Once considered a rising Asian giant, Japan today is a cautionary tale about the perils of stagnation and economic mismanagement. Among other problems, a once robust industrial sector is falling prey to foreign competition and automation, forcing many plants to lay off workers. Japanese analysts now worry that over-reliance on an industrial base may be strangling the country’s economic growth. The New York Times reports:
“It is time for Japan to find a new model for its economy,” said Masatomo Onishi, a professor of business at Kansai University. “We can follow the United States into a more postindustrial economy, or we can follow Germany into high-end manufacturing, but we shouldn’t be trying to compete with China in mass production.” . . .It is a similarly bleak story for many of the small factories that were the loyal foot soldiers of Japan’s postwar export machine. According to METI, the number of manufacturing companies in Japan dropped by a third, to 540,000, in the 10 years up to 2006. The share of manufacturing in Japan’s overall economy has also shrunk to 18 percent in 2009 from about 35 percent in the 1970s, according to the Cabinet Office.By comparison, while the United States is still the world’s largest manufacturing country, such industry accounts for just 9 percent of its overall economy.
Like America, Japan faces an interesting paradox: Manufacturing output is holding up, but industrial employment is dropping rapidly; automation is the main job killer, not outsourcing. Unlike America, Japan has an industrial sector still largely controlled by a very rigid (and blue) social structure: long-term employment with extensive benefits at major firms remains the norm.Although America’s prospects for a smooth transition away from that blue model are much better than those of other developed nations, but Japan’s recent troubles are a good reminder of where we may be headed if we fail to adapt.