Renewed strength of the Japanese economy and Japan–EU relations

Abstract

The last 15 years, in particular the last decade, has cost Japan its leadership role as a sound and well-managed economy. However in this ‘lost decade’ Japan was not idle, in fact as she did move out of the international limelight she sorted out her problems steadily and assiduously. At the same time she decided to go out and learn once more new lessons for overcoming her problems. It is now the general view that Japan’s economic stagnation has been overcome: the banking system has restructured, creating new, huge and powerful financial conglomerates. The nonperforming loan issue is considered to be under control if not resolved. The industrial structure has and is successfully responding to pressures to shed operations with relatively low productivity (upstream and downstream) and to compete with lower priced imports from foreign competitors such as China and with re-imports from Japanese direct investment abroad that pressed unto her markets. A host of support and development programs have been launched to stop and reverse the economic decline of the badly suffering regions. The economy has restarted to grow. According to Japanese statistics GDP growth was in 2004:3.7%, 2005:2.7% and is growing presently (March 2006) at an annualised rate of 5.4% in real terms. In order to assert the correctness of the assumption in the title of the presentation—is the strength of the Japanese economy renewed?—one has to see whether Japan’s fortunes have sustainably improved and what will be her further likely economic and social development. For this it seems useful to turn to the substance of three major ‘Visions’ published in the last two years in Japan, two that sketch Japan’s future in the world of the 21st century up to 2025 (the Keidanren vision) and 2030 (the 21st Century Vision), respectively, and a report issued in 2004 by the Minister of Economics, Trade and Industry, Nakagawa (Nakagawa Report, with a 2005 update) dealing with future industrial structure adjustments. Japan’s “Council on Economic and Fiscal Policy” (altogether ten persons plus chairman) presided over by the Prime Minister (Koizumi) and comprising Ministers of the economically most relevant ministries, the Governor of the Bank