an enthusiastic society compared with the
stagnating society of Japan.
Japan never wanted to be a protagonist in world affairs, delegating even its
own defense to the USA. But now it will have no choice: it will become less
and less relevant, overshadowed by the giant next door.
It is not the economic crisis of 2009 that weighs on their relative importance
(Japan's economy contracted the most since World War II, while China's is
still growing at a fast pace): it's the anemic growth of Japan over the last
twenty years (while China's economy was growing at a rate of almost 10% a years), and presumably for the next twenty, that makes the difference.
China is passing Japan in GPD, and has already passed Japan in trade surplus and foreign currency reserves.
Even the fact that the Chinese remain much poorer than the Japanese might not be
so inevitable: the Japanese got rich during the 1980s when the Japanese yen
skyrocket versus the dollar. A similar fate may push the Chinese currency higher
and make ordinary Chinese people richer and richer.
Of course, we've heard all of this before: in the 1980s it was Japan that was
about to pass the USA. Then reality struck.
Japan failed to create an economy independent of exports. China may find it even
harder to create a domestic economy that does not depend on the willingness of
the USA consumer to buy Chinese goods on credit.
For the time being, though, Japan is bracing for less and less relevance in
Asia, a situation that it has not experienced since it beat Russia a century ago.
TM, ®, Copyright © 2007 Piero Scaruffi All rights reserved.
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