The View

As China fights Japanification, Tokyo should look in the mirror

For all the talk of China’s urgent need to take action to avoid Japan-like lost decades, Japan itself should take heed of lessons from the past 25 years

Both Tokyo and Beijing must boldly undertake reforms, encourage consumption over saving and tackle inefficiencies to weed out ‘zombie’ companies and sectors

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Drivers fuel their cars at a petrol station in Tokyo on September 22. Japan has, for decades, suffered timid investment trends, sluggish income growth and a dearth of risk-taking. Photo: EPA-EFE

William Pesek is a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades”.

Published: 3:30pm, 4 Oct 2023Updated: 5:18pm, 4 Oct 2023

The most tantalising question in global economics is which nations are at risk of a Japan-like lost decade? China, of course, is the top candidate for this dreaded “Japanification” trajectory, whereby growth and inflation flatline year after year.

South Korea often comes to mind among economies at risk of a prolonged funk. So do nations as varied as the UK and India. But what if the place that most needs to internalise the lessons from Japan these past 25 years is, in fact, Japan?

Look no further than Tokyo’s continued obsession with keeping the yen weak to support exports and corporate profits. With the world watching, both Prime Minister Fumio Kishida and Bank of Japan (BOJ) governor Kazuo Ueda are welcoming the yen’s drop to 150 to the US dollar – and perhaps 160 next.

There are the perfunctory warnings that speculators shouldn’t test Tokyo and that Kishida’s team won’t tolerate “excessive” yen moves. Yet it’s not sizeable moves that Tokyo abhors, just those that boost the yen in ways deemed to hurt competitiveness.