TOKYO – Once again, Japan is Asia’s odd country out. For two decades, as one Asian economy after another boomed, Japan’s economy remained virtually stagnant. Now, with GDP growth in Asia’s two giants, China and India, slowing precipitously – a decline that appears to be contributing to diminishing economic performance in much of the rest of Asia – Japan is recording its strongest growth since its 1980’s boom.
But, just as Japan’s post-war economic model became the template for the Asian economic miracles of recent decades, the reforms currently being implemented by Prime Minister Shinzo Abe (“Abenomics”) may offer Asian economies a path back to strong growth. If the fallout from China’s slowdown is not to hit the entire region and jeopardize the economic integration that has already taken place, Asia’s governments – beginning with China – will need to embrace similar reforms.
How did Asia’s boom fade so quickly? Economics is supposedly a cold-blooded subject. Yet successful economies are prone to one of the most dangerous emotions of all: self-satisfaction, that excessive pride that Confucius condemned, which makes governments wary of reforming what has been a winning model, even when stresses begin to appear.
Japan has paid a high price for this attitude. Even after its property bubble burst 24 years ago, the authorities continued to believe that the country’s growth model needed no adjustment. The result was two lost decades of deflation and introspection before Japan finally embraced the reforms needed to kick-start a new, more open – and hence more vibrant – economic model.