This newspaper's journalist, Zhou Zihoon.
In recent days, the International Monetary Fund (IMF) has forecast in the World Economic Outlook that, in dollar terms, Japan ' s nominal GDP in 2023 will be about $4.23 trillion, while Germany, which is about to surpass Japan, will be about $4.43 trillion, meaning that by 2023 Japan ' s economy will be surpassed by Germany, from third to fourth in the world. At the same time, the IMF expects India to be the fourth largest economy in the world by 2026 and Japan to decline to the fifth economy between 2026 and 2028.
This is not empty. In recent years, Japan’s economy has faced bottlenecks and lost realities – high inflation, increased fragmentation between rich and poor, high ageing of small children, continued decline in real wage earnings, continued weakening of the yen, declining industrial competitiveness, and inadequate innovation in new and emerging technological industries – which have plunged the country’s economy into recession. Japan's Minister of Economy, Industry and Development, Kakushi Nishimura, stated, “Japan's economic growth potential is indeed lagging behind and still falls short”.
The yen softened is a good observation window. In the near future, the yen has fallen to its lowest level in a year against the United States dollar. On 25 October, JPY 150.23 against the United States dollar was the highest since August 1990. In addition, on 26 October, Japan ' s 10-year national debt return rose by 3 basis points to 0.880 per cent, the highest since 2013; 20-year national debt return increased by 2.5 basis points to 1.65 per cent; and 30-year national debt return increased by 1.5 basis points to 1.845 per cent.
Japan ' s capital markets fluctuated in relation to the rising interest rates in the United States dollar and the United States. On 25 October, the United States returned to near 5 per cent of its 10-year national debt return, which stood at 4.937 per cent; the 20-year national debt return rose by 5.2778 per cent; and the 30-year national debt return rose to 5.012 per cent. The spreads between the United States and Japan can be said to be an important factor in the constant depreciation of the yen, and how the Bank of Japan withdrew from the negative interest rate policy, dominated by yield curve control (YCC), adds uncertainty to the yen’s movement.
To some extent, a significant depreciation of the yen will inevitably lead to a contraction in Japan’s GDP after conversion to the dollar, but the core problem that constrains Japan’s economic development is still not sufficiently dynamic. Japan ' s economy is characterized by a dual structure, over-reliance on investment for economic growth, the end of the demographic dividend, the urgent need to transform the way in which economic growth takes place, the adjustment of industrial structures, low per capita national income and insufficient consumer demand. Japan ' s real wage income decreased by 2.5 per cent in August and by 17 months in a row. The decline in real wage income has resulted in a decrease in disposable income, which in turn reduces household consumption. What is even more alarming is that the main reason for Japan’s chronic economic downturn is the low-fertility trap in which its population is trapped, leading to insufficient labour supply, weak domestic demand, weak innovation capacity, and high financial stress.
In the face of its economic difficulties, his Government needed new economic policies and plans to promote economic and social development in order to regain its lost economic status. In his inaugural address to the new Diet on 23 October, Prime Minister Wen Hsimoto of Japan stated that stimulating economic growth would be a top priority for the next three years and that an updated economic response was planned to be finalized at a Cabinet meeting on 2 November. As he had stated earlier, Japan would not hesitate to continue to implement the “new capitalist implementation plan” to open the way for the “new Japan”. “Our economy has the opportunity to enter the first phase of a new blonde in 30 years. We must not miss this opportunity.”
It remains to be seen whether the new economic response will truly save the Japanese economy in the face of the current global economic polarization and growing contradictions in the distribution of wealth. At least a few Japanese investors have warned that, for the Japanese Government, the window of global interest in the country is limited. As the United States and Europe interest-rate cycle draws to a close, it means that if the spread between Japan and the United States narrows, the yen may start to strengthen from 2024, which may lead foreign investors to choose to flee the Japanese market. Once international capital has begun to reverse, it is feared that the Japanese economy will face a more dire situation in the face of a long-standing set of problems, such as an increase in population ageing and an insurmountable gap between rich and poor.