Chapter 4 Update. Japan's Shrinking Weight in the World Economy

The Editors

Japanese Economy, 2001, vol. 29, issue 5-6, 29-47

Abstract: Only six short years ago, the president of the United States was photographed carrying a book whose subtitle read: Why Japan Is Still on Track to Overtake the U.S. by the Year 2000. It is, of course, no news that this forecast has failed to come true. What is stunning, however, is just how far Japan has fallen in the world rankings. In a number of key indicators, such as share of world gross domestic product (GDP) and share of world exports, Japan hit its peak during the late 1980s and has now dropped substantially. With the country's growth performance so far below what one would expect for a country at its stage of development, its weight in the world is now dropping precipitously. Most of the drop in Japan's growth is due to supply-side factors—a falling labor force and dwindling productivity growth—rather than demand factors that could be remedied by macroeconomic stimulus. Hence, without substantial reform, we should expect Japan's weight in the world to continue to drop far more than mere maturation would dictate.

Date: 2001
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DOI: 10.2753/JES1097-203X29050629

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