Money and Finance

Japan’s Economy in 2012: Multiple Challenges - By Vaclav Smil

“Adding insult to injury” sounds like a lawyerly phrase compared to its painfully evocative Japanese equivalent 泣面に蜂 nakitsura ni hachi -- literally “a bee to a crying face”. But even that stinging proverb fails to convey what Japan has been through during the recent past. In March 2011 its economy, slowly recovering from the worst global post-World War II downturn, was hit by a powerful earthquake followed by a massive tsunami. That twin disaster disrupted many supply chains of Japan’s important manufacturing sector and caused a catastrophic failure of the Fukushima nuclear power plant; the ensuing fears led to the eventual shut-down of all of the country’s nuclear generating stations, limited electricity supply, increased imports of fossil energies and the first annual foreign trade deficit in a generation.

But even without these setbacks the country’s record during the past two decades would stand in sharp contrast to its 35 year-long rise from post-WW II destruction (pre-war GDP was equalled only in 1954) to the world’s second largest economy whose accomplishments by the 1980s were widely seen as a foundation for further advances toward possible global leadership in the 21st century. Japan’s economic face has not been smiling for more than two decades, since the early months of 1990 when the bursting of the real estate bubble and the falling stock market exposed the fragility of those seemingly solid pre-1990 achievements and ushered in decades of stagnation and uncertainty.

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Money and Finance