Japan Is Not No.1 Anymore

(Hiroko Ota, Picture: Jijicom)

The Yomiuri Shimbun
Hiroko Ota, state minister in charge of economic and fiscal policy(like Chairperson of CEA), said in her Diet policy speech Friday that Japan was no longer a top-tier economic power.

Observers say it is unusual for a cabinet member responsible for economic and fiscal policy to state categorically that the nation's economic global status has declined.

"In 2006, for the first time in 24 years, Japan's national income accounted for less than 10 percent of the world's total income," Ota said. "Japan's gross domestic product per capita also slipped to 18th among member countries of the Organization for Economic Cooperation and Development."

(Jan. 19, 2008)

Listen, Japanese people! "YOU ARE NOT NO.1 anymore!! "

Well said, professor Ota!! (She used to be a professor of graduate school.)

I think that the Japanese people should have a sense of impending crisis. The Japanese people should know that they are not in the top-level economy. Certainly, GDP is not only the statistics that shows the performance of the economy as a whole, but is a very important and easy to watch the economy. Here's the world GDP.

The Japanese economy is now declining: The population is aging and decreasing, that is, there're more older people and less younger people living in Japan. Therefore, the government expense of the medical treatment for old people is going up and the medical insurance is also going up.

Moreover, the government budget deficit is growing larger. Then, tax should be raised later on and the pension that old people collect should be imposed on young people at higher amount, which should make young people consume less.

The result is very, very clear: The people working consume less to pay high tax, medical insurance and pension, thus the economy as a whole should be decreasing. The less people consume, the less firms invest, and the less people consume further; Japanese economy goes to the possible low-welfare equilibrium.

What should the Japanese people do? Sorry, I have no idea, but it would be better for Japan to accept many foreign companies and workers who want to do a business in Japan. And then, young population in Japan would be increasing and the consumption and investment would also be increasing. However, can Japan do that? I don't know.