Japanization: 30 Years of Failed Economic “Stimulus”

In Europe, the danger of “Japanization”—a long-lasting economic stagnation accompanied by expansionary monetary and fiscal policies (Schnabl 2015)—is now discussed more intensively, as the stagnation in southern Europe continues and the ultraloose monetary policy of the European Central Bank (ECB) is widely expected to persist. Concerns about Japanization have been countered by the argument that after thirty years of stagnation the growth in Japan is high when calculated in the appropriate manner (Krugman 2015). This implies that Europe will have nothing to fear if the ECB continues its ultraloose monetary policy, something that is widely expected.

Meanwhile in Japan the question of economic and social decline is increasingly taken seriously. One of the oldest Japanese television programs Shinichi Hatoris Morning Show discussed why Japan is the big loser in the international community. The starting point of the discussion was a graph showing that since 1997 the real wage level in Japan has fallen by 10 percent while in all other Organisation for Economic Co-operation and Development (OECD) countries real wages have continued to rise significantly, in Sweden by almost 40 percent.

Figure: Real Wage Developments in Japan and Other Industrialized Countries

Source: OECD. Calculated based on hours worked. After Shinichi Hatoris Morning Show.

The show started with the statement that despite still being a world economic power Japan has become a cheap country, where tourists from low-income countries come to shop around. 100-yen shops (dollar stores in the US) have gained a prominent role in the lives of the Japanese as real wages have trended downwards. It is shown that in terms of the the average citizen’s annual income Japan now ranks only nineteenth among the thirty OECD countries. In 1990, shortly after the bursting of the bubble economy, Japan was still ranked ninth. Young people are argued to no longer have any economic perspective or personal orientation. The most frequently mentioned career aspirations among pupils are found to be youtuber (men) and artist (women).

The search for the causes throws a spotlight on the system of lifetime employment. Payment in Japan remains based on the seniority principle instead of performance. The well-off older employees are argued to be reluctant to change. The older generation was loyal to the ruling Liberal Democratic Party, because they had experienced the period of high economic growth and still were benefiting from it. The elder generation was able to start families and could still expect respectable pensions. For the younger generation this is no longer the case. This is shown to lead to an emigration of qualified young workers because they find higher wages and better working conditions abroad, in particular in the IT industry.

The discussion of Japan’s Abe government’s possible economic policy mistakes does not take place on the show but in the commentary fields of social media. There, many Japanese’s disappointment with the economic policy of the Abe government (“Abenomics”) becomes apparent. Thirty years after the Japanese bubble economy burst, the expansive monetary and fiscal policies, which have been further intensified since 2013 under Prime Minister Abe, have not delivered the promised recovery.

Instead, average real economic growth has remained stuck close to an average of around 1 percent per year since 1990. Real interest rates on savings have been close to zero since 1996. Real wages have been falling by an average of half a percent per year since 1998. Irregular employment (fixed-term, part-time, or temporary) has increased from 19 percent of total employment (8 million people) to 38 percent (21 million) between 1989 and 2018.

There is rising concern in Japan that everyone may end up equally poor if the economic policy remains unchanged. The economic and social decline frustrates the otherwise patient and polite Japanese. On social media, a term describing Abenomics as “Ahonomics”—stupid economic policy—is floating around. As fiscal and monetary policies in Europe converge toward Japan, only the future will show whether Europe meets a similar fate, with a similar discussion about the decline of Europe setting in.


Krugman, Paul. 2015. “Rethinking Japan.” New York Times, October 20, 2015.​

Schnabl, Gunther. 2015. “Monetary Policy and Structural Decline: Lessons from Japan for the European Crisis.” Asian Economic Papers 14, no. 1: 124–50.


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