What the world can learn from Japan

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December 11, 2021

Two stories about Japan are often told. The first is a nation in decline, with its population shrinking and aging, and its vitality depleted. The second is a seductive, hyperfunctional, somewhat eccentric community – a nice place to eat sushi or explore exotic subcultures, but with a slightly broader connection to the outside world. Both tales lead people to turn a blind eye to Japan. This is a mistake.

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As our special report this week argues, Japan is no exception — it’s an omen. Many of the challenges you face are already affecting other countries, or soon will, including rapid aging, secular stagnation, the threat of natural disasters, and the risk of falling between China and America. The fact that some of these problems hit Japan early makes it a useful laboratory to monitor their effects and work out how to respond to them.

One lesson is that societies must learn to live with risks. With climate change and the spread of natural hazards, countries must be able to recover from shocks. The traumatic experience has led Japan to invest in resilience. Bridges and buildings are retrofitted to make them earthquake-resistant. After a major earthquake hit Kobe in 1995, leaving many without water, the city set up an underground system to store a 12-day supply of residents.

Many Japanese understand that disaster response is everyone’s problem, not just the country’s. And that helped during the pandemic: Wearing masks was almost commonplace. Among the G7 countries, Japan has the lowest death rate from coronavirus and the highest rate of double vaccination.

Another lesson is that demography matters. Most societies will age and shrink like Japan. By 2050, one in six people in the world will be over 65, compared to one in 11 in 2019. The population of 55 countries, including China, is expected to decline between now and 2050. Data show Recent reports indicate that India will shrink sooner than expected.

Like climate change, the demographic is broad and gradual and seems abstract – until it isn’t. And like climate change, it requires a shift in both institutions and individual behaviour. Staying active for longer is essential. The Japanese government is urging companies to keep employees until they reach the age of 70. And many remain: 33% of 70-74-year-olds have a job now, up from 23% a decade ago.

Demographic change brings significant economic challenges. Japan owes its slow growth in large part to its shrinking population. However, if you look at the well-being of the individual Japanese people, the picture is more rosy. In the decade from 2010 to 2019, Japan enjoyed the third highest average per capita GDP growth rate in the G7, after only Germany and America.

Japan is a major creditor and the third largest economy at current exchange rates. Its people live longer than the citizens of any other country. It is home to the largest tech investor on the planet, a leading 5G company, and a host of global brands, from Uniqlo to Nintendo. Expertise in robotics and sensors will help its companies make money from a wide range of new industrial technologies. Geopolitically speaking, Japan plays a pivotal role between China, its largest trading partner, and America, its main security partner. In short, it shouldn’t be a universal afterthought.

Japan’s mistakes offer another set of lessons. Living with so many risks makes prioritizing more difficult. Faced with many potential dangers, Japan has taken its eyes off climate change, the largest ongoing disaster ever. In 2020, it finally pledged to reach net zero carbon emissions by 2050, but the details are imprecise. Politicians pin their hopes on restarting nuclear plants that were halted after the collapse of Fukushima in 2011; This is unlikely as long as the public overestimates the dangers of nuclear power. Meanwhile, many bureaucrats remain stubbornly skeptical about renewable energy. So Japan continues to burn coal, which is the dirtiest fuel.

One way to deal with shrinking population is to get the most out of people. Japan will never live up to its potential while many of its highly educated citizens are denied the opportunity to live up to their potential. Seniority-based promotion in traditional companies, combined with excessive respect for gray hair, silences youth voices and stifles innovation. That is why many of the brightest recent graduates prefer to work in startup companies. Japan has done a good job of getting more women into the workforce in recent years, but they still have very few opportunities to rise. The dual-track system of work traps young men and women in precarious part-time jobs (which, among other things, makes them less eager to have children).

Politicians tolerate all this in part because they don’t feel much pressure to do otherwise. The Liberal Democratic Party has remained in power almost uninterruptedly since 1955, thanks to a pathetically weak opposition. VIPs, usually senior men of political dynasties, are more conservative than the audience they are supposed to represent. For the common people, in turn, the comfort of today mitigates the impulse to push for a brighter tomorrow. The final lesson for Japan concerns the danger of inaction. ■

This article appeared in the “Leaders” section of the print edition under “What the World Can Learn from Japan”

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