Japan is confronting existential crises: a rapidly aging demographic, a stagnant economy, crippling debt, fraying relationships with its neighbors, and a declining regional influence. Its military buildup and sanctions against neighbouring countries are only worsening these issues.

Electing Japan’s first female Prime Minister is no doubt a historic feat, but what Sanae Takaichi’s election into office actually represents overshadows any feminism or identity politics.

Not progress, but rather a continuation of a deepening commitment to policies that alienate Japan’s largest neighbors while desperately courting distant powers that view Tokyo as little more than a forward military base. Takaichi’s recent appeal to Saudi Arabia for investment crystallized this troubling trajectory. The plea managed to be simultaneously desperate and condescending, begging for Saudi funds while lecturing the Kingdom on economic modernization.

How much  more ironic can it get to have to listen to a lecture from a country whose own debt-carried economic model – albeit being technologically and infrastructurally advanced —has failed for three decades straight and led it eventually to beg for Gulf investments and pivot to a financialized solution, as Bank of Japan monetary policy shifts to boost its government bonds profitability at the expense of US government bonds?

Both are typical symptoms of an economy running on debt while having no solution but to make its own debt bonds more appealing to investors, at the expense of its biggest ally’s government bonds.

Good luck finding a win-win solution for such a dilemma in the “trilateral” financial arena!

The Tokyo Spirit: When Neon Flickers

Tokyo, the capital of cutting-edge technology, towering skyscrapers, and neon-lit streets, is a city at the core of modern Japan’s innovative aspirations. But a different reality lies hidden in the shadows, ignored and buried beneath the polished, shiny surface. A reality most of Japan’s political elites are resolutely disregarding.

The “Lost Decades”, is the refined term that economists use to describe Japan’s economic stagnation for more than 3 decades now, particularly, since the bursting of the 1991 assed bubble, caused mainly by “overconfidence” and “overvaluation” of asset prices in the real estate and stock markets, exacerbated by an aggressive monetary policy from the Bank of Japan, which led to a quick collapse. Pioneering the approach of negative interest rates and a flood of asset purchases, creating an economic Zombieland, where genuine productivity is replaced by cheap credit.

Japan was achieving a GDP growth that lingered below 1% between the years 2000 and 2020, as China’s rate averaged 9% during the same two decades. Japan’s mid-90s GDP peak has almost stopped growing ever since.

Not to forget other symptoms, like a national debt ballooning to above 2.5x of Japan’s GDP, a feat no other “developed” nation can compete with. Add to this mix an aging population with a rigid resistance to immigration, and you’ll get a concoction of demographic and economic decline that can only use debt to varnish its shiny façade.

Takaichi’s Saudi overture reflects this underlying weakness.........

© New Eastern Outlook