The economy of Japan is the third largest national economy in the world after the United States and the People's Republic of China and is the world's second largest developed economy. According to the International Monetary Fund, the country's per capita GDP was at $34,739 or the 25th highest in 2011. Japan is a member of Group of Eight.
Since Japan’s economic problems result from its social problems, their solution will require changes in Japanese attitudes toward women’s roles, immigration and sustainable resource use.
In the past, Japan went through drastic changes:
1.) Meiji Restoration, which began in 1868
2.) Forced to open ports by Commodore Perry in 1853-1854
3.) Abandoned its shogun leader, samurai class, feudal land system and ban on guns.
4.) Adopted a constitution, cabinet government, national army, industrializatoin, European-style banking system
Japan still has room to grow socially, but will they be willing to take on future changes? Throughout centuries, Japan has kept its language, writing sytem and most of its culture, and is the first, according to this article, "Non-western country to rival the West in wealth and power."
Japan illustrates the opposite policy mix--relying on increasingly costly "fiscal stimulus" plans, hoping that would offset the Bank of Japan's general unwillingness to accommodate the domestic and global demand for Japanese cash.
If the Bank of Japan (BOJ) had been using either inflation, nominal GDP, or exchange rates as targets, the BOJ surely could and would have expanded the growth of money through larger open market purchases or through the foreign exchange desk (Meltzer 2000).
An economy that is in a liquidity trap, says Bartlett in this journal, "monetary policy is impotent." Instead, an aggresive policy to circulate the money in the market, and not in bank accounts, is essential to raising the spending among consumers. There is a inverse relationship when governments have a budget surplus--people saved less, whereas when governments had a deficit--people's savings increased.
Unfortunately the root causes of Japan’s problems are common: social insurance programs and entitlements that made sense when lifespans are relatively short and each new generation is larger than the old one no longer make financial sense as lifespans extend and families shrink.
As technology and medicine is helping us to live longer, the government should look into new policies to improve the insurance programs and entitlements. In Japan, the birth rate has been declining, where there are not enough born to replace those who passing away. This has a negative impact to the labor market, which has a negative effect on businesses, because there are fewer consumers.
"Speaking generally, exports have been the weakest link in recent data, and the direction exports take will be key for economic recovery," said Jun Kawakami, market analyst at Mizuho Securities.
Japan now has "no driver of growth," said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.
Exports, consumption and business investment, crucial components of the economy, recorded their sharpest falls in multiple quarters, the Cabinet Office said.
Historically, from 1960 until 2011, Japan GDP per capita averaged 26,843.3 USD reaching an all time high of 40,707.0 USD in December of 2007 and a record low of 7,117.8 USD in December of 1960.
Per capita GDP is a measure of the total output of country by taking the gross domestic product (GDP) divided by the population in the country. If this number increases, it is signaled as growth in the economy and translate as an increase in productivity. In a sense, it is used to describe the standard of living--how well off you are compared to others in the world.
In the mid and late 90s, Japan experienced a deep recession that was mainly rooted in a collapse of land and property prices and the aftermath of sovereign debt crises in other East Asian countries.
Japan's "lost decade" of economic stagnation has been dragging on for nearly a quarter century now, but may get much worse. The danger now is of a full-scale financial collapse fueled by a crushing debt burden.